Is the goal to make money, or is the goal to
win? Or can you find a way to do both? That's
the business of baseball. The players, the owners,
and the league at large all have a variety of
income streams to pay for their services. On
this month's episode of the Service Time Podcast,
we're looking at the business of baseball right
now. Not how it will change in the CBA, not how
it was when it was 25 cents a ticket in the 1920s,
but giving you a thousand mile wide and one mile
deep view of how everyone makes money in the
game. After all, diamonds are forever. I'm Dominic
Catronio. I'm Scott Sweeney. Welcome to episode
four of the Service Time podcast, the business
of baseball. Let's get started. Welcome in and
thanks for listening. This is our first episode
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And in the future, we're going to have some more
Substack -only content coming as we get closer
and closer to CBA Day. All right. Let's get started
with the podcast. I'm looking forward to this
one because, you know, talking the money of baseball,
I mean, that's kind of one of the reasons why
I got into. these kind of topics and contracts.
I'm currently going to business school at the
time, learning a lot of things about accounting
and finance and really digging in for this episode.
It's kind of interesting to look at a lot of
the different teams, how they're run, how they're
structured, and then also on the player's side,
how they make the money from draft day until
they retire and then get their pension. So we've
got four categories that we're going to look
at here of how everybody makes money. Just think
of any type of revenue you can think of that
has to do with Major League Baseball. We kind
of divvied them up into four chapters. So this
first chapter is going to be all about the player's
revenue. So how do the players make money? The
second chapter is how do the owners on a local
level make money. So ticket sales and ballpark
villages and that sort of thing. Then how the
owners in the game at large make money is chapter
three. That's the national view of the game.
And then finally, chapter four is kind of a little
bit of new money of how modern changes have affected
how the income streams move around between private
equity, how revenue sharing works, how luxury
tax works, and that sort of stuff at the very
end of this podcast. And I think, Scott, we have
to kind of say a blanket catch -all disclaimer
here at the top. There is only one team. that
has their books public and there is one team
that we're really going to rely heavily upon
and some reporting from other pieces as well
to analyze the business of baseball because no
one's books are open. No one's really inviting
media members to go open their books and to reveal,
oh my gosh, you have this much that you spent
this much on this. That is the Atlanta Braves.
They are a publicly traded company. We have access
to their proxies. It's available to anybody.
If you're a shareholder too, I mean, it's $57
a share right now. If that tickles your fancy,
if you want to go invest in them, this is not
investment advice. We are not an investment podcast,
but I think it's important for us to remind everybody,
everything is reported. and not necessarily clarified
unless we are actually citing the Atlanta Braves
proxy report, which is the only firm numbers
you really get to use throughout this whole podcast.
Yeah, one of the things is for the longest time,
all the numbers that people would get from the
team operating income, team revenue, team valuations,
league overall revenue would come from Forbes.
Forbes would do an annual article where they
would list all the teams. There's always been
some questions into whether those numbers are
valid or close, but I've always held the opinion,
hey, they should at least be a good estimation
and in the ballpark. And I've kept a spreadsheet
because this is the kind of stuff I do. For the
past 20 years, they've been doing these articles.
I have a spreadsheet of all the valuations, revenues,
incomes, just to see how teams are going and
then kind of analyze the numbers on where the
league is going. And there were some major warning
flags. in last year's article where the operational
income based on past years made absolutely no
sense. Like it was according to Forbes, which
they didn't put this in their article because
no one actually goes through and adds up all
the operating incomes of all the teams like I
did. But according to the numbers they were saying,
baseball had the lowest profitable season since
20 years, not even adjusting for inflation or
even including inflation. was the lowest revenue
year, was the lowest profit year. And that just
didn't make any sense. That was the year where
we just had the Yankees and the Dodgers in the
World Series, which was the most profitable World
Series. Attendance was higher over the past four
years leading up to that. So since that, I've
had a lot of doubts on whether Forbes' numbers
are actually in the right ballpark. If you ask
any GM or owner, They've said that those numbers
make no sense, and I'm tending to agree with
that. So we're relying a lot on the Braves because
those are the only ones that are publicly posted,
audited, and should be accurate if they're following
the law. And on that note, the way that it's
reported on Forbes. is in an evaluation sort
of mindset where this is what this company is
worth it's not talking about revenues and profit
sharing and some of the deeper deeper stuff that
you'll find in a proxy report i think that's
an important definition for us to get right off
the top here where I get really frustrated when
you see like the number one graphic I hate more
than anything in this world is when you see percentage
of revenue and payroll. That is not how this
works. And I think When you see the Mets being
at like, oh, they made $450 million of revenue
and they paid their players $400 million. That's
not how this works. That doesn't include half
the stuff that you need to include. And we'll
talk about that in the owner side of things.
I thought the Braves proxy report exhibits of
just everything else you got to pay for when
you're an owner. It's not just big league payroll.
Front office payroll. It's literal baseballs.
I think equipment is something that people forget.
Travel, gas, the plane. You got to staff so much
of this industry that it is why it is evaluated
as greatly as it is. So an important definition
off the top here, revenue is just money generated.
It doesn't mean profit. Revenue is just the money
that is generated from this. Profit obviously
means, hey, our revenue minus our costs. making
sure you make more money than you spend. It's
that simple. So make sure you keep that in your
brain for these next six months when you hear,
oh, baseball operated at a $12 .7 billion revenue
stream. Okay, that doesn't mean they made $12
billion last year. I need to make sure people
are understanding that. I think most of our listeners
understand that, but you'd be surprised every
now and then, Scott. Well, you can even get into
some technicalities of profit. You can be making
money, but not post a profit. because of depreciation
and amortization, which are actually major things
on the financial statements for the Braves and
other sports teams. These teams own sometimes
billion -dollar stadiums, and those don't go
down as a normal, hey, minus $1 billion, let's
calculate the profit. It gets more complicated
than that. So this whole thing is, yeah, we've
got to rely on the Braves a lot. I mean, we've
gone through in our other episodes historically
how much. the owners have not wanted to have
their numbers be public. And there are a number
of reasons why, which we'll also get into. Yeah.
And we talked about it in the preview in the
sub stack for this episode about how the Twins
and the Pirates are kind of going through it
right now. And that will come more to light once
we get to the modern side of the game. But for
now, let's jump into this episode, starting with
the players. This first chapter is everything
having to do with how do the players make money?
And how does the door first get open for a player
to make money? It's the MLB draft. And we're
going to start with, let's just say, Scott, congratulations.
You're good enough to be drafted to Major League
Baseball. These teams are scouting you. We just
saw it this past weekend during the All -Star
break. Hey, you're going to be one of the next
great studs. Now, the draft. started in 1965
ironically not really having anything to do with
Marvin Miller at the time but before 1965 it
was the wild wild west you could just sign whoever
you wanted you'd had the bonus babies that were
coming out of high school that's still a thing
to this day the bonus babies whether it's college
or high school in the early rounds but back then
it was go to the highest bidder there are no
guardrails there is no chance for any other team
to create some sort of system to say, well, we
think we can offer you more. There's no bidding
war. It's just go get whoever you want, scouting,
farming, that sort of stuff. Whereas now, the
rounds have shrunk year over year over year over
year. We're down to 20 rounds now, it seems like.
I hope it stays here. That's something for a
later episode if it stays 20 rounds. But the
number one thing that has changed in the Major
League Baseball draft for Americans, Canadians,
and Puerto Ricans how the bonus pool works. Yes,
it's 20 rounds, but there is a bonus pool only
available to be used in the first 10 rounds.
And that pool is pretty strict. You cannot go
over by certain number percentage. In your bonuses
to your players. So Scott, congratulations. You've
been signed in the second round by the Milwaukee
Brewers. The slot value for that pick is just
shy of a million dollars. But hey, you're a high
school pick. Hey, I've got a great commitment.
I'm really excited to go to LSU next year. You
got to sweeten that deal. The player then can
negotiate and say, well, I know the slot value
is $950 ,000. But I think you should pay me $1
.2 million to forego my commitment to LSU. Now,
the team has to go to the players and the other
players that I've drafted saying, hmm, who can
I save money on the slot? Because I cannot go
over on this pool that I have allocated to me.
And that goes the first 10 rounds. You know,
I use an example because we both live in the
Wisconsin area and I think we use Cooper Pratt
as a great example of how this works because
Cooper Pratt was signed in the sixth round by
the Brewers. Well, well, well below the slot
value of what he actually signed for because
the Brewers were signing players in their first
three, four rounds under the assigned slot value
and use that savings to give it to Cooper Pratt.
You're allowed to do that where you reassign
your slot values and give it to somebody else
within the first 10 rounds. Anything beyond the
10th round is kind of up for fair game. There's
a certain level that you can't go over still.
You can't just suddenly offer a guy $5 million
in the 14th round. That's not allowed either.
But this is something that's changed over the
years too because you can remember back in the
early 2000s. Signability was a real concern where
there were no limits on what you could give a
player. There were no international or there
were no bonus pool offerings to give a player.
Bryce Harper missed this just barely in 2012
to be able to be signed and drafted where, hey,
there's only a limit of how much your slot value
is worth. Guys would be turning down number one
draft money because they felt that they weren't
going to get signed or I'm going to go to college
out of this high school pick. Nowadays, it doesn't
happen as much. I think teams have a better understanding
of who's going to sign, who is not. Obviously,
NIL makes things complicated. But the draft has
changed drastically in just the last 15 years,
going from 40 rounds down to 20. That shrinks
the talent pool, but simultaneously shrinking
the amount of money going to these players that
are drafted in the Major League Baseball. So
one thing that's really interesting is a lot
of people follow and watch the NFL draft. When
you watch the NFL draft, to go to your point
on slot and over and under, the NFL draft's really
easy to understand. Players, teams are going
to draft the best player at a position of need.
Well, Major League Baseball, the draft's completely
different than that. You almost never draft on
position of need because you're not going to
see these players for three to six years sometimes.
And as far as even best player, in order to manage
your bonus pool, a lot of times teams will, like
you said, underslot, draft players not as good.
You mentioned Cooper Pratt. The Brewers, three
of their top 10 prospects right now were all
over slot picks in 2023. Sixth round for Cooper
Pratt, 11th round with Bishop Ledsen, and 15th
round with Josh Adamszewski. And the reason,
like you said, they drafted college players earlier
on or players that would sign under slot, saving
them money. So these high schoolers that would
have gone to college, they can now throw money
at like the Prats, like the Lettcens, like the
Adam Shevskys and be able to get these guys that
have higher ceilings. They definitely have lower
floors. Lots of high schoolers don't pan out.
And they, in fact, if you look, they had. actually
about five or six more high schoolers that they
signed over slot not for nearly as much and they
aren't top 10 prospects now but they're kind
of rolling the dice on week if we get more high
schoolers with high upside a few of them are
going to be hits and we're going to end up with
better players and dom did you see what the braves
did with their draft that they just did now with
their eighth ninth and tenth round picks tell
me more So they drafted three college seniors
in their eighth, ninth, and tenth round. Total
slot value of around a million dollars total,
those three picks. And all three just signed
for $5 ,000 a piece. Basically making it so the
Braves can now sign a bunch of high schoolers
with much higher upside with that extra million
dollars that they have left over. So this is
a strategy that more and more teams are doing.
And it may sound shrewd, but this is the truth.
If you're a senior sign coming out of college,
you've got no leverage. Where are you going to
go? You can't go back to college. Are you going
to go to independent baseball and then get even
less? If you get selected, you're kind of in
this, man, they really picked me. I'm not going
to get this lot value here at all. And then college
players, even if you're a junior. You still don't
have a lot of negotiation power because, hey,
it's the first year you're eligible. You got
to strike when the iron is hot. Yes, my slot
value might be a million dollars, but this team
wants to sign me for $750K. What am I going to
say? No, and then go back to school for a senior
year. Now I'm a year older. Maybe I don't perform
as well. Maybe I get picked later. Look at what
Brandon Sproat did. It's kind of fascinating,
again, to use a Brewer example, that he got drafted
by the Mets back -to -back years. for virtually
the same cost. That doesn't normally happen for
players who bet on themselves and gamble to go
back out for another year as a senior sign. But
to give this year's example of the MLB draft,
modern rules with the bonus pool pick, it goes
up in conjunction with MLB revenue as to how
much money the teams have available to them.
So the White Sox, they obviously had the number
one pick this year. They also had the largest
bonus pool available to them. over $20 million
available to them in their bonus pool. Granted,
the number one pick, which went to Rock Chalowski,
not Rock Chaluski, Rock Chalowski, $11 .35 million
was the slot value for Rock. So that means they
really got about a little less than $9 million
to spend on the other nine picks in the first
10 rounds. You can get penalties. impacted going
beyond that bonus pool. And furthermore, if you're
a team that pays into the luxury tax based on
how much of a penalty you pay, it impacts your
draft picks. Like for instance, the Dodgers,
they only had two picks in the first five rounds
of the draft because of how much they are paying
into the competitive balance tax and into revenue
sharing. Because as much as people complain about
the Dodgers, oh, they never have to deal with
a penalty. They never have to do, they never,
this is the penalty. They have had the fewest
draft picks over the last three years because
they've signed qualified free agents. That's
another penalty. You lose a player. You sign
a player in free agency. The team that loses
that player gets compensation in a competitive
balance pick. I don't want to get into the minutia
of all this because it's going to maybe change
coming up in 2027. But the way that it works
right now is anyone 1 through 18 that didn't
make the playoffs. You are assigned based on,
hey, are you a perennial tanker? Are you, you
know, look at what the Rockies and the A's, they
have been penalized. They cannot be a top five
pick because we now have a lottery. There are
ways to assign the number one pick, not just
automatically the worst team in baseball. I enjoy
that. I think that's a great way to. curtail,
to tear it all down and move on like the Rockies
have been perennially bad since 2018. They don't
get guaranteed the number one pick every year.
Look at the Guardians last year. They barely
missed the playoffs, and then they're able to
get Travis Buzana, who's an all -star this year.
I think it's a great way to introduce some variance
to the Major League Baseball draft and to find
a way to create some value. Now, we just talked
about the Americans, the Puerto Ricans, and the
Canadians. What about everybody else? There are
plenty of Dominicans. There are plenty of Venezuelans.
They don't have a draft yet. That is another
major contention, major project for the 2027
CBA. As things stand right now, I think we can
predict we're going to see an international draft.
But why would they want to go to an international
draft from the international bonus pool rate?
The reason why is to clean up the game. Down
in the international scouting world, This stuff
starts when the prospect is 13, 14 years old.
I know that sounds gross and sort of disgusting.
Like, are you kidding me? You're making a handshake
agreement with a 13 -year -old for a million
dollars in three years? That's how it works.
I don't have any other way to say I'm sorry,
but these countries and these families understand
baseball is their way out. And you could call
it exploitation. You could call it... you know
just the way that the business works you could
say there's a supply and a demand the supply
is latin baseball players from underprivileged
communities and the demand is baseball players
trying to save baseball teams trying to save
money on who they can sign to join their clubs
so there are international firm bonus pools now
in the past again there used to be no limit there
used to be luis robert being able to sign for
30 million dollars on a snap of a finger coming
from cuba to say yeah we got him Literally, Louie
Robert was the last person to get that large
of an international bonus pool because then in
the 2017 CBA, things changed to create this international
bonus pool money. Now, on that front, it is extremely,
extremely strict. You have to stay in the firm
bonus pools of under, let's say, $4 .75 million,
whatever the number may be for year to year.
If you go over that, you are penalized. harsh
you may even lose some of the players that you
signed and you mentioned on the proposals for
2027 to make it an international draft and the
reasons are to clean up the game that would be
one reason but i don't believe that's the owner's
reason the owner's reason is it's going to save
them a heck of a lot of money if they go to an
international draft on scouting as well as um
as well as training and development costs and
the players you would think oh they want to clean
it up as well the players kind of don't want
an international draft, even though it's completely
corrupt, because that brings a lot of money into
their communities regarding having complexes,
having training facilities, all these things
in the Dominican Republic, in Venezuela. If they
went to a draft and there was no benefit for
a team to be able to get a 13 -year -old, they're
not going to invest any money into that country.
We saw this with Puerto Rico. Puerto Rico used
to be under this system. And then they added
them to the domestic U .S. draft. And the amount
of talent in Puerto Rico and the amount of funding
and money that was funneled into Puerto Rico
evaporated overnight because teams had no incentive
to spend money in these countries. So while,
yes, it is kind of an obscenely terrible system
on how it works, the players, the ones that grew
up with this system. actually still kind of support
it. And I think the only way they would support
going to a draft is if Major League Baseball
set up a funding system equivalent to what is
spent now on the development, on the scouting,
league -wide to be able to still run those academies.
Because right now, if they just went draft today,
all that money would disappear, which it's kind
of a double -edged sword, as you're saying, because
it is, yeah, kind of making deals with 13 -year
-olds. It's not something fun to talk about.
To think about the money that's being flowed
around, where it sounds kind of gross to say
this, but a million dollars to a Major League
Baseball team given to a kid is kind of nothing
in the Major League Baseball players. If this
kid becomes something, cool. If not, that's just
the cost of doing business in Venezuela and the
Dominican Republic. Now, in your bonus pools,
You don't have to disclose bonuses worth less
than $10 ,000. And a reminder, most of these
kids are signing at age 16, 17 years old. And
then they're going to the academies and growing
up kind of, there's an education aspect to this
thing. Hey, this kid is not ready to come immediately
stateside. That's where you see all these teams
have Dominican academies that are actually run
and staffed by the Major League Baseball teams.
And then they maybe will come to the complex
leagues in Florida and Arizona as they've hit.
maybe 18, 19, 20 years old as they've grown up,
if they are good enough to come stateside. The
vast majority of international signings every
single year, the vast majority of them never
make it off the island. And that's a phrase saying
they never make it off the Dominican Republic,
even if you come from Venezuela. Meaning you
come to the Dominican Summer League and you walk
30 guys and you strike out 15. Sorry, kids. See
you later. Good luck next time. It's brutal.
