2020 PBA Negotiations: Explaining The Latest Discussions Between MLB, MiLB

What Would The 120 Plan Mean For the Minors?

Put simply, 120 teams means four full-season clubs for each MLB club. Each MLB team would have one Triple-A, one Double-A, one high Class A and one low Class A team. Beyond that, each team would also have at least one “complex league” team based at their spring training home in Arizona or Florida and a club (or clubs) in the Dominican Summer League.

There have been discussions at the MLB level about limiting how many complex and Dominican Summer Leagues teams each MLB team is allowed, but that does not necessarily have to be part of this agreement—the Professional Baseball Agreement covers the agreement between MLB and the “ticket-selling” minor leagues outside of the complexes. MLB can make its own rules when it pertains to the complex leagues.

So How Would That Work With Affiliations?

From what we understand, the current affiliation system is expected to—at the minimum—be massively revised as part of a new agreement.

Currently, MLB and MiLB teams sign two-year Player Development Contracts (which can be extended beyond that in two-year increments). That arrangement has consistently given a musical chairs aspect to affiliation swaps where there is often an MLB left stuck when the music stops. That especially happens at Triple-A (where one East Coast team always ends up stuck with a West Coast affiliate and the travel problems that occur as a result) and high Class A (where MLB teams consistently battle to end up in Carolina League instead of the California League).

There are a lot of understandable misconceptions among fans about how affiliations work. MLB teams currently sign the Player Development Contracts (PDCs), promising to provide players and coaches to the MiLB teams. But those affiliations are not fixed, even if a team has had the same MLB affiliate for decades. Losing an affiliation doesn’t mean losing a team—they aren’t linked. If there are 120 teams in the new deal, those 120 minor league teams are each assured an MLB affiliate.

The process behind those deals might change as part of a new agreement. MLB has indicated its desire to ensure that affiliates are logical geographically. One of the reasons MLB initially proposed moving the Northwest League from short-season to low Class A was to provide West Coast MLB teams with West Coast low Class A affiliates.

There are risks for both sides if teams are limited to geographically cohesive affiliations (and longer-term affiliation agreements). For an MiLB team, there’s very little recourse if the MLB club consistently provides subpar talent. For the MLB team, there also would be fewer options if they have problems with how a MiLB team operates and provides for its players.

Even so, it’s expected that any deal will bring much longer, stickier affiliations. There is even some thought that MiLB teams could be assigned to MLB clubs.

So What Would Happen To The Teams Left Out?

Let’s start with the simplest point. The adoption of a 120-team plan does not by itself mean that baseball is taken away from the cities which lose an affiliated club.

Before the novel coronavirus pandemic hit, MLB officials, including commissioner Rob Manfred, repeatedly said their intent was to ensure that all of the cities left out of affiliated baseball would still have baseball teams. On April 21, MLB reiterated that in a public statement, marking the first time they had done so after the coronavirus shutdown.

In a 120 plan, 40 cities/teams would lose affiliated baseball (that number could jump to 42 if Sugar Land and St. Paul are brought over from independent leagues, something that is possible but is not a certainty). Both MLB and MiLB have indicated that it is important to keep baseball in those cities.

The next question, of course, revolves around how that would be accomplished. When MLB first unveiled its “Dream League” plan last year, a number of minor league operators questioned its economic viability.

But plans can be tweaked.

If the number of affiliated clubs is reduced to 120, there’s no one-size-fits-all answer for the 40/42 who would be left on the outside. The path to economic viability in a new system for a current Appalachian League or Pioneer League club is very different than that of a current New York-Penn League, South Atlantic or Midwest League club. In some cases, it would likely be a summer college league (where amateur players would not be paid). In other cases it could mean joining an existing independent league (with relatively modest salary requirements). And in others, it could mean being part of a newly established, MLB-run league for undrafted players.

The economic details in such plans will be very important in any potential deal, because players on affiliated minor league teams are paid by their major league parent club. For a short-season club, that could mean $300,000-$450,000 in extra expenses if they are to continue to have pro ball. If the club made a modest profit previously without having the expense of paying players and coaches, it has to have a way to either bring in significantly more revenue in the new system, have other ways of cutting expenses or have some sort of external help (subsidies/revenue) to make the numbers work. Or it could have all of the three.

There are a lot of ways it can be done. A longer season could potentially provide more home dates. A club that goes from having 36 home dates to 48 could bring in an additional $200,000-$250,000 in revenue (expenses do go up as well with extra dates, but not at the same rate as income). MLB teams could provide coaches and other resources, as well as promotional help and other services which would reduce teams costs.

Working out these parameters will be very important. It’s one thing for these cities to have baseball in 2021 but to fold shortly thereafter. It’s very different to have sustainable baseball for years to come.

What Else Has To Be Settled?

That’s only part of the negotiations.

