The Once and Future Lock Out
Reggie Dunlop: Let ’em know you’re there! Get that stick in their side, let ’em know you’re there! Put some lumber in their teeth, let ’em know you’re there! Ned Braden: Bleed all over ’em, let ’em know you’re there. Slapshot (a 1977 Hockey Movie)
December 16, 2021
Many authors have used the game of Baseball as a metaphor for the United States of America as a whole. Often the metaphor is stretched so thin that it breaks. Hopefully, this post will not be one of those times. One of the central problems in this country right now is supposedly wealth inequality. The rich get richer and richer, the once prosperous middle class watches their money and their spending power and then their very jobs slip away, and the poor live to be exploited by the rich. Or, to quote an acquaintance, the billionaires just get richer and richer without ever giving anything back, the middle class makes less and less and pays more and more for goods and services every year, and the poor work themselves to death in Amazon warehouses while wasting the rest of their lives on Facebook. The current economic situation in baseball certainly resembles this financial spiral, though it would be hard to argue that anyone in Baseball is working themselves to death.
In baseball, the rich (the owners and the star players) get richer and richer. The middle class (the fans and the regular players) watch their respective spending power and jobs slip away. And the poor (minor league players not on the Major League 40 man roster and those potential players subject to a player draft) are exploited like cattle. With the expiration of the 2016 contract between the Major League Owners and Players at the stroke of midnight on December 1st of 2021, these trends (or at least the trend in which the owners get richer and richer at the expense of everyone else) is once again up for negotiation. The Baseball Owners, who are quite happy with the status quo, immediately locked the Players out and brought the business of Major League Baseball to a complete halt. This pre-emptive “Lock Out” will continue until some agreement on these economic issues gets forged. Thus the question of the day is: “When will this Lock Out end?” To even attempt to answer this question, first we should look at the history.
Quick Baseball Labor History Recap
The greatest expanse of Major League Baseball History, from 1871 to 1965, is simply one long tale of the Baseball Club Owners enriching themselves off the labor of their underpaid and exploited Players. In the year 1922, the Baseball Owners even received an anti-trust exemption from the U.S. Supreme Court in a bizarre decision that suggests the Owners bought the Court off. The Players started to organize (not for the first time) in 1953; but the Players Union really began in 1966 when they hired Marvin Miller, a professional labor organizer. With Miller in charge until his retirement in 1983, the Baseball Players Union won victory after victory over the Owners. By 1983, Players simply had to play for two seasons under Owner control and could become free agents after six seasons. Their salaries for seasons three to five were set by arbitration which was based on the free agent salaries. This economic set-up was basically an engine that drove player salaries ever higher. The Major League clubs in small markets began to reportedly struggle.
From 1984 to 1995, the Owners fought an economic war against the Players Union to roll back salaries. In 1984, they fired their long term Commissioner and stooge, Bowie Kuhn, whose main claim to fame was losing every round to Miller. The Owners hired Peter Ueberroth to be their new Commissioner. In the 1985 CBA negotiations, the Players Union agreed to let the Owners push back arbitration to three, rather than two, years of service. After that victory (and with Ueberroth’s urging), the Owners continued their war by cheating from 1985 until 1987. The Owners illegally colluded with each other to set the players’ salaries. Federal Courts would punish the Owners to the tune of $280 million dollars for this tactic. After this defeat, Ueberroth was replaced by Bart Giamatti as the Commissioner in 1988. Before he had any real chance to lead the Owners, Giamatti died in 1989. He was replaced by his friend and Deputy Commissioner, Faye Vincent, who decided to act as if Commissioner was an independent party, not a hireling of the Owners.
Like most employers, the Owners were not happy about an employee acting like he ran the show. In 1992, Faye Vincent was replaced by the Owners with one of their own, Bud Selig (the owner of the very small market Milwaukee Brewers). Selig led the Baseball Owners into the apocalypse, a baseball strike by the Players that wiped out not only the rest of the 1994 season, but also the 1994 World Series and the beginning of the 1995 season.