It's dog -eat -dog. It is... A lot of bad baseball
down at the Dominican Republic, but the few diamonds
in the rough are the reason why these teams still
continue to do it because you need to have a
presence in Latin America. But the moment you
take advantage of that bonus pool, Major League
Baseball is going to come down heavy on you.
And that is the case of the Atlanta Braves back
in 2017. They lost a third round pick in 2018.
They had a massive cut to their international
bonus pool money for the next three years because
the Braves were circumventing the international
signing rules where they were basically saying,
hey, if you sign for 50 grand, we'll give you
another 500 grand next year when it's not technically
a signing bonus. Guys were losing jobs. There
were suspensions involved in this. arguably led
to Alex Anthopoulos coming into Atlanta to be
able to create this behemoth that he's been able
to create and then winning the World Series,
obviously, in 2021. When you look at the rest
of baseball and the teams that are really good
in Latin America and the teams that are really
poor in Latin America, teams have tried to change
that. You think of the Dodgers, you think of
the Yankees, you also think of the Milwaukee
Brewers as being successful in Latin America.
Teams that you don't think are successful in
Latin America are teams that are more recently
getting involved down there, teams like the Baltimore
Orioles, teams like now the Washington Nationals.
Yes, they got Juan Soto. That was more of a product
of their scouting, not so much about how great
their Dominican academies were down there. Every
single team has to have a presence in Latin America.
And with international signing bonus pool money
maybe changing into the draft to clean things
up down there, it's something to monitor for
2027. It impacts how many players are going to
be drafted, but it also impacts the teams that
don't have investment down there maybe lucking
into the next great Latin prospect that maybe
haven't put the resources down there, which is
what some teams are complaining about. You mentioned
teams getting involved, and you also mentioned
the Brewers having very good success in the last
10 years. Before they put those limits in place,
before they put those signing bonus pools and
all that, and teams could really spend whatever
they want, it's a little more complicated than
that. They actually did penalize them for spending
too much, so they couldn't sign anyone the next
year, which created this weird thing where teams
would just spend. a ton of money every other
year. But before that, the Brewers were one of,
I think they actually were the worst, the worst
international signing team because they couldn't
keep up financially. So here's a question for
you. From 1980 till 2020, what international
signee for the Brewers had the most career war?
Gosh, it probably wasn't even with the Brewers,
was it? It was with the Brewers. This guy only
played with the Brewers. But it's a weird one.
Dave Nielsen, an Australian, was the only spot
they were able to get a guy. Now, they did have
Sixto Lascano before that, but he was Puerto
Rican, which in the 90s, that changed. So they're
international on the current international countries
list. Their best prospect, I think Jackson Churrio
just passed him, like just passed him on that
list. But it was Dave Nielsen. So just to show
you how they had no presence in the Dominican
Republic, they had no presence in Venezuela.
And after those rules changed, that gave them
an opening. And in the last 10 years, they have
been spending a lot of money in Venezuela, actually
a considerable amount in Guatemala, opened their
academy in the Dominican Republic, and have completely
overhauled their international system. But it
definitely was not fair before 2017. If you were
the Dodgers, if you were... The Yankees, if you
were, the Giants also were really well. The Marlins
also actually had a pretty good international,
but that's just because of their proximity. And
the Mariners had a stranglehold on Japan. But
if you weren't those teams, if you were like
the Pirates or the Brewers, you were getting
the scraps at the end. And now it's a lot more
even for every team involved, if you put the
money into it anyways. And you mentioned Japan,
which leads me to the last point on the international
player acquisition. How do I make money from
these signing bonuses and from first getting
into the door into Major League Baseball? We
got to talk about Korea and Japan and how those
players come stateside with the posting fees
and that sort of thing. Let's get Rintaro out
of the way. Rintaro Sasaki, who just was drafted
in the first round by the Miami Marlins. He's
a unicorn. It's actually shocking that he skipped
the MPB draft, the Japanese league, to come stateside,
to come to Stanford, and then gets drafted from
Stanford to the Miami Marlins, never going back
over to Japan. He is the first and one of the
only to have ever done that in the history of
the MPB. So he's an anomaly to essentially be
treated like an American. prospect even though
he's Japanese he was the Japanese high school
Babe Ruth he set every home run record you could
imagine down there and now he's maybe going to
be a Miami Marlin and never play for MPB for
the players like Shohei Otani for the players
like Yoshinobu Yamamoto for the players like
Roki Sasaki they're all very different in how
they were signed obviously they're all with the
Dodgers now originally Shohei signed with the
Angels but it's a reminder that in 2013 to 2017
in the middle of the cbas that you know you look
at somebody like masahiro tanaka or you look
at somebody uh like dice k matsusaka in the early
2000s and how these players were stars in japan
and then being posted by their teams to come
stateside you had to have played at least six
years in mpb to be freely posted as an international
free agent now there were no rules in that time
of how much international bonus money needed
to be allocated. No, you were essentially an
unrestricted free agent. It's just a matter of
a cut of your signing bonus was going back to
the team that posted you in Japan. Then this
changed really with Shohei when he decided to
come over early. Shohei had only played three
seasons of NPB and decided, I want to go to America
right now. I want to be a two -way player. which
meant he was subjected to international bonus
pool money and subjected to being uh being forced
to essentially be on a minor league deal now
that's a blunt way to say it saying you get the
full six years you're essentially drafted and
signed and controlled for six years you're not
a free agent it's not going to the highest bidder
sort of thing now ultimately he did decide to
go to the angels but this is where it's different
with somebody like yoshinova yamamoto yamamoto
had already spent his time. He had spent enough
time in NPB to be an unrestricted free agent,
which is why he got $325 million for 10 years
from the Dodgers, as opposed to Shohei, who's
become the greatest player of all time, to be
a two -way player with the Angels. He essentially
got signed a standard contract, six years of
control, option years, all that stuff. Obviously,
he was never optioned. And then you look at Roki
Sasaki, the last example we'll use. Rokey was
not yet at that six years of service. He was
under the age of 25 as well. That's a new wrinkle
in all this in your age of when you get posted.
He was forcing, I want to be posted. I want to
go stateside. And the same rules applied to him
as Shohei, but now with even stricter international
bonus pool money, meaning just like the Dominicans
and Venezuelans and Nicaraguans and Panamanians
that you're spending money on in your international
bonus pool money, that applies. to Japanese players
and Korean players that are not yet at their
service time requirement to be unrestricted free
agents coming to America. So it impacts the signing
bonus. Rookie essentially did not get a signing
bonus other than the international bonus pool
money that the Dodgers were able to allocate
toward him. Then he's making league minimum right
now. He's not making the money that Yoshi and
Shohei are making because he was signed as a...
pre -six -year NPB free agent who was posted
by his team. So it gets a little complicated
over there. Just know that Korea and Japan have
different rules for their posting because they
have professional leagues. The reason why that
doesn't apply to the Dominicans and the Venezuelans
is there are no summer professional leagues.
Yes, there's obviously winter ball down there,
but it's not on equal footing as Major League
Baseball or NPB or the KPO. Yeah. And the people
I feel bad for in the Roki Sasaki situation is
the number of handshake deals they had with other
Dominicans, Venezuelans and Guatemalans that
the Dodgers had to then cancel because they decided
to give. I don't remember what it was like three
plus million to Roki Sasaki under their pool
because they had to make room for him. Being
eligible like that was a last second addition.
So they are most teams already have their deals
aligned months before the signing day. And the
Dodgers had to cancel a number of them last second.
But you brought up team control, and that's going
to be our next topic. What are we talking about
when we say six years, when we say league minimum?
And we'll get into arbitration as well. But really,
when a team signs a player, they have six major
league seasons, full seasons of control over
that player. At the minor league level. It's
kind of almost indefinite, but they put in rules
in place something called the Rule 5 draft, where
basically if a player doesn't make it to the
major leagues in a certain amount of time, he
becomes eligible to be drafted by other teams
to be able to put on their major league roster.
This became an issue. We talked about past lawsuits
with George Toulson. He was suing because he
was in the Yankees minor league system, and he
had no way of making the roster because the Yankees
were loaded. That could have been an issue. Hey,
we can keep this guy for his entire career in
the minor leagues because we never called him
up and never started his service clock. But they
changed the rules that the MLBPA was able to
put in. If a player was drafted or signed at
18 years of age or younger, and he spent five
years in the minors, and they still haven't put
him on the 40 -man roster, a 40 -man major league
roster. other teams can come in and draft that
player and put them on the active roster. For
players that are 19 or older at the time they
are drafted or signed, it's four years. So there's
kind of a soft mechanism to make it so you just
can't keep someone in the minors and hoard minor
leaguers for an indefinite number of years. But
the penalties and the system is not that. really
the number of Rule 5 draft players that make
an impact on the major league level has been
decreasing steadily over the past 20 years just
because players want to protect their talent
and bring their guys up. And one of the ways
that the teams identify... Who's going to be
available? Because currently the deadline is
in November to place somebody on your reserve
40 -man roster for him to be not eligible, protected
essentially from the World 5 draft. That's why
you suddenly see a flurry of activity in the
middle of November out of nowhere, maybe some
minor league trades, maybe some guys that are
getting traded or trying to create 40 -man availability
because everybody that's on the 60 -day IL at
the end of the season. gets put active again
on the 40 -man roster. So suddenly somebody that
you want to protect, you may are not able to
protect. And suddenly a team, one man's trash
is another man's treasure, is able to pluck somebody
that is not protected. There's even a minor league
version of the AAA Rule 5 draft, which is basically
the team saying, we don't want this guy anymore
and take him. It's a $50 ,000 bonus. He doesn't
have the same upward mobility. But the thing
about the Rule 5 draft is... The number one caveat
about it is if I sign you, Scott Sweeney, from
the Milwaukee Brewers to my Chicago Cubs or whatever,
and say, all right, Scott, congrats. You're a
major league rule five pick. You got to stay
on my big league roster for at least 120 days
of service for me to keep you for the rest of
the year. Now, if in the middle of that time
I say, ah, he's not good enough, I return you
with a cash penalty to the Milwaukee Brewers
and say, hey, he didn't work out for us. Hope
he works out for you back in your organization.
So the Rule 5 is an upward mobility chance for
the guys who get stuck in the minor leagues,
maybe behind a guy that's signed to a long -term
deal. A trade can be made. Rule 5 pick can be
made too. And I think with the contraction of
the minor leagues as well as also played a role
in rule five draft being less and less of an
impact regarding actually good major league ready
prospects being selected in the draft. But OK,
you've spent your time in the minors, though.
And when you're in the minors, you're making
minor league pay, which fortunately has gone
up pretty significantly in the past five years.
But it's still not that great. I feel bad for
anyone that came. that didn't make it to the
majors that spent years in the minors before
2020 because it was poverty wages. Now they at
least cover your rent, like the team pays for
your rent on top of the pay you make. And the
pay has basically doubled. across all levels.
Still not that great, though. And doubling from
$15 ,000 to $20 ,000. It's not like they're making
a ton of cash down in the minor leagues. A AAA
experience guy is making roughly $40 ,000 to
$45 ,000 if he's on a six -year on his original
signing. When you're more service time in the
minor leagues, you can get a different six -figure
deal. But you're right. It's better than what
it was. It's still not all the way there. I saw
the King of Juco. I forgot his name. Eric Sim.
Eric Sim. He went through what he made his first
six years in the minors. And it was, in total,
including his signing bonus, like $12 ,000. Total.
Because he didn't get paid unless he was on a
team. And they put him through instructionals
for four months where he didn't get paid. Spring
training, he didn't get paid. It was... I don't
know how you're able to feed yourself at those
wages. And he had to pay his own rent up to,
I think like double a, when I was in Kingston,
when I was in Kingston, North Carolina, I was
getting paid $1 ,800 a month and then meal money
to travel with the team. I had to pay my own
rent. just in season i did not get paid in the
off season it it's a grind and that's where the
minor league grinder became a real thing because
so many of these teams were not investing in
the minor leagues and it's something that's going
to come up in the 2027 cva of what's too much
how can we you know decide who develops what
and again not for this episode but you're right
it's it's gotten better but back in the i mean
i saw a team that i worked for that Post -game
spread was legitimately peanut butter and jelly
sandwiches, right? I mean, legitimately, a major
league baseball franchise served its minor league
players peanut butter and jelly sandwiches. That's
not happening anymore, thank God, but that's
how it really was in the 2010s. I lived in an
apartment complex. So this wasn't minor league
baseball players, but it was like minor league
soccer players. And I had my own apartment. That
team, those players were living five to an apartment.
Cause they were just, they, they had to save
as much money as possible. And it was very similar
for major league baseball players. You just,
you get these apartments or you get families
in the individual cities to house them. So, but
you've grinded through the minors. Let's say
you, what we're saying, a second round pick before
you out of high school, you spend four or five
years in the minors. You finally make it to AAA
and you get your call up to the majors. Now the
team has six years of control. That's not six
years from your call up day. That's six years
of time on the active roster, meaning we're talking
about 40 -man roster. There's the 26 -man active
roster. Anyone who's on that roster for one day
of the season gets one day of service time. If
they're on the injured list, they still receive
that service time as well. The only time you
don't get the money without being, you don't
get credit for service time without being sent
down is if you get put on the restrictive list
or some sort of suspension. You get one day of
service time. The major league season is about
185 days from opening day till the end of the
162 games. So you think one year would be 185
days. It's actually 172 days. Once you get 172
days in one season, that counts as a full year.
If you get, let's do the math in my head here
very quickly. If you get 86 days. that would
be a half a season. And the next year you'd need
another 86 days before you take over to over
one year. That's why you would see with, I think
Chris Bryant was the best example. His rookie
year, he got called up, I think it was April
17th or 18th. He got called up exactly at the
point where there were 171 days left in the year.
So if you go to baseball reference and you go
down to service time for Chris Bryant, Every
year has 171 in the second column number of days.
So zero years, 171 days would be his final number
at the end of his first year. And really, it's
that first number, number of years, number of
days. If you're zero dot blah, blah, blah, you're
still technically don't have a year yet. And
you don't become a free agent until that first
number ticks over to six. And then your next
season, you would be a free agent. If you're
at 5 .171, one day away, like Chris Bryant was,
he would still have one whole more year of Cubs
having team control. And he filed a grievance
trying to fight this and trying to sue the Cubs
and Major League Baseball. Sue is too strong
a word, but the grievance to say. This is, you
know, prospect emotion. You're keeping me down
when I had an epic spring training. You know
I'm good enough for your team. And Major League
Baseball and the Players Association kind of
had to throw their hands in the air and saying,
we're sorry, Chris. Don't hate the player. Hate
the game. This is how it works. You're the most
famous example. He lost that grievance, thus
helped create the prospect promotion incentive
program, which is the biggest piece of eyewash
ever legislated in the CBA. Oh, you can get a
draft pick if you promote this guy before any
– well, he has to be on a top 100 prospect. He
also has to finish top two in rookie of the year.
He also has to finish – no, that's not how this
works. That's something that's going to be very
important for the 2027 CBA of, hey, can we just
eliminate the – If you play at least 100 days
of your season or 86 days, can you change how
many days are required for a year? I don't know
if that could be that easy, but the Chris Bryant
case is the most famous example of manipulating
team control for an extra year to have him in
a Cubs uniform. And we'll never know the what
ifs of it. Like, is there a chance he would have
won his grievance if this is really weird? The
Cubs third baseman that they were playing the
day before Chris Bryant came up broke his hand
that day. So they literally had a legitimate
out of, well, our third baseman got hurt. So
now we called up Chris Bryant. That's why we
waited. We would have waited longer. Yes, they
were going to call him up that day anyway. But
they just by chance had a player hit the I .L.
due to a legitimate injury right as Chris Bryant's
date. hit that specific timeline. And that may
have been the factor in why Chris Bryant did
not win his grievance because, you know, they
had a legitimate out. I want to bring up one
other example. Tyrone Taylor, currently with
the Mets, previously with the Brewers. Tyrone
Taylor was a 2012 high school draft pick. Slowly
worked his way up in the minor leagues. Nobody
selected him off the Rule 5 draft. He stayed
in the Brewers organization in the minor leagues
for seven years before he finally got added to
the 40 -man roster. and made his major league
debut in 2019. So even those seven years do not
count to your service time. And he gets a brief
amount at the end of 2019. Here's another fun
fact. If you get called up in September when
the rosters are expanded, That does not count
to your service time days added. So Tyrone was
not adding any service time despite being in
the big leagues for 15 games in 2019. Then 2020,
everybody still got a full year of service if
you played, if you were active for the 60 games.
But essentially, for a guy that was drafted in
2012, Tyrone Taylor. and spent seven years in
the minor leagues, and then made his big league
debut in 2019 because of service time and the
way how many days he was active and that sort
of thing. This just now in 2026 will be his final
year of team control. 14 years later, because
nobody signed him as a Rule 5 pick, he kept remaining
with the Brewers, working his way up. But he
is just now accruing his sixth year of major
league service time in 14 years as a professional.
And for position players, normally it's pretty
straightforward. You get called up. Unless you're
a fringe guy, you're going to stay on the roster.
But for a lot of relief pitchers especially,
they'll get called up for a couple games. Team
will go, hey, we need another fresh arm to come
up. And they'll come. get sent back down. And
their clock stops ticking when they get sent
back down to the minors. It's actually one of
the proposals the players have brought up is
to limit the number of times you can call up
and send down a guy. The rules now, this rule
didn't exist before. The rules is now, I believe,
five times in a season you can be called up and
sent down. It used to be unlimited. And I don't
know if you've ever played the game out of the
park baseball, Dom, but... I played this a decade
ago. It's like a simulation being able to manage
a team. And they use the service time rules,
but they didn't have the rule of when you get
sent back down to the minors, you have to wait
10 days, kind of an error on the games part.
