WHY ARE MLB PLAYERS PAID SO MUCH?
Updated: Jun 1, 2020
This article was originally published on October 24th, 2018.
Yesterday was Game 1 of the World Series, between the Boston Red Sox and the Los Angeles Dodgers.
The unlikely hero of Game 1 was Boston’s Eduardo Núñez (@EduardoNunez), after he fired a three-run homer into the first row of seats atop the Green Monster, in the seventh inning. Turning a narrow 5-4 Red Sox lead into a comfortable 8-4 margin.
For the 2018 season, the Red Sox are set to pay out $233 million in player salaries. The MLB has more players making $10+ million a year, than any other league around the world. 1 out of every 6 MLB players, made at least $10 million this season, that is more than the other three major American sports leagues combined.
So, why are MLB players paid so much?
America's Past Time
Since the formation of the National Association of Base Ball Players, in 1858. The sport of baseball has spread around the country, helped by a boom after the civil war.
The sport would continue to grow in popularity in the early 20th century. Giving the sporting word, legends such as Jackie Robinson, Babe Ruth, and Lou Gehrig.
Recently, however, baseball has hit its lowest popularity rating ever. It now ranks as the third most popular sport in the U.S., behind football and basketball. Only 9% of Americans class baseball as their favorite sport, this puts it just above Soccer with 7%. There is a big chance that we could see baseball continue to decline in popularity.
Despite baseball's decline in popularity, baseball players are continuing to make more money than ever. Star players in the MLB are seeing the best contracts and salaries than other sports leagues.
The Dodgers' Clayton Kershaw (@ClaytonKersh22) is currently the highest earner in the MLB, with an annual salary of $35.57 million.
There are generally two kinds of contracts in professional sports. These being rookie and veteran contracts.
Rookie contracts are for players in their first 3 years in the MLB. Teams will often choose to pay most rookies, the minimum required salary.
From a player's perspective, there is little bargaining power, on rookie contracts. This is due to the limited opportunities that players have because of the free agency rule. Players are not eligible to talk with rival teams until their seventh MLB season. However, once a player has played through their rookie contracts, free agency opens the door for a player to sign a veteran contract. This swings the power of contract negotiations back in favor of the player, where he can not pick from a variety of offers from multiple teams.
MLB players have one more ace up their sleeve, fully-guaranteed contract. This means that a player will receive the full compensation agreed on in their contract, no matter how they perform over the course of the deal. Even if a player is traded, the deal ensures that they will still be paid by their new team, for the rest of the contract.
The MLB's legendary union, the MLBPA, was key in developing the fully-guaranteed contract for their players. The MLBPA progress under legendary director Marvin Miller paved the way for the beneficial contracts. Miller raised the minimum salaries for players from $19,000 to $326,000. While establishing the union’s right to collective bargaining agreements. Which in return established the guaranteed contracts and ushered in free agency.
An example of the fully-guaranteed contract working in favor of an athlete comes from 2013. When the San Diego Padres signed pitcher Josh Johnson after he left the Toronto Blue Jays. The Padres agreed a one year contract with Johnson, for $8 million. Despite not throwing one single pitch over the 2014 season, Johnson still received the full $8 million.
If we compare MLB contracts to NFL contracts, the key difference is that NFL contracts are not generally guaranteed. That means that if a player picks up an injury, outside of football, their contract could be voided. Team owners can choose to renegotiate contracts if a player's performance is poor. This is all due to the limited guarantee in NFL contracts.
This can be seen when you look at six-time Pro Bowler, Donovan McNabb's (@donovanjmcnabb) 2010 contract extension. In November 2010, McNabb signed a contract worth $78 million over 5 years. With a reported incentive package that could push the compensation to $88 million. However, after the 2010 season ended, McNabb never managed to collect a single penny from that contract.
McNabb's deal with the Redskins was later revealed. It turned out that nothing beyond the current season 2010 was guaranteed. Washington had arranged a team option, on the five remaining years of the contract. Which they chose not to use, instead they traded him to the Vikings the following summer.
The Vikings would choose to waive on resigning McNabb, living him without a team. Whatever money he was set to receive from the original $78 million deal was simply voided, as if it had never existed.