Will teams receive compensation for dropping one or more classification levels? Will teams have to pay to move up the classification ladder (something that was in MLB’s initial plan)? There often isn’t a significant economic benefit for teams to move up a level—in many cases their travel costs would go up without a clear resulting revenue benefit. The only economic case for the move is if it creates significantly higher franchise valuations, but that’s likely not enough to induce an ownership group to come up with $5, $10 or even $15 million, as was laid out in the initial plan—especially in the current economic environment.

Most importantly, what about compensation for the teams left out of affiliated ball? That’s very important to the owners, teams and cities who wouldn’t be part of the 120, but it’s logically important to the 120 teams as well because it affects their long-term franchise valuations.

If the ability to be part of affiliated baseball could be taken away without compensation in a PBA negotiation, many inside the game believe it will depress franchise valuations for years. There is some evidence to support this thought. In the 1980s, Double-A and Triple-A teams were guaranteed affiliation agreements every year. Class A teams were not. At the time, there was a clear delineation between franchise values in Class A franchises and those of Double-A and Triple-A franchises. When guaranteed affiliation agreements for 60 Class A teams were included in the 1990 PBA, Class A franchise valuations quickly rose.

Simply getting to the point of agreeing on compensation may be difficult–would that compensation come from MLB’s coffers or from MiLB teams revenues or both? Figuring out how compensation would be funded is another tricky aspect of the negotiations. Even if compensation is agreed to by all parties, figuring out those valuations in the middle of a coronavirus pandemic would also be very difficult.

Is That It?

No. Not by a long shot.

There’s a very significant new wrinkle. Major League Baseball has made clear in the negotiations its desire to run the remaining affiliated minors. That would be a massive change to the current structure of the minor leagues.

Minor League Baseball has been governed independently from Major League Baseball since 1901, when seven minor leagues reached agreement to form the National Association and fight against their teams being raided by the National and fledgling American League.

There have been times when the minors independence has been tested. In the early 1960s, MLB owners had to step in and set up a structure to keep the struggling minors alive—that’s when the Professional Baseball Agreement was first developed. In 1970, MLB tried to bring the National Association (MiLB’s name at the time) into MLB’s offices in New York, but then-NA president Phil Piton successfully resisted the move.

This is different.

In the past, MLB’s efforts to take more control of the minors happened when the minors were fighting to keep the lights on. The idea then was that if MLB had to foot many of the bills to keep the minors functioning, they would attempt to get control as well.

This effort comes at a time when MiLB has been thriving (at least before the novel coronavirus struck). This time, MLB is trying to make the argument that it is in the MiLB owners’ best interest to let MLB run the affiliated minors.

MLB’s arguments are that they could do so with less overhead (which means less costs for MiLB teams) and they could produce more revenue for teams in a variety of ways thanks to their sponsorship and marketing muscle.

Taking control of the minors would allow MLB to potentially rework the governance of the minors and streamline some of the issues that have regularly frustrated MLB teams.

The MiLB office in St. Petersburg is, as you would expect, pushing back against MLB’s desire to run the minors. The MiLB office handles a wide array of issues for the minors ranging from marketing and sponsorships to trademarks and other legal issues, community outreach, events and communications. St. Pete’s argument includes the case that it’s better for the minors to have an office specifically focused on Minor League Baseball, staffed with people who know the needs of the minor leagues.

Off the record conversations with numerous MiLB owners at various levels seems to indicate less resistance to the move than one might expect. Even before the coronavirus pandemic postponed teams’ 2020 seasons, the negotiations had left a number of owners and operators clearly aware of the power imbalance between MLB and MiLB. Also, during a very difficult economic time, MLB’s arguments on lower costs and higher revenues are getting some traction.

MLB’s initial proposal last year was for a new, short-term PBA. That was eye-opening for many MiLB owners because it left them well aware of the possibility that in just a few years, MLB could be looking to make further cuts. Could 120 teams in 2020 turn into 90 in 2025?

On the minor league side, there is a desire among owners for long-term stability in a new deal, which means a longer-term agreement. There is also the feeling among some MiLB owners that some stability could be provided by developing a system where MLB is a partner and benefits financially from the success of MiLB and the rise of MiLB franchise values.

The bigger question MiLB owners will have to answer is: Can they find an agreement where MLB and MiLB can see each other as partners—unequal partners— but partners? Right now, there are MLB owners who view MiLB teams as parasites and believe their franchise valuations are almost entirely fueled by their ties to MLB. The long-term success of the minors is somewhat dependent on changing that view.

The addition of the control wrinkle has also created a useful negotiating advantage for MLB. By proposing to eliminate the St. Petersburg office of MiLB, it has created a tension between the MiLB office and the MiLB owners because the groups are not necessarily unified in the negotiations. MiLB owners will ultimately decide on what kind of deal to accept, but MiLB’s office has been key to distributing information to MiLB teams.