Baseball's labor deal is being stalled by dealmaking
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Major League Baseball may be heading toward a work stoppage in 2027, as owners and players remain far apart on their next labor contract.
The big picture: This impasse is being driven by the recent surge in pro sports dealmaking.
- Both majority stakes sales and minority stake sales — the latter of which increasingly involve private equity and can provide liquidity for majoity owners.
Catch up quick: Owners last week proposed a salary cap and salary floor, which the players union is expected to reject out of hand.
- MLB doesn't currently have either, which is why the LA Dodgers' player payroll can be around $400 million while six other clubs spend less than $100 million.
ESPN's Jeff Passan writes: "Stagnating franchise values are every bit as much the motivation for a number of owners as whatever competitive balance a salary cap would ostensibly bring ... Fixed costs make a business more attractive for prospective buyers. And for organizations that claim to be cash poor, the sale price is paramount to their investment."
Reality check: This feels more like owners trying to rationalize their profligacy.
- Yes, the NFL and NBA both have salary caps. And each league has seen soaring team valuations via both majority and minority sales.
- But their caps are kinda squishy. For example, the top NBA payroll spend this past season was around 37% higher than was the lowest. The costs may be somewhat contained, but certainly not fixed. Moreover, all pro sports teams now use dynamic pricing that can juice margins.
- A salary floor may actually help raise team values by making more teams competitive and more games meaningful, but apparently that's a secondary concern for many owners.
By the numbers: As for MLB team values, the San Diego Padres just sold for a record $3.9 billion (as Passan notes in his piece), after reportedly receiving multiple bids in excess of $3.5 billion. It's neither a marquee franchise nor one that's been keeping its player costs low.
- Before that, Sixth Street bought a 10% stake in the SF Giants for $3.8 billion. In between, the Tampa Bay Rays — always a low spender — fetched $1.7 billion.
The bottom line: MLB hasn't missed regular season games due to labor issues in over two decades. If owners do lock out the players next year, they may blame the deals they're unable to make.