There is nothing preventing an NFL agent from negotiating a fully guaranteed contract. However, this rarely happens. Taking nearly a century for the NFL to have its first multi-year fully-guaranteed contract. This honor goes to Minnesota Vikings quarterback Kirk Cousins (@KirkCousins8). His $84 million contract is fully guaranteed, no matter his performance.
Unlike the NFL and NBA, the MLB does not have a salary cap for its teams. This is despite team owners seeking to implement one, since the 1980s. This means baseball teams with more capital can spend what they want on player contracts.
The NBA has a salary cap of $101.9 million. Without it, LeBron James (@KingJames) would, without doubt, have the largest contract of any athlete.
In the NFL, a team's salary cap is $177.2 million, which is shared between the 53-man active roster.
MLB teams only have a 25-man active roster. However, they often exceed the payroll of NFL teams. Both World Series teams spent more than the NFL salary cap. The Red Sox roster share a $228.4 million salary, and the Dodgers share $199 million.
However, it is important to keep in mind that the payouts are not equally spread across the team. Looking at the Red Sox team, top player David Price (@DAVIDprice24) makes $30 million per year. But teammate Sam Travis (@DoctorChill6) only makes $545,000. This is because of MLB's collective bargaining agreement. This mandates that MLB players can only enter contract negotiations, after playing in the league for 3 years.
In sports such as the NFL and NBA, it can often be difficult to differentiate an individual's success. The comprehensiveness of MLB’s statistics gives GMs the ability to distinguish individual player contributions.
With a total of 71 stats outlining an individual player's performance during a baseball game. These stats have a lot to do with deciding how much a contract could be worth. More accomplished players with great stats are often seen as less of risk. GMs will often choose to offer these players larger compensation packages.
Another point to highlight about an MLB player's salary is that they are only paid for the regular season. They receive no pay for spring training or for playing in the playoffs. Instead in the postseason players receive bonuses. These bonuses come in various sizes and are in the form of postseason shares. In 2017, Astros players split the largest postseason share of $30,420,155.57. Braking this down each share was worth $438,901.57. Players generally vote on who gets a share, of the bonus pot. Determining if bench players, bit-part players, traded players and even clubhouse employees receive a share. We can break it down even further, Astros’ postseason regulars received $24,383 per postseason game, in 2017.
To create the players’ postseason share pool, players and owners split the gate revenue. The Wild Card Game revenue is split down the middle, at 50%. While the players get a higher percentage in the next three series, at 60% in each. However, there is an oddity that it’s just the first three of five LDS games and four of seven for the LCS and World Series.
Another factor in MLB players' contracts is the number of games in a season. Not including playoffs, the NFL has 16 games. While the NBA has 82 games, but there are 162 games in an MLB season. The baseball season is so long that it provides more chances to generate revenue.
The coverage of baseball games is a huge market for regional sports networks. Creating reliable, popular content for television networks. These television deals play a huge role in determining income for MLB team. Some regional sports networks spend billions of dollars a year on broadcasting rights. Which teams can then use to stack their rosters with top talent.
An example of how influential broadcasting deals can be is with the Los Angeles Dodgers. In 2013, Time Warner signed a broadcasting deal with the Dodgers, for $8 billion. The Dodgers used this new deal to triple their player payroll. Spending big on contracts for Clayton Kershaw, Adrián González (@Adrian_ElTitan), and Zack Greinke. Helping the team make the World Series for the first time in 29 years, in 2017 and repeating the feat again this year.
In the hope that stars will lead teams to the World Series, MLB teams are still shelling out hundreds of millions of dollars. However, how is this going to be possible if the popularity of the sport is dropping?
This season the MLB seen game-day attendances take a large hit. In 2018, the league averaged just over 28,000 per game. Making it the first time since 2003, that the MLB has had under 70 million fans attend games. This drop in attendance makes up a revenue loss of almost $125 million for the league, in one year.
Furthermore, when comparing championship games of other U.S. major sports. The MLB pulls in the lowest number of viewers, with only 18.9 million watching the Astros beat the Dodgers in the 2017 World Series. Which is less than the 20.5 million of the NBA finals and 103 million for the NFL's finale.
This year the MLB Postseason has averaged 4.39 million viewers before the World Series. This is down 8% from last year's MLB Postseason. While Streaming figures, from YouTube TV's postseason coverage, is also down 7% from 2017. However, last night's Game 1 was down by 200,000 viewers from 2017.
This loss of revenue will have to be filled if baseball players are going to continue to rise.