And I did this once just to try to min -max one
of my saves. I had a top pitching prospect. And
what I would do is I would call him up, have
him pitch a start. send him down after the game
wait four days call him up have him pitch a start
send him down and over the course of a season
he would only get 32 days of service time and
there's three years where you can have unlimited
sends up call -ups and send downs so i basically
turned that six years of control uh into nine
years of control uh obviously you can't do that
in the major leagues but just to show you how
you only get credit when you're on the active
roster And this is a problem for a lot of relievers
and a lot of starters. They call it for a spot
start and sent down. You'll have relievers that
have had a similar thing where they've been in
the league for, you know, three years in the
majors, pitched in the majors for three years
and still might only have one year of service
time because they've been shuffled up and down
so often. You only get active service on the
big league roster. Also on the big league injured
list is a big reason. It's a big thing to monitor.
Yes, injuries are up. There are questions about
that. I'm never going to question another man
putting his body on the line, but I will leave
it at that because you get service time when
you're on the major league injured list, and
I'll just leave it there. You can even make the
argument that there's some relief pitchers that
their career, how much they've made in their
career, benefited because they had Tommy John
surgery just during a period where they happened
to be called up. Like there might've been a guy
that would have been fringe, but you can't send
down a guy that's injured. You have to put them
on the injured list and you can't cut a guy that's
injured. That's just like normal labor law. And
so you'll have guys that are fringe bullpen guys
get called up for a couple of games, all of a
sudden have to go down with a Tommy John surgery
or have a egregious arm injury where they're
out for a year and a half and they get a year
and a half of service time. They might not have
otherwise gotten. It's, again, another double
-edged sword where some guys, there is a very,
if you're good enough to stay on a major league
roster, this doesn't benefit your finances. We'll
get into arbitration later. But if you're a fringe
guy, there's been some guys that have benefited
from that. Well, let's get into arbitration because,
yes, we know six years is free agency. We'll
get there in a moment. But what about in the
middle? When do I start getting a say in my pay?
When do I start being able to say? I'm worth
more than league minimum if I'm pounding the
table and I'm Jacob Mizorowski. I'm only in my
second year of service time. I don't have a say
in my salary yet. Arbitration and what you get
paid during those six years is also completely
dependent on your service time. We talked about
that first number, which is the number of years.
It's 0, 1, 2, 3, 4, 5. If your first number at
the opening day starts with a 0, 1, or 2, you're
making league minimum. League minimum, regardless
of anything, except there is a thing called Super
2. If your number starts with a 2 and then your
last three digits are in the top 22 % of players
whose numbers start with 2, like the 22 % highest,
you are eligible for arbitration for the first
time and will have four years of arbitration.
Everyone else, people who aren't in the top 22%,
if their number starts with a 3, 4, and 5, those
are their arbitration seasons. And what is arbitration?
Well, we talked about this in things that the
Players Association fought for in the 60s and
70s. We talk about grievance arbitration, but
there's also salary arbitration. Basically, in
the old days, your year -to -year contract, it
would be what the owners kind of really wanted
you to pay. If it was egregiously low, you could
sit out, which almost never happened. But basically,
the owner said, you make this. If you don't like
it, tough luck. And they introduced arbitration
where they have a third party. an arbitrator
come in and listen to the arguments of the team
listen to the arguments of the player and based
on historical trends of salary based on what
normal players make of that caliber they look
at their stats they look at their accomplishments
the team says here's what he's worth the player
says here's what he's worth and the arbitrator
based on their arguments picks one or the other
for players in their first year of arbitration
they're not making free agent money it'll basically
be like throw out a number like maybe 25 % of
what they'd be worth on the open market. And
for arbitration two, three, and for the super
two players arbitration four, that number will
creep up closer to free agent numbers, but it's
always a discount on free agency. But the players
still kind of like this. It's getting a worse
rep now because earlier free agency would just
be better overall for them as far as what they'd
make. But compared to what it was beforehand,
this is a better system because you have a third
party determining what a player makes. And so
if we take a step back and look at those six
years, you make league minimum year 0, 1, 2,
or their first three years. And then you make
arbitration years 3, 4, and 5. And that will
raise your salary. So you're making league minimum
for the first three years. And then your salary
gets closer and closer to free agency. And then
you hit free agency. And let's say you're a...
player that wants to go to the actual arbitration
hearing. You'll see a lot of settlements. This
usually comes in December and January when that
deadline comes to say, okay, we didn't come to
an agreement on Scott thinks he's worth, you
know, $2 million. I think he's worth 1 .5. Maybe
teams generally meet in the middle, say, all
right, 1 .75, or maybe they lean one way or another
and they make creative moves. But the moment
those arbitration doors open, the numbers are
locked where Scott's filing for 2 million. I'm
filing for 1 .5, and the arbitrator has to make
the decision. Now, you look at the most famous
arbitration case from the last cycle, that's
Tarek Skubal, and where the Detroit Tigers filed
at a hilariously low $15 million, whereas Skubal
in his ARB 4 year was filing at $32 million,
thus making him the highest paid arbitration
player of all time. They could not make an agreement
beforehand. And I'll tell you what, I actually
got to meet... the arbitrator who ruled on the
case and just by a way of luck and i was you
know in the same place as this person i don't
want to reveal their identity and we talked about
that case and i said hey did Boris really bring
in the Cy Young Awards and put them on the table?
He said, he didn't put them on the table, but
they were in the room. And I think that that's
such a cool flex because you're truly sitting
there and arguing in front of an arbiter saying,
here's why I'm worth $32 million. On the open
market, I'll be worth this. The production I've
done is this and this, that, and the other. And
then the team has to go, yeah, I hear all that,
but here's why he's worth $15 million. And it's
simply one person decides. The arbitrator says,
I rule in favor of this direction. the players
want this to be either accessed sooner where
everybody is a super tune you get four years
of arbitration as opposed to three or you make
free agency available sooner at five years potentially
as opposed to six something for down the road
and to give some scale on these hearings uh usually
every year there's about 150 or so players that
are eligible for arbitration actually might be
even closer to 200 200 players are eligible for
arbitration about a quarter of them right off
the top uh the players say or the team says this
guy's not good enough for us to give him a pay
raise and they aren't tendered arbitration at
all and they immediately become free agents and
then the remaining 150 what it is is the teams
negotiate prior to that deadline of filing for
arbitration and the vast majority of them do
sign one -year deals with their team, sometimes
multiple -year deals, but usually a one -year
deal with the team. And then the remaining, I'd
say, 50 or so file that are going to go to a
case. And even then, about half of those, again,
sign an agreement before an actual arbitration
case. So every year out of the 200 arbitration
eligible players, you'll maybe get 15 that actually
go to a hearing, sometimes even less, maybe five
to 15. So it's really not a lot. And the owners
in the last CBA kind of slipped in a little tricky
thing where if you sign a deal before going to
arbitration, that salary is guaranteed for the
year. If you actually go to an arbitration hearing
and have an arbitrator determine, OK, here's
your salary, that is not guaranteed. There was
I'm trying to remember the name of the player.
There was one player that won his arbitration
hearing and the team cut him two weeks later,
only had to give him separation pay, which I
believe is like two months salary. So two months.
So about a third of what he actually earned in
arbitration. And I'm sure the after that, the
players are going to try to go back and. say,
hey, we should have all arbitration contacts
be guaranteed. But the owners have given as much
incentive as possible for the players to sign
a deal before actually going to a hearing. Because
the hearing costs money for everyone, isn't a
fun environment. And the owners actually save
money if they get players to sign before an arbitration
filing deadline. And on top of... you know, arbitration,
the players and the owners understand, I need
to make as much of a margin as I can on this
guy. Because as we go into free agency, as we
go into how a player makes the bulk of their
money, this is the prime of their careers generally
in arbitration. And hopefully if a player debuted
young enough, that free agency will feature some
of that prime. The average free agency age right
now is pushing 27, 28 years old, which is...
old in baseball standards because of team control.
You want players to be peaking at 25, 26, 27,
28 years old, not necessarily peaking at 28,
29, 30 years old when you're paying them the
most. That's hard to do. Aging curves really
kick in starting at age 33, 34 years old, which
is something we're seeing getting harder and
harder, which is why players are saying, you
want to pay us when we're at our best. So make
us accessible to free agency a little bit earlier,
a year earlier, maybe to be a five -year free
agent deal instead of a six -year free agent
deal. Or furthermore, to say, you want to pay
us earlier, you want to pay us for our prime
or what we're worth during our prime. Let's make
that whole time eligible for arbitration because
the owners know they are saving boatloads of
cash with the way the system currently works.
Yeah, and right now there's also been some proposals
to add some age qualifier on that. I think it
was the players were pushing for if you're over
30 with only, I think, five years, then you become
a free agent. Because you have some guys that
don't make their major league debut until they're
like 29. They're a late bloomer. They're not
going to see free agency until they're 36, and
no one's going to pay for a 36 -year -old. You're
not going to make that much money. We'll go back
to this career of this player. I think you were
saying it was me. Let's make it you now, Dom.
Dom, you've killed it in the majors. You are
one of the best players. You've hit your six
years, and you're going to be a free agent. So
you're ready to go for the bidding. But there's
still one final step, which is the qualifying
offer. Basically, if the team says, hey, you're
one of the top guys, we're going to be worse
without you. But we don't want to sign you for
anything. We can give you a qualifying offer,
a one -year contract that is the average of the
top 125 players in the league salary. We offer
you that. And if you decline, we get a draft
pick. So we get something in return. You see
this in a lot of the negotiations around free
agency in the 70s and 80s between the MLBPA and
the owners. The owners really got wanted compensation,
meaning if we lost a player, we would get something
in return. And this is kind of over the years
what it's settled on. If you are a good enough
player, well, you'll turn down a top 125 salary,
which this year I think it was like $22 million.
If you're good enough where you think you'll
make more than one year, $22 million contract,
we're going to get a draft pick in return. There
are some players that are on the edge of, well,
$22 million might be what I make. So there are
a rare few, Brandon Woodruff was one recently,
that will accept that $22 million contract and
go back to the team. But most players either
aren't offered a qualifying offer because they're
not worth $22 million or are offered it, decline
it, and go into free agency. And I'll tell you,
free agency is where you make the money. You
look at the players that have made the most amount
of money without signing a long -term deal during
their first six years of service time, you might
get around $80 million cumulative. I'd have to
look up what Mookie Betts' was. He was near the
top. There was for pitchers, it used to be David
Price. Now it might be Scooble. But you might
make 60 to 80 million dollars, even if you're
an MVP caliber player. And then you have Kyle
Tucker, who just became a free agent last year,
and he's making 60 million a year. You know,
you that you look at that comparison of where
you can almost make in one year of free agency
what you've made your entire career up to this
point. This is why the Players Association is
really trying to make sure players have access
to free agency. Their number one goal is to make
sure their playing members have money in their
pockets. And one of the ways to do that is free
agency. However, the majority of players never
make it to six years of service time to make
it to free agency. So do you make it accessible
earlier? Do you change the rules? Right now,
the PA is stuck between we want players to make
it to free agency. and get what their money is
worth. And realizing, okay, most of these players
are not making it to free agency. We're supposed
to be down on these team -friendly extensions
and players signing before they've really proven
themselves. But I think it's starting to realize,
hey, the hay's in the barn. Let's make sure these
guys get their cash and sort of encourage them.
To sign the deals, you look at Jackson Churio
signing an $80 million deal before he even made
his big league debut that can escalate up to
$140 million if every single team option is picked
up. You look at Colt Emerson with the Mariners.
You look at Kevin McGonigal with the Tigers.
Now you look at J .J. Weatherholt with the Cardinals.
We're seeing this trend really explode because
of two reasons. Cost control in the eyes of the
owners saying, okay. I don't have to worry about
arbitration rules changing. I don't have to worry
about this player hitting the open market in
six years' time when he's going to be priced
out for me. Now I get a couple more years of
this player's prime at a cost -controlled number
that I can budget for. And from the player's
perspective, I'm set. I've made my fortune. I've
done it. I don't have to worry about twisting
my knee and then being out for the year and maybe
never making what I'm supposed to make. The most
famous example of a guy that turned this down,
of course, and bet on himself is Jared Kelnick,
who continues to bounce around in AAA right now.
He was offered a nine -figure deal with the Seattle
Mariners. He turned it down. Maybe one of the
biggest regrets of his life, but so it goes.
That's baseball, Susan, because the way free
agency works is the sad thing is you're going
to overpay. It's the truth. You are going to
overpay for a free agent. Teams are understanding
that now, saying, let's go ahead and pay this
guy up front. We'll save money there and not
have to pay for the age 35, 36, 37, 38 year seasons
when he's inevitably going to decline. We all
talk about the Padres contracts that they've
got dealt out to Bogarts, to Machado, to Tatis,
that they're not going to age well because...
You just aren't as athletic as you were in your
late 30s. Teams are starting to catch on to say,
you know what? Let's just get it up front and
get the payment out of the way now. And one thing
that a lot of people have done studies into is
how much does one win above replacement cost
in free agency? Because you mentioned teams are
going to pay in free agency. And if you look
at someone who's still on their rookie deal or
still on their league minimum first three years,
they're not even making a million dollars. two
to four war player that you're paying a million
dollars for, that's a great deal. Because in
free agency, historically, and I'm accounting
for inflation here, from the 80s through the
90s and into the early 2000s, it was about $8
million per win above replacement. So basically,
that league minimum guy is making $1 million
and putting up potentially multiple war. You
can have some guys that are even like six war
guys. incredible bargain even in the arbitration
incredible bargain free agency you're gonna have
to pay 16 million dollars for a league average
two war player and that number has gone up since
around 2004 2005 the price of one win in free
agency is gone from 8 million creeped up to 9
10 right now the numbers that i've looked at
for recent contracts uh and and kind of charted
it out we're approaching 12 to $13 million per
one win buying it through free agency, meaning
you're going to pay $26 million a year for a
league average player, which is just, that's
why the players want free agency early. That's
why the owners kind of want to keep it out. But
one thing that does concern me, if we can touch
on. those deals that players have been signing
that gives the owners cost control, certainty
and gives the players their bag where they're
kind of guaranteed to make life changing money
is the rise in those has been dramatic. The last,
especially this year before we've had maybe two
or three players before this year that had never
had, I think it was three players before this
year that had never played a day in major league
baseball. that were in the minor leagues that
signed a long -term deal that covered all of
their team control years. I think we've had five
this year. We've had a large number. And that
concerns me because if the rules change from
the CBA negotiations and we get a cap and a floor,
that will almost certainly come with a decrease.
in service time required for free agency. You
got to give the players something in order for
the owners to get the thing they want. And the
owners signing all these deals with these young
guys, to me anyway, is a sign that they're pretty
confident about their push for a salary cap in
Florida. Yeah, and we'll see that moving forward.
And one thing we didn't touch on too, pre -free
agency and pre -arbitration is the new bonus
pool that the owners have paid into. It's a worthy
investment for these owners to essentially pay.
I believe it's 1 .67 million a year per team,
which goes into this $40 million pool or $50
million pool that gets divvied up for the top
125 players that are not yet arbitration eligible.
So for instance, when you... Factor in the value
and everything. Let's use Jacob Mizorowski as
an example. Right now, here at the All -Star
break, Mizorowski is making $788 ,000 this year
on his league minimum deal. But he will be one
of the top, if not the top, war producer that
is a pre -arbitration eligible player this coming
year. So he'll probably get a $2 -3 million bonus
coming up this offseason. from this $50 million
pool. And on the value front of that for Jacob
Mizorowski, again, he's making less than a million
dollars this year. It's like a quarterback being
on his rookie deal to use the NFL comparison
because you got to pay for quarterbacks and you
got to pay for pitching. Jacob Mizorowski to
date is worth $35 million if you were factoring
in what is worse. And that's only half of a season,
mind you. He could be easily... $40 to $45 million
by the end of the season for what he could be
worth for a team. That's why these players are
trying to get the money as soon as possible because
player careers are getting shorter and shorter
and shorter and debuts are coming later and later
and later. The peaks are getting suppressed.
You've got to strike when the iron is hot. And
that pre -arbitration bonus pool that you mentioned
is a new thing that came in the last CBA. I honestly
think one of the best wins. for the Players Association
that they've had in a while, one of their best
ideas and wins, making it so those league minimum
guys that are MVP, all -star caliber players
get a nice bonus. Paul Skeens last year got $3
.4 million from his pre -arbitration bonus. So
he's making $800 ,000. He gets $3 .4 million
on top of that, which still isn't close to what
he'd make in free agency, but it still is something
better to reward players that are on league minimum
but perform well above league minimum salaries.
But now let's say, Dom, you're in free agency.
You're going to sign your deal. And let's get
into the elephant in the room, the thing that
a lot of fans have been complaining about. You
sign your deal, and it contains a lot of deferred
money. Deferred money is kind of like the boogeyman
that people are pointing the Dodgers and saying
they're taking advantage of this. I don't know
your opinions on deferred money, Dom, but I've
been going through. business school the last
couple years and almost all my stuff is about
the time value of money i think it's a red herring
deferred money is not an issue when it comes
to the luxury tax or the dodgers dodging the
luxury tax if they didn't defer their salary
they still would have signed all the players
that they currently have they would just pay
them in present dollar values and i think it's
it's the fact that the owners put that into their
most recent proposal is something that the play
it doesn't impact the owners or the players.
