MiLB Spent Merchandise Revenue, Issued Loan Without Alerting Owners

Throughout the many contentious months of negotiations between Major League Baseball and Minor League Baseball, there was a subtext running beneath the negotiations. While many minor league team owners were wary of MLB’s plans for the minors, some were receptive to MLB’s appeals that it could run the minors better than the existing MiLB structure.

The animosity many minor league operators felt towards MiLB’s leadership proved to be a useful fulcrum point for MLB. A significant number of minor league operators have said throughout the past year that they were unhappy with the way the minors were run.

As minor league team owners sign Professional Development Licenses and prepare to withdraw from or disband leagues that they have long been members of, several of them say they have been presented with further confirmation of their frustrations with the way the National Association (Minor League Baseball) operated.

Two recent revelations have added to their displeasure with MiLB leadership. First, they learned that the National Association (MiLB) loaned the New York-Penn League $500,000 to ensure Batavia could operate after its owner defaulted.

Second, they also learned they will not be receiving their proceeds from national merchandise sales for 2020. Instead, that money was used to keep MiLB’s offices afloat last year.

In both cases, numerous owners said that they are unsure if there is anything that can be done now to change either decision—that money has been spent. But they see both decisions as examples of MiLB’s offices spending money without the oversight that was required.

Those minor league teams say they are only learning about the decisions months (in the case of merchandise sales) or years (in the case of the loan) after the decisions were made.

For a team that sells at a modest rate, national merchandise/royalties can bring in between $5,000-$15,000 per year in a normal year. For the top sellers, that figure can range between $75,000-$80,000. Losing any amount is a tough pill to swallow for teams in a year when revenues were massively impacted by the canceled minor league season.

The bigger frustration, however, was that MiLB’s leadership did not notify owners of its plans to divert funds toward running the national office. MiLB’s normal sources of revenue were largely unavailable in 2020 because of the suspension and eventual cancellation of the minor league season because of the coronavirus pandemic.

Last April and May, many minor league operators were upset that MiLB’s offices in St. Petersburg, Fla. had not yet made the same furloughs, pay cuts and layoffs as teams themselves had to while the season was in limbo and then eventually canceled.

If the league had asked to divert the funds from merchandise proceeds, multiple owners say they would have approved the decision, albeit with the caveat MiLB would need to take measures to reduce their own expenses.

Further, multiple owners and league officials say MiLB violated its own protocol by not notifying league presidents before loaning the NYPL $500,000. According to the National Association agreement, loans of this nature require that league presidents be notified. That was not done in this case, as multiple league presidents have confirmed that they did not learn about the loans until recently.

Minor league owners have been told that the $500,000 loan will not be repaid. The expectation at the time was that the loan would be repaid when the Batavia club was sold to a new owner (for much more than $500,000). But the contraction of the minor leagues to 120 affiliated teams instead meant Batavia was left out of MLB’s reorganization of the minors and there are no sales proceeds to cover the loan.

Batavia’s ballpark will now host a summer wood bat league team, but that is entirely separate from the old New York-Penn League operation.

In a statement to Baseball America when asked about the loan and the merchandising decision: MiLB said: “Minor League Baseball does not disclose membership financial information in response to inquiries from the public. We’ve been transparent with our Board, are confident that the organization’s finances are in the best shape possible given the effects of the pandemic and MLB’s decision not to renew the PBA, but we do not comment publicly about the specifics of the organization’s financial issues.”