The world of professional sports has been turned upside down by the Coronavirus (COVID-19) pandemic. Money seems to be on everyone’s mind, as the owners and players of Major League Baseball try to salvage the 2020 season before it even gets started.
The players’ association is trying to protect their members from proposals to drastically cut player salaries. Meanwhile, owners are claiming they could lose upwards of $4 billion, but the numbers just don’t make sense.
Post COVID-19 status
When play finally resumes, there is a good chance that fans will not be allowed to sit in the stands. A major source of revenue for the league, this could be devastating to the bottom line. This is where the argument comes in, as owners desperately want to hold onto their profit margin for the season. They are suggesting that players take a salary cut to protect their own interests.
Players don’t feel they should have to carry the burden of a salary cut so owners can recoup part of their losses. In March, the union proposed a solution on behalf of the league players. The agreement stated that players would prorate their salaries based on how many games they play out of the 162-game full schedule.
The owners wanted more, saying that they had the right to negotiate further since the proposed agreement did not address playing without fans in the ballparks. To offset the expected revenue reduction, they wanted to enforce larger salary cuts. The players were more than disappointed by the counter offer.
How much do MLB owners stand to lose?
A report from the baseball commissioner’s office was leaked to the Associated Press. It revealed that owners believe that paying prorated salaries to their players for play during a shortened season would give 89 percent of the league revenue to players. This would result in a $4 billion loss to the franchise owners.
This news shocked those in the know, leaving many baseball analysts skeptical about the math that just doesn’t add up. It appears the owners stand to lose far less money than they are claiming, FiveThirtyEight dove into the numbers.
MLB had record-setting revenue growth in 2019
According to Forbes, in 2019 MLB teams generated an estimated total of $9.9 billion in revenue. Close to 30 percent of that money came from $2.8 billion in gate receipts. The remaining $7.1 billion was from non-ticket stadium revenue that included licensing, local television, merchandise, and various other agreements.
The Fan Cost Index concluded that $4.5 billion was generated in 2019 for both ticket and non-ticket revenue. If fans can’t come to the stadiums in 2020, this money would not be available. But, the remaining $5.4 billion that comes from network and broadcasting deals would remain intact.
What does this all mean for the 2020 MLB season?
Even with an abbreviated season, the anticipated revenue could drop to $4.2 billion. This is a huge blow considering the league expected to bring in $9.9 billion.
Forbes estimates that an MLB team has a net operating income of $1.2 billion, after spending $4.6 billion on player salaries and an additional $4.1 billion to various other front office expenses.
Assuming the season is cut in half for 2020, costs would be reduced by 50 percent as well. With prorated salaries that the players already agreed to and a reduction in losses to $2.3 billion, the expected net operating loss would equate to approximately $129 million.
Why not a windfall, it certainly doesn’t add up to the $4 billion figure that owners are claiming. Trying to pass off the loss in revenue to players so owners can keep their status quo just doesn’t make sense.
During a worldwide crisis, it’s ridiculous for owners to think they can hold onto the same profits they made during a record-breaking pre-pandemic year.