That's more of like a for the fans. Hey, you
guys have been complaining about this. We're
going to get this. And I'll say the only benefit,
because if you go with the present value calculations
of how it works, it's not dodging the luxury
tax. The only benefit of deferred salary is players
get to dodge some state taxes. And in some instances,
yeah. Players get to dodge some state taxes because
money deferred more than 10 years is taxed wherever
you are at the time you receive the deferred
payment. So if Otani goes and leaves California
and goes back to live in Japan. he's going to
pay $0 in state taxes because his money was deferred
10 years. Now, I don't know if I just opened
a can of worms, but I'm going to pass it to you
to see your opinion on that. Well, I'm in favor
of deferred money. I think every ownership knows
it's available to them. I think every team has,
just about every team has done it for their mega
contracts to be able to say, hey, we'll give
this to you down the road because there are two
reasons you do it as an ownership group. Number
one, in the long run, As Shohei Otani, obviously,
he's making $70 million a year, but he's deferring
$68 million of it every year. So if I'm Guggenheim,
I'm saying, okay, you don't want me to pay you
$68 million this year. I'm only going to pay
you two because he's making so much on endorsements
otherwise. That's $68 million. I take that and
the S &P, and in 10 years, that $68 million is
going to be like $88 million. I am making money
off of this in the long term and paying you,
putting this, letting money grow, right? You
just talked about that. The value of money over
time, compounding interest, creating money from
within itself. In that regard, you look at Bobby
Bonilla. We just celebrated Bobby Bonilla Day.
His deferred money contract is the last of its
kind because it had interest included on it.
Modern deferred money contracts do not have interest
added to it, which is why Bobby is still getting
paid for another 15 years or whatever it is.
Shohei Otani is getting $68 million with no interest
per year once he is done with this 10 -year deal.
There is not interest on top of that. And you
talked about the taxes. California even introduced
and is trying to pass legislation that... If
you sign this contract in California, you thus
have to pay the taxes on this contract in California,
no matter where you're living. I haven't checked
the status of that recently, so hand up if that's
already been passed or if it's been shot down
or something like that. But it's going to be
an issue moving forward because every team has
it. Another example that I bring up is somebody
like Max Scherzer. I believe he's getting deferred
money from four. Different teams in throughout
his career where the big mega deal from the Nats
is a lot of deferred money When he signed as
a free agent with the Mets was deferred money
then when he got traded to the Rangers Part of
that bonus was deferred money, and now with the
Blue Jays and the Dodgers, some of it is deferred
money. He is going to be getting a lot of money
well beyond from three. His taxes are going to
be complicated. This is not a new thing. He's
going to move to Florida, and he's not going
to pay anything. Truly. I mean, this is not a
new thing. I think that's the number one thing
to hammer home about deferred salary. This is
not new. It's just become a bigger boogeyman
because the Dodgers do it. The Brewers have done
it. The Yankees have done it. Almost every team
has done deferred money at some point. The other
thing is what else has changed, and I haven't
been able to pinpoint exactly when this changed,
is how the reporting is done on these deals.
Because there were just as many, if not more,
deferred contracts in the late 70s and early
80s in the advent of free agency. But when they
reported the contract, if you look at Brent Souter,
Brent Souter's contract. was a, in present value
terms, $10 million total contract. All of the
deferred money he got, which his interest rate
was, I think, 13%, he got a $9 million payment
in 2021, I think, 30 years after he played with
the Braves. If you count up all his deferred
payments, all the money he made down the line,
his contract today would have been reported as
a $50 million contract. But at the time, it was
reported as a $10 million contract with a lot
of the money deferred. They used to report the
present value of the contracts. And I think only
in the last 15 years have reports been of the
future value of the contracts, which has changed
the perception of these deals. If they reported
Ohtani's contract. that he signed a few years
ago as a 10 -year deal at $480 million, the present
value, nobody would have blinked an eye at that.
No one would have said, oh my God, the Dodgers
are getting away with murder, highway robbery.
They're taking advantage of the league. But because
it was reported as a $700 million contract, it
raises a lot with 98 % of the money deferred.
it raises a lot more eyebrows than it did in
the past. That's just a personal opinion of mine.
I think the reporting is one of the things that
have changed the perception of deferrals. I think
that this is going to be something used heavily
in the future, which is why it is going to be
something that we need to pay attention to come
December 2nd of what is the messaging. I recently
compared it on a podcast I was on about the two
buckets. Everyone's focused on bucket number
one, which is salary cap. But bucket number two
is going to have, are there going to be limits
on deferred salary? Are there going to be limits
on how many years you can defer a payment and
how ownership works? That's going to be one of
the key things to monitor moving forward because
of the fact that players shouldn't mind deferred
money. They really shouldn't because I understand
the thought of. Oh, I want it now. And who am
I to complain about somebody else's bank account?
But I want all the cash I'm worth right now.
But at the same time, it's saying, oh, I can
be paid $10 million this year to live and to
do my thing. That's plenty. You're going to pay
me $20 million in 30 years when I'm done playing
ball. Yeah, I'm good with that. I'll take it
very much now. Ownership. Doesn't love to do
it all the time because it makes it harder for
them to sell a team and impacts their valuation
down the road. But ask the Padres. It did not
impact them all that much. That's a heavy first
segment. We're going to talk about licensing
later on in the show. That's another way players
can make money, but that can kind of fall into
the national at -large stuff. They're not going
to all be this dense, but those are basically
the... Easiest ways that we can give you the
business side from the player's view. All the
ways players can make money from on the field,
arbitration, free agency, bonus pools, drafting,
that sort of thing. That chapter was a dense
chapter. They're not all going to be this dense.
So we've outlined every way a player can make
money on the field. What about the people paying
them, the owners? There are two levels on how
the owners make money. First, on the local side,
everything that has to do with Detroit that doesn't
have to do with Los Angeles, that doesn't have
to do with Seattle, that doesn't have to do with
Atlanta, right? Each individual ballpark, infrastructure,
village, local media rights, parking, every single
team is different in their local side of things.
And then the second half of this segment is the
national view of the game. Broadcast revenues,
all -star games, playoff shares, international
revenues, merchandise, licensing, things like
that become more of a the game national view
to create revenue. Now, this chapter is all about
the local side of things. And the most important
way, Scott, to make money as a baseball team
could be media rights. It could be real estate.
It could be non -baseball events. The most important
way to make money is to get people in the door.
You got to sell tickets. The gate continues to
be one of the biggest drivers of revenue for
all of these teams. And as we talked about at
the beginning of the show, we have the books
on the Braves. We don't have the books on the
other teams. What we do have is baseball reference.
And baseball reference has the official attendance
figures for every single team. across Major League
Baseball. Now, another fun fact about all this
and something that the Society of American Baseball
Research has done in tracking the average cost
of tickets. Now, this goes to 2004 from the 50s.
Just take a wild guess here, Scott. How much
do you think it cost to watch baseball in, let's
say, 1956, 70 years ago? What was the average
ticket price to attend a game in Major League
Baseball in 1956? Oh, you're putting me on the
spot, but I would guess two bucks. I don't even
know. $1 .72. I was close. I was close. 70 years
later, we don't have a firm average on this,
but we know the Dodgers average about $90 a ticket.
The Yankees average about $95 to $98 a ticket.
It has become vastly more expensive to attend
a game. So you may be thinking, okay, great.
That means that... attendance continues to rise
and everybody's paying that. Not necessarily.
One of the things I think that's fascinating
about the current trend of the gate and how to
generate income from the gate is to create margins
on, you know what? Even if we only have 20 ,000
fans in the stands, we've charged those 20 ,000
fans more money to be here. So we have now made
the same amount of cash. With 20 ,000 fans in
the stand as we did maybe in 2005 with 36 ,000
fans in the stands. This is part of the dynamic
pricing that we see in seats. Obviously, a lower
bowl seat is going to cost more than a upper
terrace level seat. But now we see dynamic pricing
from section to section within the same. ballpark
or dynamic pricing based on demand and secondary
markets that aren't controlled by the teams have
something to do with that as well. But I find
it fascinating just looking at the American League
attendance totals here just for the sake of the
one that I pulled up here. In 1994, strike shortened
year obviously, one of the peaks of popularity
before the strike of that year, baseball was
averaging over 30 ,000 fans a game. That's not
an insignificant number. Averaging over 30 ,000
fans a game. Right now, in 2025, last year, averaging
about 26 ,000 fans a game. But again, because
of those margins, teams are making as much, if
not more money because of rising ticket costs,
different suite level packages, different premium
seating packages in order to make that money
back. Again, we don't have firm data on what
each team makes on their gate. But I think it's
fascinating to see that league attendance has
kind of stagnated right around 30 million per
year per league, right? So 60 million fans or
so per league in total in Major League Baseball.
That post -COVID, this is actually down from
pre -COVID. Again, are the costs lining up? Is
everything more expensive? But these teams are
still able to make money. And to give you an
impact and to give you a picture, Scott, of what
the strike did to the popularity of Major League
Baseball when the gate was everything in 1994
and in the 80s and the 90s. The drop from 94
to 95 after the strike. Again, they were averaging
in the American League 30 ,366 fans a game in
1994. 1995, that dropped to 25 ,000. 107 averaging
less than 5 000 fans a game and it dropped their
season total to 25 million whereas the previous
full year it was 33 million to show how drastic
a work stoppage can be to the gate into a massive
revenue generator for all of these teams you
need to make sure you are not only putting a
good product on the field but Listening to your
fan to say, stay on the field and keep playing
baseball. Things are a little bit different now
because of the size of stadiums too. Stadiums
have slowly gotten smaller to be baseball specific
and the baseball only. We'll talk about ballparks
in this segment too. But comparing the Dodgers,
who have more than 50 ,000 seats available to
them, the largest stadium in Major League Baseball,
to say the Trop and the Tampa Bay Rays, who average
about 12 ,000 fans a game. It's not the same
apples to apples comparison. However, these are
part of the net local revenues that teams are
pooling together to share with each other in
order to make sure that you stay afloat in the
revenue sharing model that is net local revenues
that when the Rays are not making as much money
at the gate as the Yankees and the Dodgers, they
can survive because they're getting a piece of
the pie from those other teams. You mentioned
margins and a really good example, a personal
example I have on margins is in the early 2000s,
I was going to college in New York. And a lot
of times on the weekends, we would go down to
old Yankee Stadium at the time, which has larger
capacity than new Yankee Stadium. But it was
always fun. The tickets weren't overly expensive.
I'd sit out in the bleachers, have a hell of
a fun time. And then in, I believe, 2010 or 11,
I went to my first game at New Yankee Stadium.
And the difference was stark. They basically
built this stadium, slightly less capacity, but
with a focus on luxury seats, with luxury boxes,
with really that ring around. The first couple
of rows behind home plate was where the priority
was. And the bleachers were an afterthought.
I thought, hey, I had a great time in the bleachers
in old Yankee Stadium. We'll get some bleacher
tickets, be out there and have a fun time. We
got and sat down in our seats, which is right
next to center field, where they had a giant
restaurant. And half of our view was blocked
off. We couldn't see left field. We couldn't
see half of the field because designing that
stadium for those bleacher seats was an afterthought.
Those aren't the money -making seats. The money
-making seats are the premium ones that cost,
you know, $500 a pop. And they have since fixed
that. That's no longer an obstructive view area.
They kind of made an opening in between the restaurant.
But for three years, they put TVs. up along that
concrete wall that was blocking our view so if
a ball was hit to left field you could see what
was going on it was that poorly designed because
again the bleacher seats were not the money makers
it was the afterthought in designing the stadium
and we can go back to the brewers they just had
a proposal to turn their first six rows excuse
me they just had a proposal to turn their first
six rows into a club level seat where they have
the trust club Where you can go hang out at the
club and get drinks before the game. And then
you pay a premium. You have to buy, I think,
a half season worth of tickets. I think $20 ,000
a seat to even be able to afford that. I think
for full season then is like $40 ,000 a seat.
And they're pricing out the average fan in...
The goal of trying to get corporate packages
that come in and buy a couple of those seats
and have their salespeople bring their customers
in and treat them to a game. Tickets that the
average person can't afford because those give
increasingly higher margins relative to just
a normal seat in the stadium. So as you mentioned,
attendance may be less than it was per game than
1993, 1994 today, but they're making. way more
money on the margins than they were back in those
days. And on that note, some of those big corporate
sponsors, they may have suites, they may have
access to these clubs. And under the... the guise
of, oh, they're paying $40 ,000 to be in these
seats. It doesn't necessarily work like a simple
cash transaction. There could be trades involved
with this where, hey, if you want to create some
signage in the outfield, or if you want to sponsor
some sort of program within the Brewers, you
know, I use, you know, to use the Brewers because
they're the team that we watch the most often,
Northwestern Mutual, right? Northwestern Mutual.
has the jersey patch they have an outfield sign
they have presence with the telecast they have
presence in the stadium right and on top of all
that they have multiple suites they have a giant
block of tickets available to them all this is
to say it's not necessarily just a cash flow
transaction with some of your sponsors where
yes you want the big ticket spenders to go into
these premium areas of your ballpark but at the
same time some of these deals are really just
trades where if i'm a private equity firm in
new york city Maybe I don't necessarily have,
you know, season tickets, but I pay for a half
season package of their, you know, luxury lounge
down there behind home plate to say, Hey, we
will pay for this half season tickets for us.
This is a write off for us. And we don't mind
that because we're using this for client business
and for trying to acquire people to, to help
out our organization and everything becomes kind
of a little of a trade of like, we'll scratch
your back here. We'll scratch your back there
in cash. Isn't necessarily getting moved around.
And to add to that point, the only time I in
my life have sat in a luxury box at a baseball
game was when I lived in Cincinnati and worked
for Procter & Gamble. And our section won the
raffle to be able to have our work section sit
in the luxury box there. If you go to a Cincinnati
Reds game today, count the number of PNG ads
you see littered around the stadium. Count the
number of PNG references they'll have on their
scoreboard when they do in -between inning ads.
This section is sponsored by... Procter & Gamble,
this section is sponsored by this. It's entirely,
and I think Procter & Gamble actually has a small,
small ownership stake in the team as well. Like
it is a transaction where they're able to lure
in Procter & Gamble to spend a lot of money on
the Reds by offering them a luxury box for employees
and for any other use they want to use. And Sportico
had a brilliant article recently about how the
home plate view, has become a billboard for all
of these teams, how it's changed in the last
15 years. These companies that are trying to
invest in the most premium camera view of a ballpark,
meaning you're now seeing behind the mound sponsor
next to the cleat scrape. You're now seeing,
obviously, the banner and the ribbon board right
behind home plate where that changes from inning
to inning. Then you've got maybe a painted on,
you know, laminated by brewers tickets at brewers
.com. Then maybe the back of the seats have signage
like you see in Cincinnati with the Lexus club,
or like you see in Atlanta with the Delta club,
or then maybe you have another sponsor that rotates
on a video board behind it. The amount of sponsors
that pop up now on that most frequent view of
home plate. I mean, it's NASCAR esque of how
many ads you see on the most frequent shot in
the game. Then you now see the augmented ads
when you, Cut to camera two, which is the high
home camera, and looking out to the field and
see the center field batter's eye now have, for
instance, Apple TV uses Verilux. There's a free
ad for you, Verilux, where they put in Verilux
on the hitter's eye as the presenting sponsor
of baseball on Apple TV+. There are so many ways
to augment and to create sponsorship opportunities
for these local revenues where, I've literally
seen it augmented on the local level. For instance,
the Brewers are playing in St. Louis and there's
a sponsor on the back of the mound that's not
a sponsor of the Brewers. You were able to augment
over that sponsor on the back of the mound and
put Northwestern Mutual or Pottawatomie or whatever
you need to put for your local broadcast, even
though it's not even in the ballpark. And I don't
remember what team it was, but there was opening
day this year, the camera view from center field
where you can see the pitcher and the batter
and everything. One team had it set up where
the entire, where the action is, where the pitcher
was, where the batter was, was entirely on the
left -hand side of the screen, and the right
hand was just so they could capture the billboards
behind home plate. And you'll also see it wherever
the Dodgers play. Even though a lot of teams
on national broadcasts have the green screen,
if the Dodgers play in Milwaukee, the static
advertisements all become in Japanese. They're
selling them to the Brewers are selling ad space
to Japanese companies because Otani is in town
for three days. And on the national ones, they
have the green screen so they can change it,
which a pet peeve of mine. is whenever one of
those ads have a bright color, like a yellow
or a bright red or something like that, it doesn't
really green screen that well behind the players
and you have these weird little artifacts. So
I think they should outlaw, or the league should
at least tell these companies, don't do bright
colors in your ads because it looks horrendous.
I think there was a Phillies broadcast. A couple
of weeks ago, I saw where the catcher's arm would
actually disappear every time you throw it back
because the bright color behind him was messing
up the green screen. And you had these like fuzzy
outlines on all the players. So just a pet peeve
of mine. The other thing about these local revenues
that you can generate that varies vastly from
team to team is where we get into the media rights
and where we get into how these owners are making
money based on their market and what they're
able to do locally. Media and television continues
to change literally by the day right now. And
everyone wants to compare the Dodgers as being
unfair, which it truly is. They got a billion
-plus dollar deal from Time Warner Cable at the
time, now Spectrum, to broadcast their game over
a 25 -year period. So they're getting $350 million
a year to broadcast exclusively on Spectrum aside
from the national broadcast deals. Most teams
are not getting a nine -figure deal from a cable
company, let alone, to broadcast their games.
Some of these teams are able to cook their books
with Nesson, with Yes, with teams that own their
own broadcasting entity within their own. Marquee
is a different story because the Cubs don't outright
own Marquee. It actually was being operated in
conjunction with Main Street Sports Group, which
was RIP Valley Sports. Each team has something
a little bit different. Not every team nowadays
make money on their local revenues, especially
now you look at the teams that are signed up
for MLB TV instead of doing their own regional
sports network. That costs money to get it up
off the ground. You look at what the Rangers
just went through this week in July. The Rangers
literally had to change sports providers in the
middle of the season. Because Victory Plus was
going under. Now they're using a different service
provider whose name I don't understand how to
pronounce. Ranger Sports Network, RSN. And it's
a mess right now. And that's something to monitor
for the 2027 negotiations. Because media rights
and local revenues, those don't go hand in hand.
