MLB owners spent more than $2 billion last month in free agency deals and contract extensions, as nine players secured nine-figure commitments from clubs. Corey Seager became the eighth player over the last three years to get a $300 million deal, when the Texas Rangers guaranteed the shortstop $325 million over 10 years. But the music stopped Dec. 1 when the league locked out its players, putting an end to any player signings.
The big-ticket, headline-grabbing signings, however, obscure MLB’s biggest problem: anemic salary growth overall. The average MLB salary last season was flat compared to 2015, and it is up only 21% from a decade ago. Meanwhile, salaries have nearly doubled in the NFL and NBA during the same period.
Sports team values have skyrocketed over the past 10 years on the backs of massive TV and sponsorship contracts. The average MLB team is worth $2.2 billion, versus $2.4 billion for the NBA and $3.5 billion in the NFL.
NFL and NBA players have benefitted from the revenue growth, as their collective bargaining agreements directly tie player compensation to revenues. Players in both leagues are guaranteed roughly 50% of revenue through their respective salary caps. The NBA’s escrow system ensures the even split, while NFL teams must spend 95% of the cap over a multi-year period, per terms of their CBA. The league and unions in those sports butt heads on plenty of issues, but at the end of the day, players know they are getting half of the revenue pie.
Baseball’s CBA, however, does not have any mechanism that ties salaries to revenue. So, while MLB teams added well over $1 billion in total annual revenue between 2015 and 2019, salaries barely budged. The divergent growth trajectories of revenues and salaries have fueled animosity and sowed distrust between the league and union.
MLB’s median salary peaked at $1.65 million in 2015, when only three players earned at least $26 million. Last season, 17 players pocketed $26 million or more, but the median plummeted 30% from 2015, to $1.15 million, according to an analysis by the Associated Press. By contrast, the median salary in the NFL is up roughly 25% during the same time and up 50% in the NBA.
“When we began negotiations over a new agreement, the Players Association already had a contract that they wouldn’t trade for any other in sports,” wrote MLB commissioner Rob Manfred in a letter to fans when the lockout was announced. “Baseball’s players have no salary cap and are not subjected to a maximum length or dollar amount on contracts.” He points out that only baseball has guaranteed contracts that run 10 years and can be worth more than $300 million in some cases. “We have not proposed anything that would change these fundamentals,” Manfred wrote.
Baseball’s system is unique and allows stars to secure historic contracts, but teams have increasingly filled out their rosters with minimum-salaried players. MLB’s minimum is the lowest of the Big Four U.S. sports leagues at $570,500, versus $925,000 (NBA), $750,00 (NHL) and $660,000 (NFL). Thirty-five percent of players on 2021 Opening Day MLB rosters earned less than $600,000.
One of the fundamental issues keeping baseball salaries from being tied to revenues is the disparity in revenue between the teams. The New York Yankees generate 10 times the local revenue of the Miami Marlins from their stadium and RSN deal. When revenue sharing and national media and licensing deals are factored in, the chasm shrinks to three-and-a-half times, but still, the two teams are playing totally different financial ballgames. Equally shared national TV contracts play a larger role in the financial picture of the NFL and NBA, which helps keep the team revenue and payroll ranges tighter.