MLB Lays Out Proposal To Run Minor League Baseball

MLB’s plan once again reiterated its goal of having 120 full-season teams (30 teams in each of the four full-season classifications) and eliminating short-season and Rookie-level teams outside of the Gulf Coast, Arizona and Dominican Summer leagues.

It did not include which teams would be among the 120 who retain their affiliations or the specifics of league structure, although it did say it will attempt to retain current classifications and league structures when possible. The list of 120 teams is expected to come later if the two sides can agree on the details of the structure and economics of a new development system.

The National Association, which trademarked itself as Minor League Baseball in the 1990s, was founded in 1903. MiLB has always been independent of MLB, which has provided players and coaches to minor league teams through affiliation agreements. Under this arrangement, MLB teams pay the costs of the players and coaches and minor league teams handle the business of operating games and providing facilities. The relationship has been governed for decades by Professional Baseball Agreements.

The current MLB proposal would change that dramatically. Under the proposed system, MLB would take over governance and all aspects of the day-to-day operations of the minor leagues. The current PBA system would be replaced by one in which MLB operates the minors. MLB would deal with individual minor league owners on a franchisor-franchisee system, similar to how many hotel and restaurant chains operate.

MLB laid out a system in which it would run the minor leagues at a guaranteed lower cost to minor league teams. It is also promising the expectation of higher revenues for minor league clubs.

On the cost side, minor league teams would continue to pay the 8.5% ticket tax (a percent of ticket sales) they have long paid. The current ticket tax sends 8% of ticket sales to MLB and 0.5% to MiLB’s offices in St. Petersburg, Fla. Under the proposed system, the entire 8.5% would go to MLB.

That would be the entirety of revenues MLB collects directly from minor league teams. MLB can promise lower costs than the current system because it is promising to provide all of the services currently provided by MiLB’s national offices in St. Petersburg, as well as the individual league offices, without charging minor league teams anything beyond the ticket tax. MLB would eliminate the per-level fees paid to MiLB’s national office as well as league assessments and shared expenses.

Minor league teams would also grant to MLB their sponsorship, broadcasting, licensing and digital rights. This could best be described as national rights, as minor league teams would retain the ability to sell locally. Currently, minor league teams grant many of those rights to MiLB’s offices to sell as part of national sponsorships and licensing.

In its proposal, MLB would then split the revenues from those conveyed rights on a 50-50 basis with minor league clubs.

MLB would be responsible for handling scheduling, umpire assignments and development, league governance, dispute resolution and the many other day-to-day tasks that MiLB and individual league offices provide.

It even proposed a Baseball Cup which could potentially see minor league teams face MLB teams on the field in a tournament.

But it also would require minor league teams to put their fate more in the hands of MLB. MLB would govern the minors, ending the more than a century of minor league independence. MLB’s proposal does include a minor league executive council which would have representatives from MLB as well as minor league owners.

The executive council would have significant power to drive rules changes for the minors, but it would be in an advisory role. It would make recommendations for adoption by the MLB commissioner’s office, but the commissioner’s office would have final decision-making authority.

The system would also mandate improvements that directly impact minor league players and coaches. In the MLB-run proposal, the requirements for quality of travel and hotel accommodations would be increased.

The MLB system would also change some of the rules restricting MLB-MiLB team cooperation and investment. Currently, MLB teams cannot purchase a share of an MiLB club unless it is a majority interest. Also, because of the rules around affiliation agreements, MLB teams are not permitted to cover the costs of facility improvements for a minor league team unless they own the club.

For instance, if an MLB club desires an improved weight room at its Double-A affiliate, it can request that the minor league club install one, but it cannot currently offer to cover the cost to get the room built.

Under MLB’s plan, capital improvements at MiLB parks paid for by MLB teams would be permitted. MLB clubs also could become minority investors in teams. Those two aspects could be linked, as it is conceivable that MLB teams would in some cases fund facility improvements (which benefit the MLB club’s minor leaguers and allow the minor league club to be in compliance with facility standards) and in return receive an equity share in the minor league team.

Under MLB’s plan, the 120 remaining minor league teams would receive licenses. Those licenses would replace the current affiliation agreements, which lead to some affiliation swaps every two years.

Licenses would have terms of a maximum of 10 years. Some will be shorter, especially where facility upgrades are needed. Minor league teams whose facilities do not meet the upgraded facility requirements of the proposal would have time to make the required improvements.

That 10-year maximum license is less than the 15 or 20 years that many minor league owners desired. There is a second aspect of the license that may meet minor league owners’ long-stated desire for a system that preserves franchise values.

If a team is in compliance with terms of the license but is left without an MLB affiliate at the expiration of its license, that minor league owner will receive a guaranteed buyout. The new affiliate will be required to pay compensation.

Teams that do not remain in compliance with the license requirements could lose their licenses without compensation.

Nothing in MLB’s proposal covers compensation for current minor league teams left out of the 120. Throughout negotiations, MLB has maintained it has a contractual obligation during the PBA to provide players and coaches to minor league teams. At the expiration of that agreement, the league contends it has fulfilled their obligations to minor league teams. MLB has said during these talks that if minor league owners want to compensate minor league clubs left off the list of 120 affiliated teams, they are free to set up a system.

MLB commissioner Rob Manfred told the Los Angeles Times yesterday that MLB’s intent is to ensure “some sort of baseball” remains in the communities that are not part of the 120.

Missing from the proposal is the “Dream League” MLB proposed last year. Minor league operators never embraced the idea and questioned its economic feasibility. Instead, undrafted players looking for another chance to prove themselves will likely head to existing independent leagues, which will have a new slate of potential markets because of the contraction of the affiliated minor leagues.

Thursday’s proposal was significant in that it was the first tangible, detailed proposal MLB has rolled out to an MiLB negotiating team in months. Both sides have now sent proposals to the other in the past month, a sign that as the deadline nears, the talks are heating up.