Meaning your local media deal, the Dodgers, do
not have to share what they make off Time Warmer
Cable and Spectrum. with the Brewers, with the
Reds, with the Marlins, with all that stuff,
all those teams are left out to dry. You look
at it from a media market standpoint, obviously
the small market teams are not going to be able
to demand as much money to get a local media
right deal in their favor. Whereas if the Dodgers
are being allowed in the Mets and the Yankees,
these teams that own their own sports networks
to thus staff their own people. create their
own sponsorship nesting doll within their own
companies to keep all of that money because it
doesn't have to be considered net local revenues.
That's how the pay gap gets bigger and bigger
and bigger. You can make a little bit of money
on television rights, but if you're doing it
yourself, nowadays teams are realizing very quickly
how expensive it's been to produce games on their
own with the downfall of Fox Sports and Bally.
And now having to go to the MLB model with the
central fund and blackouts are still a thing.
It is a big chunk of revenue that is missing
from the majority of the league to not be able
to say, snap your fingers, and you're going to
get $50 million a year based on somebody who
wanted to broadcast your games. Yeah. Talk a
little about the 2027 negotiations and my wishes.
I honestly think the one thing. If you could
give me anything, it's not a cap or a floor.
It's not earlier free agency. It's not any of
this. It's that the league would completely share
local revenue because right now that is the largest
differentiator between a large market and small
market team. Yes, the gate can make a difference,
but the Dodgers, while they're doing very, very
well with their gate, they're not making 10 times
more than the next team. The Dodgers on their
TV deal. are making 10 times more than the smallest
market team just on their TV deal. So I honestly
believe a lot of the revenue disparity and competitive
disparity is based into these local TV deal rights
and how much money the teams make. On that front,
too. The future of blackouts and baseball being
available over the air, however you get it, whether
it be cable, whether it be on a local channel,
or whether it be on MLB TV, is going to be a
massive thing to monitor for the 2027 CBA. But
the catch to it is, we'll talk about this in
the national game in Chapter 3. But the catch
to it is that the media rights deals run through
2028, meaning the ESPN, the NBC, the Apple Plus.
That doesn't get to change until after the CBA
has begun. But the local can be negotiated right
now for a way to generate more income for some
of these other small market teams. We'll talk
about how the Dodgers were able to keep that
money and how that deal came about. in Episode
7 and 8, the 2000s, in the McCourt divorce and
how Bud Selig had to step in and make sure Major
League Baseball was running the Dodgers on their
behalf during this divorce because no one knew
how it was going to play out, of who was getting
what. It was a nasty divorce. It's actually fascinating
to read about, but we'll save that for the November
and October episodes of this podcast. Another
way that teams try to save money, though, and
try to create something locally is the government
is trying to get local state funding to help
them with their ballparks. This is nothing that's
breaking news. This is not a baseball -exclusive
idea to have. taxpayers flipped the bill on ballparks.
I don't have to tell you twice, Scott, about
how contentious it was for Bud Selig to build
Miller Park at the time, in 2002 finally getting
open, 2001 finally getting open, that even in
the 90s when he was trying to negotiate, it was
dead multiple times because people were refusing
to pay. for a millionaire into a new ballpark,
right? And wanting to foot the bill for that
sort of thing. The vast majority of modern ballparks
that have been built during the ballpark boom,
and we'll talk about the ballpark boom in the
90s episode, but it's taxpayer -funded, the majority
of them. I look at Lone Depot Park, right? It's
a shame that Lone Depot Park is empty as often
as it is. And they have a winning team right
now, which is fun. But it's in Little Havana.
People have talked about how... who are familiar
with Miami. It's kind of hard to get to. It's
not a great spot to do it, but the reason why
they chose it is because they were getting money
to build it there. In the percentage of Lone
Depot Park, 81 % of the total cost of Lone Depot
Park, then Bartland's Park at the time, was being
footed by the public. $580 million of taxpayer
subsidies were helping build Marlins Park for
a ballpark that took $716 million to build. The
majority of it, was done by the taxpayers you
look at the other end of that spectrum say the
new york yankees almost completely financed they're
actually leasing it from the bronx and owe the
bronx money every single year because the bronx
owns the land and owns yankee stadium essentially
even though it was privately financed by the
Steinbrenner family. Or you look at Truist Park,
where it was a big deal when the Braves were
leaving Turner Field in downtown Atlanta to move
north to Cobb County. Well, the reason why they
were able to do it is, yes, they got 40 % or
so of public money from Cobb County and from
the surrounding areas north of Atlanta. But they
were still footing a good chunk of that bill.
They were still footing $400 million to build
this ballpark. And by the way, it's a lease.
It's a 25 -year lease that they need to make
sure they uphold their end of it. They are paying
rent to live there and to house it. That's one
of the reasons that we're able to look at this
proxy report from the Braves and understand what
they're paying on an annual basis to operate
and to continue to own the battery and everything
around Truist Park. And as we see the unfortunate
side effect of this, not only taxpayers paying
the money, but that the teams can almost hold
a city hostage or a state hostage on saying we
will move out. I mean, I think the Royals, they're
going to be moving from Missouri to Kansas, Kansas
City, Missouri to Kansas City, Kansas. They're
talking about doing that because Kansas is going
to give them a more sweetheart deal. We're going
to have the Hammond Bears in the NFL in a few
years because Indiana. And the city of Hammond
gave them a sweetheart deal while Chicago and
Illinois were going, no, we're not going to pay
for this. So while there's been public backlash
against these deals, it ultimately comes down
to if they are asking for their government financing
and they don't get it, they don't get their taxpayer
financing, they will move. I mean, the brewers
would have lost. The Milwaukee Brewers would
not be in Milwaukee if they lost that vote to
get taxpayer funding for Miller Park. And it
won by one vote. And the guy that was the deciding
vote lost his job because of that vote. So really,
it's this thing of where there's public backlash.
But I can say as a Brewer fan, it would have
sucked to lose the Brewers. So I don't know how
I even feel about that vote. Yeah, I'm not a
fan of taxpayer funding of all of this, of having
to pay for the stadium and subsidize. you know,
Marc Antanasio or at the time Bud Selig's, you
know, company, but it would have sucked to lose
the Brewers. So if I were in that chair making
that deciding vote, I don't know how I would
have voted, honestly. I think the major selling
point at the time. was that there was competition
for expansion. There were other cities that were
actively bidding to get Major League Baseball.
And expansion fees are something that are going
to come up in the 2027 CBA of what's going to
happen if they're able to expand to 32 teams.
And that's a conversation for another time. But
right now, the threat of moving... is kind of
empty because realistic cities that can host
major league baseball are running out we know
the a's are moving to las vegas that's always
been a popular oh we could move to vegas vegas
is off the board uh you all assume that Nashville
is going to be one of those expansion teams whenever
that day comes. Could the other expansion team
be on the West Coast? Most likely. Could it be
Salt Lake City? Could it be Vancouver? Could
it be Portland? It seems like all signs point
to Salt Lake City. But the point being is that
if somebody... is trying to say, oh, we're going
to move. Look at the Tampa Bay Rays situation
right now. Tampa Bay has released new renderings
to say, we want to stay in Tampa Bay. They're
going to move over by the Buccaneers complex
over on the Tampa side, away from St. Petersburg,
and try to build there. While there are veiled
threats of maybe we'll go to Orlando instead.
And there aren't many cities that can realistically
say, we can bid and get this team to move. And
this is where the antitrust comes in. that teams
can do whatever they want they can go and hold
these city governments and local governments
hostage and i think that the way that they are
able to make this sales pitch and people can
roll their eyes at the sound of this and i sometimes
do myself they're always baseball and and sports
teams in general are always one of the largest
employers in any given state it's kind of fascinating
when you think about the private sector There
aren't many other organizations that pay that
amount of tax to the rest of the government.
So it becomes a handshake. Hey, we're employing
600 people. maybe even over 1 ,000 people in
some cases, in different levels of varying jobs.
You've got high -paying jobs within the front
office of these teams. You've got director positions.
You've got manager positions. You've got concessions
people. You've got cleanup crews. You've got
ground crew. You've got skilled work. You've
got so many different employees of a sports franchise
that these ownership groups are able to go to
local governments and say, look at all these
people that you're going to lose. Look at all
this income tax you're going to lose if we walk
out the door. and that's where the local governments
are caught in this oh man they're absolutely
right we cannot afford to lose 1500 people paying
their taxes to live in our city and as frustrating
as it is to say that a taxpayer paid for a ballpark
the taxpayers are the ones benefiting from the
ballpark so at least they get to use the subsidies
that they are providing Yeah, and it's even when
you get into the jock tax. So when Kyle Tucker
is making his $60 million with the Dodgers and
they play in Milwaukee, he's paying Milwaukee
and Wisconsin income tax on the money earned
there. So even though the Brewers may be on the
lower end of the payroll, those higher payroll
teams are also still paying tax in Wisconsin
just because of a weird quirk of how taxes work
for traveling professionals. The other part of
all the state funding and how ballparks get built
is what can you do around it? And real estate
has become a massive boom. I really point to
the Cardinals as somebody that with the ballpark
village, obviously beyond the left field wall
with new Bush stadium three to understand let's
make this as they call it. And I barf in my mouth
a little bit. Sorry, Cardinals fans, baseball
heaven. And quite frankly, you got to hand it
to them because they were one of the first to
say, let's create a whole ecosystem here where
people will come from all over Missouri, not
just St. Louis or all over the Midwest, because
they were for a long time a national brand to
say, let's make sure they spend their money on
our land and our businesses that we have a cut
in to make sure that. There's another form of
passive income for these clubs. And now the darling
of all this, the one that everybody is trying
to emulate and the one that we have plenty of
data on is the Atlanta Braves and the battery.
Yeah, it's it's it's this has kind of been something
that the Brewers may even do soon because they
have a whole bunch of parking space. They have
they might be able to add a parking garage instead.
reduce a bunch of that parking space and add
a ballpark village the bucks did that recently
uh in milwaukee as well they made a little they
made a bucks village uh what do they call it
again the i can't remember the uh the the deer
district the deer district they have the deer
district and it's not even in cincinnati also
has on the riverfront when i was there they have
a little baseball district and it's not even
just for games uh i know people that will go
out drinking around the stadium near the river
in Cincinnati just because it was a nice place
to be. It was nice real estate. There were nice
bars there. There were things to do. So it becomes
a thing where it can bring in revenue year -round,
not even during the baseball season. But I got
to say, if they call it baseball heaven in St.
Louis, I'd never heard that before. There's a
lot of ugly six -story... white parking garages
littered around that area for it to be heaven
i don't know that's the brew fan coming out in
you as well but when you look at the proxy report
from the braves one of the ways that they define
it the battery you know they talk about the battery
in this report but they define it as mixed use
development The reason why this is important
to point out, and not every team has this, right?
The Cubs are trying to do this with Wrigleyville.
And the Ricketts are buying up all the rooftops
and trying to create more space for them and
more land for them to buy and sell apartments
and that sort of thing. Or even the businesses,
Hotel Z across the street and some of the other
businesses when you go up Clark and you see all
the stuff that is on Cubs -owned land. Mixed
-use development. does not need to be put into
net local revenues. This is where the definitions
and the ways that you can keep money can be cooking
the books in a way. The Braves have no obligation
to have to share the money on real estate that
they own on the ballpark. They have to share
the gate revenue. They have to share licensing
revenue. They have to share merchandising revenue.
They all share national TV revenue, but the Braves
don't have to share. the amount of stakes they
sell at that steakhouse across the street there
in the Battery with the Tampa Bay Rays, that's
why mixed -use development has become so popular
because it's a way for you to generate income.
You've got to bite the bullet early when it comes
to land acquisition, construction costs, and
that sort of thing. But at the end of the day,
if you create an environment that can... Be a
consumer friendly area where everybody can get
what they want. There are apartments disguised
or parking garages disguised as apartments in
there at the battery, too. It's really a genius
way to try to circumvent how much money is leaving
the Braves and revenue sharing. And it said they
could keep in their own pockets. And as far as
it being a growing year over year. something
for the Braves, since we have their official
numbers, their mixed use development revenue
in 2023 was about $60 million. In 2025, it has
just gotten to the edge of $100 million, almost
doubled in just two years. And we may see this
go up and up and up as they continue to develop
the area around there. And as far as the costs,
we're talking about margin on seats. The margin
on this mixed use development, dwarfs the margin
for the Braves on their baseball revenue and
baseball operating costs. For the baseball revenue
on the Braves side, they had $635 million in
2025 and their operating costs were about $500
million. So for every dollar they earn, about
85 cents of it is going out the door in costs.
For their mixed use development, almost 100 million
in revenue in 2025, their costs were 15 million.
So for every dollar they earn, they're keeping
85 cents, not losing 85 cents, which is just
an incredible margin. compared to the baseball
side of things. You have a million acronyms that
you can look in this, and I'm not a business
guy. You're in business school right now. The
operating income before, I don't know, is it
OBTA? Well, there's different terms. The Braves
use O -I -D -B -A, but a lot of companies in
the business world use E -M -B -I -T -A, which
is almost kind of a running joke. Because when
you look at these financial statements, You have
the things that are required to post. They're
required to have an income statement. They're
required to have a balance sheet, a cash flow
statement, a retained earnings statement. Those
are the things required by law and are governed
by the accounting principles, gap accounting
principles. And then each company, this isn't
just baseball. You see this in a lot of companies.
They'll create their own. little thing they'll
make this summary of their financial statements
and create their own you know definition of net
income for the braves it's adjusted oidba for
a lot of companies it's ambita which is basically
let's ignore depreciation amortization uh for
i believe i'm bit it's like let's ignore taxes
as well let's ignore a lot of these things and
give you a summary that's because these companies
want you to buy their stock Let's give a summary
that gives the rosiest picture possible. And
the Braves definitely do that. For any financial
statement I look at, I almost ignore that summary
first page because it's them trying to tell you
a story. To give you the operating income before
depreciation and amortization, the OBTA, however
we want to pronounce it, maybe some baseball.
Some business baseball man is cringing as we
say that. We're not business guys, okay? I am
reading a report. I am trying to figure out and
talk to people that I know. They are essentially
saying before depreciation, before amortization,
before taxes, before all that, they made $107
million last year. Now, there are taxes and there
are more expenses that go into on top of that.
That's why it's not just a firm number. on Liberty
Media's proxy report. But I highlighted something
interesting in the proxy report, too, just below
that, when you look at baseball revenues specifically.
Baseball events, they made $357 million, so that
is ticket gate, that is concessions, that is
that sort of thing. Broadcasting in 2025, they
made $188 million. Then retail and licensing
is another $46 million. Other is just a catch
-all for 46 mil. So the baseball revenue that
the Braves reported last year, just baseball
revenue, was $635 million. They also, in this
report, talk about what their baseball cost is
when it comes to employment, how much money all
their salaries, not just baseball salaries, but
coaching staff, front office, that sort of thing,
and how... They are still making a profit. And
here's the sentence that I highlighted from this
proxy. Baseball event revenue increased by nearly
$10 million from the year ending 2025 as compared
to the prior year. primarily due to the contractual
rate increases on season tickets and existing
sponsorship contracts, as well as new premium
seating and sponsorship agreements, partially
offset by reduced attendance at regular season
home games. If you know anything about the Braves
in 2025, they didn't make the playoffs. They
were not a very good team the majority of the
year, and they still made more money. That's
how this business works. Yeah, it's kind of incredible.
It's what's funny, though, is when the first
year the Braves were public was their previous
year was the World Series year. So there was
this kind of interesting picture of where they
weren't a high payroll team that year. Like their
payroll has more than doubled since the World
Series year. But their revenue was still kind
of up there. They made a lot. So it was interesting
seeing their reactions to the first year of the
Financial Braves statements because what they
got that year was about the maximum profit a
baseball team could possibly get in the last
five years. And it happened to be the first time
it was something like that was declared public.
So I kind of found that funny on the outrage.
But the thing you point out, if you look at the
revenue for that. World Series year and their
revenue today, they're making more revenue today
than they were then. The thing that's changed
in that time regarding their overall profit is
they've signed a lot more large contracts in
those five years. And that's really been the
only difference. They've shown year over year
growth on the revenue, growth on the both baseball
revenue and both mixed use area revenue. And
they're in this proxy. We can also see their
employment agreements here. This includes baseball
payroll and includes their front office payroll
and everything else that goes into it. They pay
$730 million in compensation to their employees.
That includes the baseball team, I understand,
which is operating north of $200 million of that.
So, I mean, you can argue nearly $500 million.
Being paid to people not on the field. I think
that's a really important smoking gun to point
out here that look Not everything is just guaranteed
to make cash. And this is the Braves, let's be
honest, a very successful franchise, a very well
-run organization with a fantastic fan base.
They have an entire region that's a fan of them
because they have Alabama, Mississippi, the Carolinas,
Tennessee, even parts of Kentucky are more Braves
fans than Reds fans. It's kind of surprising
to hear that. And even parts of North Florida
are massive Braves fans too. And they're still
operating with... a lot of debt with a lot of
employment agreements on top of what it takes
to put out a winner every single year. And they
try to stay below that luxury tax line as much
as they can. It's $244 million this season because
the other $500 million they got to pay to the
rest of their employees. Those people want raises.
Those people want benefits. Those people want
pensions. All of this is just like any other
business. Just because you work in baseball and
it's a cool business and all, yeah, it doesn't
mean you don't want to raise. It doesn't mean
you don't want the same benefits that a regular
person working a nine to five would want. This
is an important and we'll drop the proxy report.