The Genius of the Bud Selig
With the advantage of hindsight, it is now apparent that Bud Selig defeated the Players Union in the 1994/95 conflict. A kind reading of this history would credit Selig with establishing a labor peace that lasted until the current day. A more unkind interpretation would accuse him of negotiating to enrich himself above all else and accidentally hitting upon the correct formula to enrich all of the Owners. Selfish or not, Selig basically made it impossible for the owner of a Major League Baseball club to lose money. As part of the 1995 Settlement Agreement with the Players, Bud Selig also got his fellow Owners to agree to redistribute income from the Large Market Teams to the Small Market Teams [i.e himself and others like him]. This Redistribution Plan funneled the money through the office of the Baseball Commissioner. This redistribution, coupled with ever increasing national broadcast money that was shared by the owners equally, made any Baseball Owner bulletproof. By not fielding a competitive team and cutting expenses, any Owner could easily turn a profit by just raking in the redistribution and National TV money.
The fact that any Owner could make a bundle of money by not even trying to field a competitive team was immediately apparent. The Florida [now Miami] Marlins led the way in both directions by spending a ton of money on players to win the 1997 World Series and then immediately dismantling their team to take advantage of Bud Selig’s safety net. The Marlins reportedly made even more money in 1998 than they did in 1997.* Wayne Huizenga, the owner of the Marlins, was at the forefront of another revolution. Huizenga, the founder of companies (such as Blockbuster Video and Waste Management Inc.) was a businessman through and through. He treated his team simply as a vehicle to maximize profits in whichever way possible. The old school Baseball Owners, who usually ran their teams like southern plantations, would become baseball dinosaurs shambling toward extinction. Bud Selig, who would be the Baseball Commissioner from 1992 to 2014, was also deeply involved with changing the very type of baseball owners involved in the game.
* Ironically, the owners added 4 teams in 1993, using their entry fees to pay off the $280 million dollar collusion debt. The Marlins were one of the new teams].
From the 1995 Collective Bargaining Agreement [CBA] that ended the Strike until the most recent 2016 CBA that just expired on December 1, 2021, the Owners’ Negotiators with the Union followed a simple two-pronged strategy. First, they worked to limit how much money any of the Large Market teams could spend on players (with a “Luxury Tax”); and, second, reduce any money going to Non-Union talent. In other words, the Owners strategy was to limit the amount of money being spent at the top and the bottom. The Owners won every round. In each and every CBA negotiation, the owners either 1) made it more onerous for Large Market teams to spend unlimited funds, or 2) reduced any leverage that amateur players had to negotiate for their actual market worth. The 2011 and 2016 CBAs with the Union were the culmination of this long string of victories. At the same time, the so-called “Money Ball” revolution resulted in more and more Major League front offices applying normal business strategies to running the teams. The combination of the downward pressure on expenses at both ends and the change from basically amateur to professional business management accelerated the transfer of more and more of the profits generated by the teams from the Players to the Owners.
The Parties to the Negotiation
With the labor history summarized, we will now discuss the different parties that each have a stake in the negotiations. Understanding their motivations will then help us try to answer the question: “When will this Lock Out end?” There are actually six distinct parties in this labor negotiation. The first party would be the Small Market Team Owners [SMTO]. The second party would be the Large Market Team Owners [LMTO]. In the negotiations, these two parties are represented by the Commissioner’s Office [CO]. The third party would be the Star Major League Players [SMLP]. The fourth party would be the Normal (or Non-Star) Major League Players [NMLP]. The third and fourth parties have the Major League Player’s union [PU] as their representative. The fifth party would be the drafted and non-unionized minor league players. This party can be collectively called the Cannon Fodder. And, of course, the sixth and last party would be the Fans. Neither the fifth or the sixth party are represented in this negotiation at all. And, for all intents and purposes, the Commissioner’s Office really represents the Small Market Team Owners and the Player’s Union represents the Star Major League Players. In other words, the Lock Out will end when the fully represented parties (SMTO and SMLP) are able to placate the partially represented parties (LMTO and NMLP) at the complete expense of the unrepresented parties. We will discuss each party in reverse order.
