A Seriously Simple Proposal To Start the Season Quickly
It appears that the success or failure of the negotiations between the owners and the players is going to come down to economics. This is obviously no surprise. The players don’t trust the owners and the numbers the owners give the players (which I will explain in a bit) are understated. So you have an atmosphere of mistrust and poor information. This is, not surprisingly, an almost impossible environment in which to quickly cut a deal. And a deal must be cut soon or the season will get shorter and shorter and at some point, there’s no point in having one at all. Fortunately, I have a pretty simple solution.
The players get around 50% of stated revenues. But the problem is that they actually get less than that. Most teams have started sports networks and the teams undercharge them for the rights to televise the games. My guess is that the main reason for doing this is to get around revenue sharing. The networks are separately owned and their revenues don’t count towards a team’s revenue sharing. This saves the team money.
So baseball revenues, actually should be much higher except that the owners are deflating them.
Now why does this matter? Around 20% of baseball revenues are local tv ($2 billion). That’s around 20% of total baseball revenues. Let’s say that this should be $3 billion and players are actually getting 45% of revenues ($5 billion out of $11 billion). If you eliminate the 30% of revenues from ticket sales and pay players $3.5 billion on an annualized basis (50% of $10-$3), they are getting 44% of actual revenues of $8 billion ($10-$3 plus the $1 billion bump which is the the 50% bump from hidden local tv revenues).
Now of course, this is just wild guesswork on my part. I have no idea if the 50% number is accurate. But you can see that given the fact that the hidden revenues make up a larger portion of a smaller pie, the players should be concerned about cutting a deal with limited information from owners who have been hiding money for years.
So what’s the solution?
1) Players and owners should agree that the players will get roughly the same percentage of real revenues as the past 3 years. This can be adjusted up or down, of course.
2) They should agree how to split this up among the players (this should not be difficult).
3) Play should start with players getting paid the agreed on percentage of reported revenues (with the low, fake tv numbers).
4) The owners and players should hire a financial firm to calculate what fair market local tv deals would have been over the past 3 years. They should then calculate the percentages of total revenues that the players would have gotten had those revenues been reported. The financial firm should then calculate what revenues actually are in 2020.
5) At the end of the season, the players would be given a bonus equal to the correct (fair market) revenue amounts.
Now the owners may be shocked by this because they will be going full kimono on hiding revenues. But let’s face it, the union already has economists estimating these. It’s not rocket science.
The nice thing about this is that it will allow play to start while the finance people grind through the numbers and come up with an answer as opposed to the union wading through miles of spreadsheets before they can start negotiating.Problem solved – batter up!