It's available for anybody on the Internet. You
don't have to be a shareholder to access this,
but I'll put it in the sub stack to go with this
episode. And you can read through it and learn
from this because it's fascinating to really
finally see how big the numbers get when you're
trying to operate a successful Major League Baseball
team. Well, the interesting thing is I did a
comparison because the Braves are the only publicly
traded. baseball and major league baseball team
that has to by law post their financial statements
but I looked at other professional sports teams
that also are publicly traded and there's the
Madison Square Garden sports group which they
own the Knicks and the Rangers and then there's
the Manchester United football team football
club and those are the only two other major sports
teams that I was able to find. I tried to find
the Green Bay Packers numbers, but because they're
a nonprofit, it works differently. I wasn't able
to get that. But we can see a similar trend on
how these sports teams operate. Because if you
compare their financial statements to other companies
that operate differently, it's kind of eye -opening
how these companies operate. I kind of brought
it down to the personal finance level. What would
it be for you or I to be able to start a business
that's similar to a professional sports team?
And a similar thing would be to buy a house with
a mortgage and then Airbnb it throughout the
course of that mortgage. Basically, you are starting
a mortgage. Your total assets is going to equal
that house, but your liabilities are almost going
to be 100%. You basically have no equity in the
house. You're all debting. Sports teams, you
look at how much debt they have to their equity
versus their assets. They're almost entirely
debt financed. So what's the benefit for you?
Well, you get this house. You Airbnb it out.
The money you bring in pays for the mortgage.
The money you bring in. makes it so you will
now own a little bit more of that house year
after year. And you won't pay taxes on any of
that money because the cost of your house, you're
going to depreciate that out for, let's say you
do a 15 year mortgage and you depreciate it out
15 years. Every year, one 15th of the house of
that cost is going to be deducted from the money
you make. The property taxes you pay on that
house are going to be deducted from the money
you make. There is no way if you do this business
that you're ever going to pay a cent in taxes
because the things you owe, the liabilities you
have, make it so you'll never cash out. It's
why the Braves don't pay a dividend. It's why
Madison Square Garden Sports doesn't pay a dividend.
It's why the Manchester United don't pay a dividend.
Because on the bottom line, they're not really
making a lot of money year over year. So what's
the benefit of you doing this plan of... buying
a house, starting a mortgage, running it out
through 15 years. Because 15 years down the road,
when that house is paid off, you have an asset
that you own entirely, and now you can sell it
to someone else. Or you can live in it for the
rest of your life. I don't know. But for these
sports teams, you constantly see ownership changes.
You constantly see deals to bring in more financing.
The Yankees just made the news. They're looking
for a $3 billion financing deal right now. These
teams will constantly leverage up their debt.
Madison Square Garden Sports Group, their debt
is more than their assets on hand. Basically,
they have $3 billion in assets. They have $3
.5 billion in debts. It's kind of crazy that
any normal business, you go, this is not a way
to operate. But for sports, they have such...
consistent income streams that are constantly
going up that can cover the interest on their
loans, can cover the depreciation costs, can
cover all these things that it costs to do a
sports team. So while they're not making money
at the end, over the long haul, they can either
use those assets, use those stadiums they own,
use those player contracts to either get more
debt financing, bring in more money, or be able
to sell and cash out. The last thing on making
money on a local level that is starting to grow
and be more popular is non -baseball events.
So for instance... I'm a music guy, and Noah
Kahn has been doing a bunch of ballpark tours.
John Mulaney just did Wrigley Field, the first
comic to ever do Wrigley Field. The Savannah
Bananas, they pay to be in these ballparks in
major league facilities, and that ticket revenue
is then kept. in part from the Bananas and from
the team that hosts them. You've got concerts,
you've got trade shows, you've got other things
that happen. Now, not every team is able to host
these sort of events where you're able to generate
non -baseball revenue. For instance, you think
of somebody like the Yankees and the Red Sox,
they host a bowl game every year that... Other
teams just don't host a football game at their
ballpark. Wrigley hosts a college football game
too once their season is over. That's more revenue
that doesn't have to be reported back. Now, I'm
not saying it's a significant amount of revenue
that is going to be given back, but concerts
and... ancillary events are starting to increase
a way to generate some income that can be all
kept. That's what all of these owners and local
ownership means. They want to be able to keep
as much of this money as possible and not put
it into the net local revenues pot where we're
talking parking, we're talking ticket gate, we're
talking playoff shares, that the more money they
can keep for themselves, the more they can invest
it. back into their team and pay down with a
lot of these teams they carry debt actively most
successful businesses do carry debt you're not
always in the green moving forward so when you
are able to create a variety of events that aren't
just baseball games right you look at the braves
they had the savannah bananas for three days
they've had a country music festival they have
multiple other concerts throughout the year they
get paid twice because they're having a non -baseball
event at the ballpark those tickets that all
that that goes into that. And those people are
probably going to the battery. Those people are
all probably hanging out, paying for parking.
They are probably all getting a dinner, they're
getting a drink, whatever. None of that is going
to the rest of the teams, which is why everybody
is envious and why every modern ballpark proposal
includes some sort of district owned by the teams
in the surrounding areas. So these owners make
money locally in a variety of ways as we just
talked about. But how do they all pool it together?
How do they work together to make more money
for the entire game and to make sure that there
is a guaranteed income coming in in a variety
of ways? It can be national broadcast revenues.
It can be international revenues. It can be licensing.
It can be playoff shares. But the event that
we want to start with, Scott, is the event that
just happened. The All -Star Game. What a show
Philadelphia put on, what it meant for the city.
Obviously, they've had a lot of events for America's
250th, but even last year, when you look at everything
that went down in Atlanta and how much fun that
was, All -Star Games are a massive piece of the
game's income at large, despite being a very
expensive event to operate, but why this is so
important for both players and owners to make
sure the game at large is making money at the
All -Star Game. Yeah, one thing when looking
into the All -Star game, I tried to find year
over year if we can find numbers of how much
the league is actually making, which it's a little
convoluted because in trying to sell the All
-Star game, they include a lot of local revenue
in those numbers. Like, hey, local businesses
will make this. So this was the immediate impact
on the local community. But the best estimates
I can get is the league makes about 50 to 80
million dollars. on the all -star game and the
and that goes into the pool that gets shared
amongst all the teams but the thing that kind
of stands out for the all -star game is the players
almost get nothing the winning team the winning
team of the all -star game all the players on
the team split eight hundred thousand dollars
but you think of how many players are on a playoff
roster how much a player makes a year they're
splitting the salary of a league minimum player
amongst you know 20 -some of the most highly
paid players across the league. And compared
to the $50 to $80 million, that's 1 % to 2 %
of what the All -Star Game brings in goes to
the players. The rest goes to the owners. They
were having problems getting players to sign
up for the Home Run Derby, so they had to put
this little incentive. And it's interesting for
someone who might be a league minimum player.
with the winner getting $1 million. And this
is a newer thing. They can double their salary
now if they sign up for the Home Run Derby. So
you get a lot of younger guys that play the Home
Run Derby. Second place gets $150 ,000. And they
even do small little incentives. Like if you
agree to do an in -game interview in the field,
you get $15 ,000 of pay. So when you see that
player that's got that little pack in their back
pocket and is being interviewed while in the
field, he's getting paid $15 ,000 for that. The
other thing on the all -star game and the other
benefits the players get, it's all listed out
in the collective bargaining agreement of six
complimentary tickets for everybody that goes
there. They don't have to pay face value on that.
Generally, in the postseason, you're paying face
value for tickets. I think that's another misconception
that we see a lot in baseball. People all assume
that players are getting tickets for free. They
are not free. You are paying taxes on those tickets
that you give away. And then in the playoffs,
you only get a small portion that you're allowed
to give away. And you are paying face value for
those tickets. I mean, the joke is if you have
a big group on your opening day or if you're
going back to your hometown, oh, you're playing
for free this week because you got to give away.
30, 40 tickets to the people that you know and
you love and that sort of thing. It's a big deal
if they get six complimentary tickets without
taxes from the All -Star Game for everybody that's
going. They get first -class travel accommodations.
They get a stipend for meals and that sort of
thing. They get mementos and gifts for their
5th, their 10th, and their 15th All -Star Game.
There are other little notches to sweeten the
pot for the players on the All -Star Game. So
how does the pot get sweetened for the owners?
Well, locally, Philly makes money. the city at
large to put their stadium on full view major
league baseball operates the all -star game Philadelphia
staffs the All -Star Game. It gets very tough
to decide what teams want to have the All -Star
Game because it is such a burden on these teams
and on these cities to be able to do so. You
think about the All -Star Village where you take
over the convention center for the week and you
have all these activations from every brand other
than the Sun. All those brands are paying to
be there to Major League Baseball. All these
fans are buying tickets to come to the game.
or they're buying tickets to the Home Run Derby
on top of the national media rights that help
pay for, like you're talking about, the winning
bonuses. Everything else is really kept by ownership
in order to make sure that this goes into the
central fund and everybody makes money on the
All -Star Game. Yeah, when you talk about people
bringing up revenue split. amongst the players
and the owners. The number like 50 % is always
thrown around. But if you look just at the all
-star game, the revenue splits like 4 % for the
players, 96 % for the owners. But something that
also brings in a lot of money that gives a little
bit better revenue split for the players is the
playoffs. It's still less than the regular season,
but it gives them a little bit more. But I'm
going to bring up kind of an old wives' tale,
old story about Marge Schott. Do you know this
one, Dom, about the 1990 World Series? It's better
if you tell it because I won't be able to hold
myself back. So the Reds swept the World Series
in four games. And after the game, the Reds were
going to celebrate in the clubhouse. And Marge's
shot was... apparently so angry that the series
ended early even though her team the team she
owns won a world series she was so angry that
it ended early depriving her of additional revenue
for games five six and seven that there was no
celebration in the clubhouse i believe it was
one of the sports writers had to go out and get
hamburgers for everyone at fast food and bring
it back and they ate it in their hotel rooms
that was their celebration regarding winning
the world series in four games and there's a
lot of People have said, oh, that can't possibly
be true. Game 5 was going to be in Oakland anyway,
so it's probably made up, even though the sports
writer that got the hamburgers confirmed that
they did that, and a couple other players have
confirmed later in life that that is what happened.
But the reason why I put a little credence into
that story is how revenue and sharing the player
pool works in the playoffs. 60 % of every playoff
games gate, but only the guaranteed games. Meaning
if you're in a five game series, only the first
three are guaranteed to be played. So they get
60 % of the first three games. Games four and
five go 100 % to the owners. Seven game series,
the first four games, players take 60%. Games
five, six, seven, 100 % goes to the owners. And
it's not the team that hosts. If the game was
in Oakland, The Reds and the A's split that fully.
So when you break it down on how much is made
in the World Series, how much is made per game,
game five would have brought in almost doubled
the amount of money that Marge Schott would have
made in that World Series if they had just played
a game five. And that's why I put a little credence
into that. I think I did a breakdown of, I did
this a while ago, of... Taking World Series revenue
today, kind of inflation adjusted back to then,
it would have been something like Marge Schott
would have made $6 million in games one through
four. And then game five, she would have made
$4 million. Game six, another $4 million. Game
seven, another $4 million. If this had gone to
seven games, it would have tripled the amount
of money she could have pocketed. The way that
last year's playoff shares worked, and you look
at it, it's a perfect example as a seven -game
World Series. And let's also be very, very clear.
It was a record -setting playoff share given
to the players, too. It's already agreed upon
that they get 60 % of the guaranteed games. The
reason you do that is a safeguard. to make sure
that nobody's throwing games to make them go
longer i know that sounds silly that would never
happen dom do you know that for certain because
we have history that tells us it's happened before
yes it was a hundred years ago so for instance
You look at this year and the player pool and
how much was retained between the owners getting
extra games, right? You only had one extra game
for the Phillies and the Dodgers and the DS.
You had two extra games between the Brewers and
Cubs. I'm just using the NL. But you didn't get
any extra games for the Dodgers sweeping the
Brewers. But then you make that up again with
a seven -game series in the World Series for
the Dodgers. And by the way, they also only won
their first two games in the wildcard series
against the Reds. So there's no extra game. in
that one too hypothetically retained by the clubs
you know you you've got 234 million dollars to
be dispersed across all 47 games but of those
32 that are guaranteed that's 64 million dollars
right there so the the clubs got to retain 77
million dollars last year from the extra games
getting played in the playoffs meaning Game three
in Wrigley against the Padres and Cubs. Games
four and five when Wrigley and Milwaukee between
the Brewers and Cubs. Or even you look over in
the American League side, that also went seven
between Detroit and Seattle. And you look at,
or I should say Toronto and Seattle, and you
look at every single extra game adds up in favor
of the owners. And everyone that says, oh, making
the playoffs is net even. In fact, Mark Ananasio
has said this as such to the media in an on -the
-record session where... Making a wildcard series,
even hosting that wildcard series, and Mark Adonacio's
own words were, you about break even when you
factor in labor costs and extra costs for parking
and everything else. You about break even if
you don't make it out of the wildcard series,
which is simultaneously hard to believe and sort
of understandable to believe because... There
just isn't that much money in the wildcard round.
It's not until you get later and later do you
start getting more of the share. Because the
way that that playoff share works, that total
sum to be shared, 157 million of it, 3 % of it
goes to the wildcard losers. So that's four teams.
So that's now 12 % of it. Then 13 % of it goes
to the division series losers. It's another four
teams. 24 % of it goes to the... Championship
Series losers, so last year that would have been
the Mariners and the Brewers. And then the World
Series loser gets 24 % of that playoff share.
And then finally, the World Series winner gets
the majority of it, 36 % of the playoff share
goes to the World Series winner. So the longer
you play, the more money everybody makes. That's
how it's supposed to be. But from the player's
perspective, you only get the guaranteed cash
from those games like you talked about, the owner's
pocket, everything else, which is why... Every
time you see a long series, the owners are smiling
and they're happy and the players know they're
essentially playing for free. Yeah, you mentioned
that on an osteo quote. There is one thing I
think he's omitting there is the television deals
are not playoff specific. They sign these national
television deals for the whole season. So he's
probably not counting that revenue, which is
a substantial amount of the television revenue
is because playoff games are all televised nationally.
But if he counts that, they're making still quite
a bit. But they make a lot more if they get into
those later games. But another interesting thing
about the playoffs is the players get a share
of the revenue, but they don't get paid their
salary. It's basically an unpaid period. You
only get that player's share after the fact when
they calculate out how everything's divvied.
So from an owner's perspective, it almost becomes
pure profit compared to the regular season. And
one way we saw this play out was 2020. I don't
know if you remember when COVID happened during
spring training and the season was shut down.
Around, I'm trying to remember exactly when,
I would say around the end of May, there began
discussions of reopening the league back up and
starting the regular season. A sticking point,
I believe, my theory is that they still could
have gotten in like 110 regular season games,
but the players wanted prorated salaries, meaning
they get paid the same amount per game. These
games are not going to have any fans, so you
have no gate. And on top of that, the television
deals will be a little bit truncated, but what
brings in the television deals are the playoffs,
and the players don't have to get paid. Their
normal salaries in the playoffs. So from the
owner's perspective, any regular season games
they have, they got to play the payers, pay the
players the full amount with no fans in the stand,
no gate. It's going to lose the money. So you
could see this in the negotiations. They kept
stalling until the last possible second, which
ended up being a 60 game season because and then
expanded the playoffs because this means they
don't got to pay the players as much. They don't
have as many of these games that are going to
lose the money, but they still get their playoff
money, which is going to bring in the bulk of
the TV revenue, is going to bring in a period
where they don't have to give anything to the
players because if there's no gate in the playoffs,
which they actually ended up having a gate, if
there's reduced gate because of COVID, that doesn't
hurt them in any way. They're almost making pure
profit on the playoffs. And yeah, again, it could
have been a 110, 120 game season there wasn't
that reason why the owners wanted to stall. Now
that's kind of a theory on my part, but everything
in negotiations kind of leaned towards that.
They wanted as few regular season games, but
still have it be enough to be legitimate to have
a playoff, which they expanded in order to make
their money back. Yeah, that's going to be a
big negotiation piece we talk about in Episode
8 of this podcast series as well. But you talk
about the national media rights and the national
TV deal. That's $2 billion a year that gets divvied
up across the teams. It is such an important
piece of what you're guaranteed to make on a
game -at -large revenue basis. So the ones that
pay into the rights to broadcast these games,
obviously Fox has the World Series. and the All
-Star game, the marquee events. They have a whole
league's postseason every year. They pay the
biggest sum of any of the media rights holders,
$730 million annually to have division, championship,
and World Series, the All -Star game, exclusives
throughout the year, also some side -by -sides
with FS1. They have their own content ecosystem
around it and that sort of thing. So the Fox
are the biggest payers. Then next, you've got
ESPN. Now this is a little complicated because
Major League Baseball just sold its BAM, the
Major League Baseball Advanced Media, entity
of MLB .TV to ESPN for them to handle the distribution
and the rights of MLB .TV this year. So Major
League Baseball exchanged the lump sum of them
operating MLB .TV. for handing it off to ESPN.
Now, why would ESPN be interested in doing that?
They want to generate the revenue of their own
subscription model because it comes with a year
or a month of ESPN Unlimited. They're hoping
they can keep some subscribers on that front
because everything's all a cart these days of
being able to watch sports is getting harder
and harder and harder. But ESPN still has some
games. They have some midweek exclusives, but
they obviously opted out of Sunday Night Baseball.
while simultaneously buying MLB .tv in order
to distribute it through the next couple of seasons.
Next on that list is TBS. TBS has been broadcasting
baseball games for over 50 years. They pay $470
million for exclusive rights to the postseason
mostly. Now, their Tuesday night side -by -sides,
which I work on, those games are not blacked
out. all the time they are sometimes blacked
out but it's a reminder they're not national
exclusives during the regular season there's
a difference between like forcing your team to
be on friday night apple being on sunday night
on nbc being on saturday against on fox tbs's
tuesdays are side by sides they are with the
local broadcast happening two booths over so
their pay goes is smaller than what fox's is
because they don't have the national blackout
of sort of This is a national excuse for us.
