How The Coronavirus Pandemic Changes MLB’s Economic Landscape

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The spread of the novel coronavirus has upended baseball both on and off the field. The major and minor league seasons remain postponed with no firm return date in sight, putting clubs, players, team employees and many others in an uncertain economic situation.

Last week, Major League Baseball and the Major League Baseball Players’ Association struck a deal governing a host of economic issues covering the game for the 2020 season and, in some cases, beyond. On Tuesday, MLB announced its plan to pay minor league players through May 31.

Here is a quick rundown of where baseball stands, and how the spread of COVID-19 has changed baseball’s economic landscape.

How are MLB players normally paid?

Players are paid their salaries only during the regular season. They are usually paid every two weeks, although that can vary by club.

How are MLB players being paid this year?

Per the agreement struck by MLB and the MLBPA, owners fronted the players $170 million to cover them through April and May. Beyond then, salaries will be prorated based on the number games scheduled in the abbreviated season. If the season is canceled and no games are played, players will not receive any additional money beyond that initial $170 million.

Will the thresholds to achieve performance bonuses or vesting options be prorated?

Yes. Both the thresholds to achieve performance bonuses or vesting options, and the dollar amounts awarded for reaching them, will be reduced according to the number of games scheduled.

How much money does this save the owners?

Player salaries were set to total a little more than $4 billion in 2020. With $170 million guaranteed to players, owners potentially save $3.83 billion or more in player salaries if the season is canceled.

Why is that $3.83 billion number significant?

Because it covers teams from lost ticket sales in the event no games are played. An estimated 30 percent of teams’ revenue comes from ticket sales. Per Forbes, Major League Baseball saw $10.7 billion in revenues last year. Thirty percent of $10.7 billion equals $3.21 billion.

 

Will teams receive their broadcast revenues if no games are played?

It’s not entirely clear at this point. It is worth noting that in the event of a strike or lockout, sports leagues often continue collecting television revenue but have to pay it back, usually over multiple years with low interest rates.

What about managers, coaches and scouts?

Managers, coaches and scouts are generally paid year-round. Commissioner Rob Manfred has reportedly come to an understanding with all 30 clubs that non-player employees will remain paid through April 30. What happens beyond that date remains to be determined. 

How about umpires?

Umpires are compensated based on a 182-day schedule but are paid year-round, similar to teachers. They are paid monthly and receive their paychecks on the first of each month. The Major League Baseball Umpires Association has been informed umpires will receive their April 1 paychecks. An attorney for the MLBUA has been in contact with MLB offices regarding what happens beyond that date and conversations are ongoing. Additionally, MLB has informed the umpires union that all minor league umpires will receive the salaries and per diems they were scheduled to receive for working minor league spring training games. Minor league umpires who were assigned to work MLB games in spring training will also receive the pay they would have received if their assigned games had not been canceled. As for the regular season, minor league umpires have been told they will be allowed to seek unemployment benefits.

Major league rosters and transactions were frozen by the MLB-MLBPA agreement. What about minor league rosters and transactions?

Minor league rosters and transactions are partially frozen. Minor league players can still be released, but they cannot be transferred between levels. That’s important because players on domestic minor league rosters are receiving $400 per week through May 31, but players in the Dominican Summer League are not. The promotion/demotion freeze prevents teams from moving players from an AZL (or other roster) to a DSL roster to avoid paying them. Players can also not be placed on the restricted or retired lists, which would prevent them from being paid as well.

How much money is saved by reducing the number of rounds in the draft?

It depends whether the draft is five rounds, the minimum number allowed under the MLB-MLBA agreement, or 10 rounds, as many clubs have said they hope it will be. Teams spent just over $79.2 million in draft signing bonuses after the fifth round in 2019. They spent just under $55.9 million in signing bonuses after the 10th round. The 2021 draft could also be shortened to as few as 20 rounds under the agreement. Teams spent just over $18.5 million on signing bonuses after the 20th round in 2019.

The MLB-MLBPA agreement stipulates draft picks will receive $100,000 of their signing bonus when they sign, half of their remaining bonus in 2021 and the other half in 2022. Are draft signing bonuses typically paid out over multiple years?

Draft bonuses are often paid out over two years (the draft year and the next year). Typically, a player receives a partial portion of his bonus upon signing, another portion in January and then the remaining sum towards July or the end of the next year. The change in the agreement adds an additional year.

Are teams allowed to deviate from the draft bonus plan of $100,000 down and the rest due over two equal installments in 2021 and 2022?

No. That is fixed for all players in the 2020 draft. Normally, teams and players have the right to negotiate allocation of bonus payments.

Will the Rule 5 draft eligibility age for draftees remain the same in the event of a later draft date? (Currently a player’s age on or around June 5 determines his age for Rule 5 draft eligibility.)

That decision has not been made yet, per an MLB spokesperson.

If the international signing period is pushed back, as the Commissioner has the power to do under the agreement, will international signees’ Rule 5 eligibility be pushed back as well?

That decision has not been made yet, per an MLB spokesperson.

If the 2020 minor league season is canceled, will minor league players be credited with a year of service time as it pertains to minor league free agency?

That decision has not been made yet, per an MLB spokesperson.