But in the postseason, it becomes national where
they have a division series and a championship
series on the side. And one thing I think it's
brought up a lot is blackouts. You know, fans
hate blackouts. And there's been a lot of talk
about the league trying to get rid of blackouts.
I want to make a clarification. When they say
blackout, they mean local blackout, meaning you
get MLB TV and you're in St. Louis. You can watch
the Cardinals on MLB TV. in which we've seen
with like Brewers TV for Milwaukee, that gets
rid of the local blackouts. I can watch any locally
broadcasted Brewers game living in Wisconsin
on Brewers TV. National blackouts, those are
never going away. That is way too much of a moneymaker
for the teams. So no matter, you know, a lot
of people got mad because Brewers TV advertised
no local blackouts. And they assumed, oh, I get
162 games. Now you still only get like 154 because
they're going to have those six that are going
to be on Apple TV+. You know, TBS, Fox, if they're
going to have everything on these other channels,
ABC. Those are never going away because as you
said, those national media deals, $2 billion,
that's almost 20 % of the entire league's revenue.
And the only reason the Foxes and... Apple TV
pluses and Netflix's are paying this money is
to get exclusivity. So you have to buy a subscription
to them to watch these games. That's the whole
reason they're paying this amount of money. And
the major league baseball is not going to give
up 20 % of the league's revenue over. half a
dozen to a dozen games a year being nationally
blacked out. So when you hear that conversation
of getting rid of blackouts, national blackouts
are never going away, at least under how the
current system works. And any proposal that's
brought up that mentions getting rid of blackouts,
they're specifically talking about local blackouts.
That's a confusion I see all the time. Every
time the Brewers... have a nationally broadcast
game. There are a number of people that go online
complaining, hey, it said no blackouts. And then
now they have this game on Apple TV Plus and
I can't see it. It said no blackouts. And you
didn't see the little asterisk that said subject
to national blackouts. Exactly. And people found
out this week with the Home Run Derby being on
Netflix. I think everybody was used to it being
on ESPN. Netflix paid $50 million to have an
opening day game, the Home Run Derby, and they'll
also have the Field of Dreams game next month
as well on their air too. So that's why their
number is so low because they're only doing really
three events. They also got the rights to the
World Baseball Classic in Japan. More on the
international revenues in a moment. You also
have NBC getting into the fold. They bought that
remaining share from ESPN. They've foregone Sunday
Night Baseball, so NBC took it. They also get
Peacock Sunday leadoff to drive subscriptions
to their web -based platform, to their streaming
platform. They also are now going to be the ones
doing the wildcard round. NBC is. ESPN did it
in the past. ESPN no longer does the playoffs.
It is going to be NBC doing the first round of
the playoffs. Then, this year anyway, the National
League is going to be on Fox with the Division
Series, on Fox and FS1, and the American League
is going to be on TBS with... The AL playoffs
moving through the DS and the CS over there.
But NBC also got the first day of the MLB draft.
They have the Futures game. They have special
event games as well. So they are trying to get
a bigger footprint. But none of that is going
to change until after the 2028 season. That $2
billion number, in theory, should be going up.
It's gone up every year because these entities
are willing to pay that to get live sports. Now,
a last couple of bullet points here in this national
game chapter of the business. International revenues
is not a massive piece of the puzzle for Major
League Baseball. It has only become more popular
lately because of NHK's desire to broadcast as
many games that Shohei Otani plays in back in
Japan. Major League Baseball gets a small cut
of that. The World Baseball Classic is a massive
revenue generator. for federations of each individual
country and the rights holders, right? Netflix
getting the rights in Japan. Fox paying in that
$730 million to have the World Baseball Classic
stateside. Also, these teams are getting revenues
locally. Miami getting local revenues. for the
finals and having sellout crowds for these games
in March if they wouldn't have revenue otherwise.
Or you look at Houston hosting it this year,
Arizona hosting it in the past, San Diego hosting
it in the past. That's revenues for those teams
too. And furthermore, the international broadcast
rights. You've got the MLB International feed,
which is the World Series in Europe. other developed
countries around the world. Canada has its own
Sportsnet international feed as well. Japan has
its own international feed. Korea has its own
international feed. And that's a whole different
rights package for all of these clubs. And finally,
the last thing about licensing and about how
players can make money in this too, trading cards
and player likeness and being able to use, hey.
all the controversy of Bryce Harper this week
dealing with a cameo ad for FanDuel, it turned
out, because sports gambling continues to be
a rise. There was a lawsuit settled earlier this
year from DraftKings and FanDuel using players'
likeness without the permission of MLBPA. And
it became a settlement and another lump sum that
comes over to MLBPA and MLB Players Incorporated
is the entity that is their licensing and using
their likeness. That's where you... See MLB The
Show. That's where you see Topps trading cards.
That's where you see different levels of merchandise
that could be sold with permission of the player's
likeness. One of the things that the Players
Association has done with that money from licensing
right now is they have made that licensing, normally
it's a payout to all players. It's not just,
yes, Aaron Judge and Shohei Otani are the most
marketable players in baseball, but it becomes
a lump sum that gets then distributed to... players
amongst the union on these licensing deals where
you get there's one of one refractor pack of
somebody's debut patch that the money that's
generated from these boxes gets shared amongst
the league and gets shared amongst players around
the league so just because you're the most marketable
player in baseball doesn't mean you're keeping
all that lump sum for yourself when it comes
to licensing but if it comes to a personal event
or a personal sponsorship then you get to keep
that money if Aaron Judge is paid by Air Jordan,
right? Or if Jacob Mizorowski is paid by New
Balance, Shohei Otani is paid by New Balance.
So those are the ways that they keep their money
while licensing gets pooled across all of baseball.
Fashion is another fascinating thing where you
go anywhere, the Yankees hat and the Dodgers
hat are everywhere in Europe, in South America,
in Japan. They are the most popular logos and
some of the most recognizable logos in the world.
They don't get more money. The Yankees and the
Dodgers don't get more money because their hats
are being worn in Japan. That gets pooled and
distributed across Major League Baseball. Just
because there are no Tampa Bay Rays hats somewhere
in Osaka, Japan, does not mean they're getting
hurt by the Yankees hats being purchased over
there because it's licensing and it's shared
throughout Major League Baseball. And the last
thing on the big game at large, this is where
one of my asides come in here, Scott. Fanatics.
Because... I can go on and on and on and on about
something just doesn't smell right here. And
that's not a very good journalistic thing to
talk about where just something doesn't smell
right. But you want to talk about antitrust.
You want to talk about a monopoly. Fanatics is
that and then some. They have every single step
of the merchandise. Every single step of the
merchandise world cornered. They have the manufacturing.
They have the drive shipping. They have the web
platform. They have the distribution. They have
even the rights to tops. They bought tops. They
bought Mitchell and Ness. They are buying up
these entities that were away that were officially
licensed gear. If it's licensed. Fanatics is
trying to buy it. And it's a monopoly. It is
scary. Fanatics Fest in New York City where they
have all these signings and these promos. That
stuff costs money. I am sitting here looking
at Fanatics. And I am looking at people complaining
about the quality of the jerseys that they are
receiving. The workmanship. Errors that they
continually make. While simultaneously, Michael
Rubin is hosting an all -white party with every
celebrity you've ever heard of on the Hamptons.
And these things cannot be correlated, man. You've
got to get this. You can't be a monopoly in also
flexing your wealth of all the people you're
paying to come party with you. I really, really
still sit here. This is where I get really unhinged.
I'm like, we need to create some sort of guardrail
for fanatics to have this awful monopoly on merchandising.
Because the leagues don't care. It takes something
that they previously had to worry about out of
their pocket. Oh, Fanatics wants to take care
of everything and the distribution. I don't have
to keep a warehouse of all my extra jerseys and
extra hats. You take care of that. You're going
to pay us to do it too? Oh, even better. I totally
understand from a business perspective why these
teams and these leagues do it. But from a fan
consumer, I freaking hate it, man. Well, I mean,
monopolies are bad for the consumers. I mean,
we know licensing jerseys and hats are cheap,
right? They don't cost that much money. Yeah,
and not only does it look bad off the field,
it also looks bad on the field sometimes, like
the uniform changes two years ago. Them moving
the MLB logo down on the back to make the player's
name smaller and the MLB logo more. It was one
of the worst -looking decisions. They looked
like cheap little knockoffs. And the fact that
they're made by Fanatics as well, which is, as
you said, quality problems. If you're making
an already bad jersey and then making it bad
quality on top of that, it's not that good. So
I'm with you. Let's break up Fanatics. If anything
comes out of this podcast, let's break up Fanatics.
I'm all in on all of that stuff. Okay. We've
talked about the game at large and the revenue
generation from all that. The new money. How
are things changing into the CBA and what the
future could hold for the business aspect of
all these teams? This has been a deep, heavy
episode when it talks about all the maybe numbers
and stuff. Maybe you know a lot of this stuff
already, but we just want to level set everything
that's on the way here for how teams are making
money more after the break. This final chapter
is a shorter chapter because... These are things
are going to come up throughout the negotiation
of the CBA. There are some things in place right
now that matter to how owners and players make
money and how the new money that has arrived
into Major League Baseball is going to be something
to monitor moving forward. Simply put, the evaluations
of teams have changed very minimally over the
last 20 or so years. The Athletic talked about
this as a reason why owners want to push for
a salary cap is because one of the ways you can
increase your evaluation of your team is to know
your fixed costs, to know that I'm going to spend
up to $250 million, throwing a number out there,
$250 million a year. on salary, and then I can
fix my cost. I don't care how much staff do I
need to employ on that, how much all this stuff.
Fixed cost is what everybody is after in all
this. And one of the ways that you're trying
to pay for those costs is create bigger ownership
groups. And one of those ownership entities has
become private equity. And private equity is
invading just about everything in our lives these
days. We briefly touched on it earlier about
how the New York Yankees are currently evaluating
what they could be worth. if a private equity
branch and a firm was able to acquire 15 of the
new york yankees and maintain controlling assets
within the the yankee global enterprise group
which is uh you know ac milan that is new york
city fc that is yes network they have a hospitality
company in there as well in addition to of course
part ownership of the yankees now private equity
is already in A lot of teams. This isn't breaking
news. What's breaking news is that it's the Yankees
listening on private equity. And we all think
of the Yankees as being this undefeated, massive
private equity power. The Red Sox, the Dodgers,
the Cubs, the Giants, the Astros, the Padres
all have some form of private equity ownership.
Now, when we say private equity. and you think
about investment groups and that sort of thing,
it means the group itself is owning up to 15
% of the team. It's a little different. It gets
a little cloudy when you talk about the Dodgers
because obviously Guggenheim is one of the most
powerful investment private equity firms in the
world, but it's a technicality that while Guggenheim
doesn't own the Brewers, it's Guggenheim Baseball
Management, but the executives of Guggenheim
Baseball Management, also work for Guggenheim
and also work for the Dodgers. So it's not directly,
oh, the Guggenheim private equity firm owns the
Dodgers. The people that Guggenheim pays to own
the Dodgers are technically the ones owning the
Dodgers. It gets cloudy there. You get what I'm
trying to say. But private equity is not something
new in baseball. In fact, the NFL has rules on
this too. The NBA has rules on this too on how
much private equity can own a percentage group
of an ownership group. And we've talked about
ownership groups in the past where you look at
somebody like John Middleton. John Middleton
with the Phillies, he technically only owns 48
% of the Phillies because their bylaws indicate
nobody can actually have more than a 50 % share
of the Phillies. While he is still the majority
owner, there are other pieces and investors within.
the Phillies as a franchise that help pay on
debts and pay on player payroll and play on front
office payroll, that sort of thing. If private
equity sees an investment opportunity in having
partial ownership in a baseball team, it means
two things to me, Scott. Number one, it means
they see value in it. They see growth in owning
a baseball franchise. And number two, they think
they can help these owners make more money. in
the long term now that goes in in hand with the
growth but it's a quick infusion of cash for
these owners to pay off whatever it may be and
these private equity groups may feel that either
a that 15 percent 15 share could increase in
years to come and they will make their money
back in the long -term play in sports yeah it's
it's interesting private equity is almost kind
of like a buzzword you hear it throughout all
of business and you know like housing you hear
it You hear it all over the place. And why is
this a thing? If you brought up private equity
20 years ago, most people would look at you dear
and have likes and be like, what does that mean?
It's become so much more common now. And why
is that is kind of an interesting thing. Because
why that is, is you ever heard of the company
called Enron, Don? Enron was a massive company
that failed. Yeah, Enron Field. Is it still Minute
Maid now? What is it? Now it's Dyken Park, and
it's not the juice box anymore. Dyken Park. It's
the ice box. Yeah, so Enron, what it was, accounting
principles and accounting law and what was required
of companies to put in their financial reports
was not as strict back then. They didn't even
have to publish a cash flow statement, which
is kind of one of the biggest things. I look
at for a professional sports team, because when
you take out all that depreciation, amortization,
all that stuff, their costs and things, do they
actually have more money at the end of the year
than they had at the beginning of the year? And
if you can answer that, yes, then the business
is okay. But back in the Enron days, they didn't
even have to publish that. And Enron was able
to cook their books enough, so to say, to make
it look like they were a fine operating business.
when they were massively, massively in debt,
at the brink of collapse. And when they finally
collapsed, lawmakers went, this isn't good. So
what they did is they passed the Sarbanes -Oxley
Act, which basically standardized the accounting
principles, standardized how they had to be put
out, standardized the things that you had to
make publicly known about your company so that
investors can know, is this a good company? Is
this a bad company? Are they generating cash?
Are they in massive debt? And what the response
to that was, yes, publicly traded companies,
you can get pretty good information on what's
going on on their books. But a lot of companies
just went, well, why don't we just go private?
If we go private, then we don't have to do any
of these reports. If we instead of being a corporation,
we become an LLC or a partnership. We don't have
to publish any of this information. And if you
look at the number of companies that are publicly
traded from 2002 to today. it has decreased massively,
especially in the small cap, the smaller companies.
Auditing your books and publishing this information
costs a lot of money. It's a major expense. So
they just said, well, we'll just not be public
anymore. And it's almost amazing that the Braves
are public in this day and age because they are,
don't get me wrong, you think of baseball, you
think a lot of money, large business, they are
a small cap company based on their cap. Most
small cap companies, I think small caps have
gone down like 80 % the number that are public
just because it's not worth them to have all
that information public, to have their books
audited, to pay for all those expenses. And that's
why you hear private equity. It means this company
is not public and is investing in these companies.
To show you how hard it is, when we had our first
meeting on this episode and we were talking about
things that we were going to research, you talked
about ownership share. And I thought, okay, I'm
going to go through each of the teams, find out
what LLC or partnership they are, and find out
what percent of each team, a different person
or organization or private capital or private
equity owns of each of these teams. I wasn't
able to find direct numbers for any of them.
I'm telling you zero. I thought, okay, I'll be
able to find out if this team's owned 100 % by
this person. They're all under LLCs or partnerships
that don't list out ownership share on their
articles of organization. They don't have any
numbers that are public. It's basically, it's
almost like dealing with an AI where it's a black
box where you don't know what's going on behind
the scenes. You just see the output. You just
see the team on the field and you have Forbes
to estimate. We think they're worth this and
they're making this much money, but nobody knows.
Nobody knows at all. I just wanted to see what
teams are owned more than 50 % by one person,
and I wasn't able to conclude any of it. I mean,
I think the Mets are mostly owned by one person,
but I couldn't verify it. I couldn't verify it
at all because even his ownership is behind a
company that owns a company that owns the Mets.
It's just these layers of... Who owns the team?
We have no idea on some level. And they're starting
to operate in a fashion that they need to be
more anonymous, where the owners either A, in
the social media world, like Steve Cohen briefly
is active on social media. And quite frankly,
it's just an absolute venom pit for anything
he steps into. The worst of the worst comes out.
There's even some anti -Semitism in there, which
is just awful. I mean, the dude's just an owner
of a baseball team, of the team that he loves,
by the way. Of course, he wants the Mets to win,
too. But, you know, these owners are starting
to get more anonymous where, you know, John Henry
hasn't spoken to the media in, you know, directly
to the media, not at a, you know, fan fest in
years. Or you look at... The learners haven't
spoke to the media in a long time. The poll ads
are speaking to the media and they're saying
all the wrong things with the Minnesota Twins
of just how much they've been dealing with their
debts and that sort of thing. Whereas it's harder
and harder to get a microphone in front of the
owners because... a they're speaking on behalf
of their entire ownership group and b they don't
want to reveal anything that incriminates them
and i'm not saying they're doing nefarious things
but they're saying they don't want to be held
to a different standard because they're not publicly
traded companies right ceos appearing on cnbc
talking about why their earnings report was underwhelming
and why they need to convince shareholders and
stockholders to keep investing in their company
that matters owners can sit there and go you
know, like the Castellini's did a couple of years
ago, where are you going to go? You know, and
it's, it's frustrating to see that because that's
what leads us into this, you know, sort of acrimonious
relationship with owner and fan when it shouldn't
be that way. I hope one day where we can sit
here and go, you know what, thank goodness somebody's
footing the bill because I can't do so. But ownership
groups are a massive piece. Private equity slowly
infiltrating into investing into these teams.
Let's be honest, too. A lot of these teams operate
at a loss. A lot of these teams operate with
debt on their books every single year. Is it
crippling debt? No, but it sounds like the Twins
and the Pirates and some other small market teams
consistently carry a large amount of debt that
would make other businesses and franchises uncomfortable.
But the reality is... They know they're getting
a long -term play here, that they're not going
anywhere. Major League Baseball can step in and
help. Maybe they sell the team one day and they
get a lump sum of cash and they deal with everything
down the road. You're starting to see some of
the old guard phase out. We talked about it at
the beginning of this show where the Polads,
the Reinsdorfs, and the Steinbrenners are the
only families that are still in control of their
teams since the 1994 strike. Three of the 27
owners have stuck around the whole time since
1994. So things are changing rapidly on that
front. And the thing that's changing rapidly
on the front is literally as we're recording,
it's the day that Chase Burns signed an extension
is agency. And Scott Boris takes a lot of the
headlines in agency and, you know, make sure
you get as much money as possible and holding
out as long as possible. But we're starting to
see changes in that front to Scott where. Team
-friendly extensions are becoming a lot more
popular. Agents are getting fired if they're
not doing their job well enough. There are different
levels to agency now that isn't just negotiate
my contract than it was 30, 40 years ago when
Dick Moss left the Players Association to become
his own agent, and he did a very good job at
it, but there were other agents that were doing
it nefariously. That stuff has cleaned up drastically
over the years, but the role of an agent has
changed a lot in just the last 10 years. It's
it's you bring up the 70s and 80s. There's a
there's an interview I saw with Marvin Miller
in I think it was like 83. And he was talking
when free agency became a thing because a sports
agent was not a thing before free agency. So
everyone goes, oh, man, I don't know how to negotiate
this stuff. I need to get an agent. And Marvin
Miller's thing was these agents. we didn't have
a certification process from the MLBPA to certify
an agent at the time. So anyone could just say,
I'm a sports agent and then take 15 % of a player's,
you know, contract and go negotiate it. And he
would tell stories of like, he met, he's meeting
a guy at a bar, met a guy at a bar, the guy he
doesn't know. And the guy goes, yeah, I decided
to become a sports agent yesterday. And then,
you know, I'm going to go get out some contracts.
And he's horrified because he's like, these people
have no idea what they're doing. And the MLBPA
would provide resources for arbitration hearings.
If you go, hey, here's the comparisons you can
use. Here's these amount of things. And he said
he would have these new agents that had no idea
what they're doing come in the day before the
hearing to the MLBPA and go, hey, can you help
me on this arbitration? I have no idea what's
going on. And he was horrified. So you can see
some really, really bad deals during these days
negotiated by agents because agents were just,
there was no. no barrier to entry whatsoever.
Since then, the MLBPA has done a certification
process. You have to meet these certain requirements.
And on top of that, you've had like Scott Boris.
I mean, he kind of rose in the eighties. You
have these official agencies where that's their
whole job to negotiate on behalf of players.
And when you say players signing extensions now,
ultimately how any agent should work is. If the
player wants something, he'll do it. Like Ozzy
Albee's extension may have been one of the worst
extensions. And if his agent said, hey, this
is a terrible extension. If Ozzy Albee's goes,
yeah, but I want to sign it. The agent should
go, okay, we'll sign it then. And so what you
have, you've mentioned players firing their agents.
That's almost a last resort, but it's the...
change from the late 70s and early 80s to today,
where it's basically an industry. If you look
at some of the things Scott Boris puts together
on behalf of his players when negotiating contracts
or arbitration hearings, it's professional documents
that look almost like a financial report. You'll
find these. 15 -page PDFs where he lists out,
here's the things we're doing. Here's the comparisons
we're doing to other salaries. Here's our arguments
for this player. It's almost like the legal proceeding
right now. The quality of agents, there are some
exceptions. There are some bad agents, and some
players will hire their friends to be their agents.
But vast majority across the league, players
are getting much better representation today
than they ever have. And some fans complain about
that. They make Boris out to be the evil guy
because he's only in it for money. That's his
whole job. His whole job is on behalf of his
player to get as much money as possible. And
I can't really fault him for doing that job very,
very well. And he seeks out those clients that
are willing to go up to that line to say, this
is what I'm worth or else. That takes some guts.
That takes some gusto to do that. And Boris has
been the guy that's been on the forefront talking
about why a salary cap would be bad, not only
for baseball, but for him, because he can't make
the same amount of commission for him and his
lieutenants at Boris Court. Another thing about
the salaries right now and things that we're
looking out for, maybe... And it's kind of dumb
for us to save two of the biggest contentious
issues heading into 2027 for the very end of
this business podcast. But if you made it this
far, you made it to the nitty gritty. It's the
luxury tax and revenue sharing issue. Because
Rob Manfred has already said it such that he
thinks the luxury tax was a mistake. And we're
now seeing, I mean, for lack of a better term,
state -run propaganda on MLB TV ads from Major
League Baseball. how aggressive they are about
wanting a salary cap because they feel the fan
sentiment is there, that they can get a salary
cap, that there is enough momentum that if they
continue to talk about the game not being fair
and all this stuff, try to sell their vision
of what the game looks like right now, I understand
why they do this. But the luxury tax system as
we know it today... To Rob Manfred's credit,
it has failed because it has not stopped the
biggest spenders from spending as much as possible.
You mentioned Manfred saying it's the biggest
mistake. Well, you can't really say it's a mistake
on the owner's behalf because they only did the
luxury tax because their push for a salary cap
in 94 completely failed and blew up in their
faces. So when they brought in a luxury tax was
the CBA negotiations. after the 94 -95 strike
where they go, okay, salary cap didn't work.
Can we at least get some form of increased revenue
sharing with a luxury tax with penalties for
going over? And that wasn't a line, unlike a
salary cap, that wasn't a line where the MOEPA
said, no, we can't do that. So that's what ended
up happening. And how the luxury tax works, I
mean, you mentioned there are some more penalties
than just financially, like Dodgers having one
of the lowest draft pools, one of the lowest
international pools, and having their draft picks
bumped back. That is one of the penalties for
going over the luxury tax. But ultimately, it
has not been a barrier to the Dodgers spending,
you know. four times as much as other teams on
their payroll is it even is it more than four
times now i'm trying to do the math in my head
they're they're pushing 400 million at the moment
they're at 420 million including their competitive
balance tax penalty from last year which the
tax penalty alone is 168 million dollars which
is more than the majority of major league baseballs
total team payroll right now. And the way that
the rolling scale works, it's based on how many
times you've had to pay into the tax. It multiplies
on itself. So if you're a first time payer onto
the luxury tax, you get 20%. based on how much
over the tax is so for here in 2026 the first
level is 244 million dollars so if i'm 10 million
dollars over if i'm at 254 million dollars i
owe a two million dollar tax On top of my payroll
already. Now that $2 million gets pooled. And
then later with all the other luxury tax payers.
Gets distributed back out to the teams. Based
on market score. And the small market teams get
a benefit from this competitive balance tax.
But it obviously multiplies as things go up.
Guess how many consecutive years. The Dodgers
are now in a competitive balance tax payer status.
Heading into 2026. And will soon be another payer
once again heading into 2027. I'm trying to think
of when's the last time they had a lower payroll.
Are we at like 10 years now? Almost. So this
is going to be year seven in a row. Or I should
say, this is going to be year six in a row. There
were three straight years. They were under the
competitive balance tax in 18, 19, and 20. But
then the previous six years to that, they were
over the competitive balance tax. So they've
kind of gone cyclical where they went six straight
years paying into it, three years not paying
into it. Now they're into six years paying it
once again. And a reminder, because things multiply
as a six -time payer in 2026, you are now paying
a 110 % tax on how much you go over. So again,
The threshold is $244 million. They are over
it by $175 million. It's not stopping them at
all. They're still paying $168 million on top
of being over it. So their technical payroll
right now is $317 million. But yet another $168
million of it. is just in their competitive balance
tax penalty. It's ludicrous. Now, the Mets, this
is where it gets sad because the Dodgers, hey,
they've won back -to -back World Series. It's
no big deal for them, right? And then the Mets.
Oh, the Mets. Everybody loves to make fun of
the Mets. They're not going to make the playoffs
for the second consecutive year. They are paying
$120 million in competitive backs. competitive
balance tax penalties while carrying a $354 million
payroll this season. That's embarrassing, and
that's frustrating. The small market teams don't
care because they get to get that revenue in
the revenue sharing, but the luxury tax system
to have multiple teams blowing by the guardrails
is an indicator that Rob Manfred knows from the
owner's perspective that it's a failure. The
guardrails that are in place are not actually
in place. Now, granted, there are some teams
that treat that $244 million as, like, we will
not go over this no matter what. I think of last
year with the Rangers barely going over and still
really not doing anything in October, right?
You look at teams right now that are projected
for their competitive balance 40 -man tax payroll
right now. In the AL East, the Yankees, the Blue
Jays, and the Red Sox are going to go over. The
Tigers are treating that $244 million as like
the line. They do not want to go over $244 million.
The Astros don't want to go over $244 million.
The Padres are above it right now. I wonder if
they're going to be able to bring that down.
The Giants are just below $244 million. The Cubs
are just above $244 million. So for all the mortal
teams, they treat it pretty strong. But then
there are teams, the Mets, the Phillies, the
Yankees, the Blue Jays, and, of course, the Dodgers.
that are saying, to heck with it, we can spend
whatever we want. And you mentioned with the
escalating payments, a lot of teams will go over
it for a couple years and then try to come back
down. I remember, I think it was the Cubs a couple
years ago were doing one of those years where
they wanted to just be under. And after the season
ended, they realized an accounting mistake and
were over by like $5 ,000. It was hilarious.
So therefore, the penalties did not reset. But
you mentioned the tax bill. Where does this money
go? So the Dodgers tax bill last year was about
$170 million. Where that goes is the first $3
million of all the collected tax bills across
the league, which last year added up to around
$300 million. The first $3 million goes to the
players' pensions and retirement funds. Then
the remainder of that is split 50 -50. 50 of
it goes to the league, which you've mentioned
revenue sharing. It's not like a strict revenue
sharing. It's this money goes to the league and
the commissioner's office gets to distribute
it to teams, however they see fit. They say it's
for teams that have shown a willingness to spend.
while still being small market, gets the priority
of the money. But we really don't know exactly
how it spread out. But the other 50 % goes to
the players' pension plans and retirement plans,
and so is additional compensation. I find a lot
of analysis of if the salary cap, the owner's
proposal was put in place with a 50 % guaranteed
share, what that means for the players. Would
they make more money or less money? a lot of
things people omit when they make these analysis,
when they break down the numbers is first, a
lot of them omit benefits. Like you should be
using tax payroll, not the regular payroll. There's
like four different payroll numbers. I think
when we go into details of these negotiations,
I could break down what each one means, but you
should be using the luxury tax payrolls, which
a lot of people don't do. A lot of people don't
include playoff shares that we talked about before.
They don't include the money from the All -Star
game that goes to the players, but especially
they don't include the luxury tax bill. If we
assume if a cap and floor would be put in place
and a hard cap, these luxury tax bills where
almost 50 or just over 50 percent, three million
dollars of, you know, initial and then the 50
percent of the remainder goes to the players
currently, that would also go away. So that's
one thing to consider when we're going to these
discussions of a cap and floor and how the compensation
to the players would change. And part of that
revenue sharing is the proposal from baseball,
and this could change between now and December
2nd, but that they've offered, in theory, so
we believe, a 50 -50 split of revenue, which
would be game -changing for baseball. What is
revenue, though? Exactly. Well, this would include
all baseball revenue. That includes media revenue.
That includes gate revenue. That includes parking
revenue. Right now, like we've talked about,
all these teams are trying to find their own
advantages to not have to pay as much into revenue
sharing. Parking gets shared. Gate gets shared.
Concessions gets shared. Merchandise gets shared.
But media... does not get shared, which is why
the Dodgers have this behemoth that they have.
A reminder, as we move closer and closer to the
end of this episode, that in this upcoming negotiation,
you need 23 owners to say yes. If you have 22
owners say yes, you do not have an agreement.
They need a three -quarters majority in order
to move forward. So if you're going to get eight
naysayers, could it be? The Dodgers, the Yankees,
the Red Sox, the Blue Jays, the Braves, the Giants,
the Padres, the big market teams. Could you get
eight no's out of that in this 50 -50 split of
revenue sharing? Because one of these advantages
for the Dodgers and the Yankees and the Red Sox
and that and even the Cubs to a certain extent
is that they don't have to share all of their
net local revenues, including the media rights
on that front. However... When you're making
nearly $13 billion in a year revenue, that is
not profit when you're making nearly 13 billion
in revenues. And if in theory that continues
to increase and it will definitely, I will say
this, it will definitely increase revenues. If
there's a salary cap, which means players could
get a bigger share than what they currently get
right now. And some people think like, well,
wait a minute, Donald, how would that actually
work? Well, more revenue gets to be kept in the
pockets of the players. even though their contracts
are thus lowered by, well, we've got to be under
$245 million, whatever the number may be, because
the revenue sharing then guarantees the players
to get 50 % of the revenue generated. They will
hopefully continue to grow, unlike the NBA this
last year where they had some players have to
give checks back in escrow because they did not
beat the revenue number, and that's where the
players come in and say, see, it doesn't work
in other leagues. It does not work to have a
cap because... Revenue fluctuates year over year.
You cannot guarantee us to make money and to
make that every single season, which is a fair
argument to be said. Revenue sharing and making
it a little bit more transparent, especially
when it comes to the luxury tax payments and
when it comes to these small market teams. David
Sampson's talked about this plenty on Nothing
Personal, on his personal podcast, where when
he was with the Marlins. You get that revenue
-sharing check, and they say you have to use
this to improve your team. You can make up whatever
you wanted in order to say, well, this helped
improve my team. I paid for a new weight room.
That helped improve my team. And, oh, I paid
for a new hotel down the road, or I paid for
a new clubhouse on my minor league team. That
improved my team. Whereas the vision of it was
to pay players, not pay for the ancillary stuff,
but the owners found the loophole, and I give
them credit. Could that change in the future?
Potentially. But revenue sharing and luxury tax
is going to be the most contentious part of this
coming negotiation. We just wanted to lay out
how it works in the current form of where it
is broken. I agree with Rob Manfred. It is broken
that you have multiple teams just blowing past
the guardrails with no big deal. And that money
that gets pulled and distributed out to the smaller
teams, they can do whatever they want with it,
even though it's supposed to be going to help
improve their teams. Yeah, we'll probably talk
the Dodgers a lot more because I think the reason
the owners are in such a good push right now
is the Dodgers are running their team incredibly
well. It's not even the fact that they're spending
the most money. You mentioned the Mets. The Mets
are spending nearly as much but are not having
the on -field success. The Dodgers, even though
they're having these luxury tax penalties and
having their draft picks bumped out back and
their international... bonus pool being decreased
guess what their minor league system ranking
is right now according to experts number two
number two only behind the brewers i gotta gotta
give props for that but a team that's constantly
been drafting not even having a draft pick in
the first round or first 30 picks for years now
and has the least amount in signing bonus money
and the least amount in amateur bonus money still
having the number two system means When you're
talking about the Marlins, oh, we put in a weight
room. The Dodgers are going, oh, we put in an
international academy. Oh, we put in this new
state of the art biometric system. We put in
all these things. So every 16 to 22 year old
that we get in the draft or internationally,
we're giving them the best facilities. We're
giving them the best meals. nutritionists, everything
to develop into the best player they possibly
can be. And I think that's something we'll find
out when we go into kind of go into details of
successful teams versus not successful teams
of teams like the Rockies and the Marlins are
notorious. And the angels are notorious for not
spending money in those areas. So the Dodgers
with all the money that they have, they spend
the money in all the areas that matter. They.
are able to not only buy the best players, but
also have the best scouts, have the best front
office guys. It's almost unfair. And the question
is, if you're that well run, is a salary cap
going to stop them? So I don't even know. I don't
even know. I think they're going to be a powerhouse
no matter what system is put in place. And that's
something to negotiate in the final episode of
this podcast. But we just wanted to, again, lay
out how everything currently works, because you're
going to hear everything we talked about in this
episode in the last couple of episodes of this,
because we see a lot of misinformation out there
in the world right now about what people do and
don't understand about the revenue and how the
business itself works for everybody involved.
Literally every single thing we talked about
in this episode will come up again. So this is
how it is. right now. And we'll talk about how
it could change in the future. That's another
long episode. I mean, as usual, you should know
by now, this is fourth episode. We know they're
all pretty long right now, but the support's
been tremendous, Scott. I know you felt it. I've
certainly felt it. And we thank everybody that's
been enjoying these podcasts. And I think everything
is starting to really come together and finding
our niche and finding our audience of people
trying to learn what baseball has been going
through throughout its history with labor. Yeah,
I'm really again, this is this has been an awesome
experience for us being able to work with you
on this and as well as doing the research. And
then it's furthering my understanding of the
business and the sport of baseball, because no
matter how big of a fan or researcher you are,
there's still going to be gaps in your knowledge.
And this has done a great job in informing me
in the research on the things that I did not
know about the sport coming into it. And our
next episode next month in August, we'll go back
in time again. We're now going into our decades
moving forward. So we've level set everything.
We've introduced you to the player association.
We've introduced you to the owners. We've introduced
you to commissioners. And now we've introduced
you to the business. So now we're going to go
back and work our way forward. We're going to
start with the advent of free agency in 1976
through the split season of 1981 and the chaos
that the 80s featured into the collusion era
and scandals that that featured in our next episode.
Then the 90s, revisiting the strike. the home
run race, the ballpark boom, then the early 2000s,
and then the modern game into December 2nd, 2026,
when the presumed lockout begins for Major League
Baseball. So four episodes down, five to go.
I think we're really starting to hit our stride.
So thank you, as always, Scott, for everything
you've done on this pod and all the research
you've done. Reminder, subscribe to the Substack.
You can follow us on social media as well. It's
all in the show notes. So go ahead and drop a
like, subscribe, rate, review. I hope you enjoy
it because we're starting to gain some traction.
And I really hope you all had some fun listening
to this episode. For my co -host, Scott Sweeney,
I'm Dominic Cotronio. We'll talk to you in a
month. And until next time, keep on swinging.