Party #6: The Fans
The Fans are irrelevant to the negotiation itself. The CBA negotiation is about how the players and owners will split up the baseball pie (i.e. money). No one will be offering a piece of this pie to the Fans. Tickets or concession prices will not be reduced. Still there will be a vocal subset of fans insisting that they are being cheated somehow. The Players Union usual tactic is to ignore the Fans. But the Owners strategy often includes stated sympathy for the Fans. This is mostly just a bid to keep the Fans on their side and ready to come back when the issue is settled. But it is actually just a bunch of hot air. The Owners and their representatives have even been claiming that their concern for the Fans is responsible for the long period of labor peace from 1995 to 2021. In 1995, the Fans were initially slow to come back. Owners and their reps have stated that they do not want this to happen again. But the actual fact of the matter is that, aided by Ripkin’s consecutive game streak and the steroids-induced destruction of the single season home run record, the 1994-95 Strike had no real lasting effect. The real reason for the long period of labor peace from 1995 to 2021 is that the Owners have basically won every CBA since the Strike, not any actual concern for the Fans.
The real way that Fans get to participate in Baseball Labor Negotiations is simply as an audience for propaganda from both sides (but usually from the Owners). Interestingly, the Owners, a group of billionaires, like to characterize the Players, mostly millionaires, as being greedy. And there are always some Fans who cannot simply see that every dollar taken from the Players will just go right into the Owners’ pockets. The reasons the Owners use this tactic is actually unclear (other then just sheer spite). By angering the players, it does little to help the negotiations; and the Owners are also simply denigrating their own product. It does help that the Owners are a very much smaller group than the Players Union (30 owners versus 1200 players). This makes it much easier for the Owners to stay on message. But this particular message is just counter-productive. And the ironic aspect of this message is that many (if not most) of the Owners are very rich because they engaged in fraudulent, unethical, greedy business practices. Despite whatever in the Good Lord’s name is wrong with Trevor Bauer, usually the worst personal trait of any of the players is simply immaturity. On the other hand, the Baseball Owners, usually drenched in avarice, are (on the average) a far more reprehensible group of reprobates than the Players.
Party #5: Non-Union Baseball Players
The Major League Baseball Players Union represents all the Players on each team’s 40 man roster. In other words, the Players Union does represent some Minor League players. Despite this, the Union has never advocated for the Minor Leaguers or any players being drafted into the Minor Leagues or any players signed as undrafted free agents. This seems strange since everyone in the Union originally comes from these groups. In reality, the Players Union only really represents the interests of those Players who have lasted over two years in the Major Leagues and reached arbitration. If anything, this is the greatest failing of the Players Union: a complete indifference to those aspiring to join it. The Owners have exploited this flaw. From the very beginning, the economic strategy of the Union has been to transfer wealth from the younger players to the veteran players. Eventually, this led to the Owners adopting the strategy of hiring younger novice players to replace the more fungible Union players on their rosters. Over the last 25 years, the Owners cabal has done everything that they can think of to artificially depress the payments to or compensation for any and all players who do not belong to the Union.
The exploitation of employees beginning their careers is a common strategy of both Employers and Unions. Law Firms demand that their associates work minimum 80 hour weeks. The American Medical Association allows interns to be worked to the point of exhaustion. Many fraternities in Colleges haze their pledges unmercifully. Baseball has been no different. Low pay and long bus rides for Minor League players are celebrated as bonding experiences. The really interesting question is: why? By ignoring the Minor Leaguers, the Union has allowed the Owners to use them against the Major League players. Why doesn’t the Players Union organize the Minor Leaguers? Or why do they not simply advocate for the players in the Minor Leagues? Stories abound of the Owners “Simon Legree” like tactics against them. The Union could easily win a publicity battle against the Owners simply by pointing out how terribly they treat the Minor League players and demanding change. Especially since it is probably fair to say that, until the Players Union finally begin to advocate for (or simply take an interest in) the well-being of the Players who are not in the union, the Owners will have a natural advantage over the Union itself.
Party #4: Normal Major League Players
The normal, or non-star, baseball players have been watching their earning power evaporate under the current CBA. The average Major League baseball salary has reportedly gone done 5% since 2017. But the median salary has reportedly fallen a much more impressive 30%. The rate of decrease must be even larger than that for the players who are on the bottom half of the pay scale. It is obvious that the salaries of normal Major Leaguers will continue to fall unless changes are made. What is causing this decimation of the salaries of the non-star baseball players? These Players are caught in between. Their salaries are controlled by the clubs until they have been in the Major Leagues for the first three years (for all intents and purposes). Then, rather than go to arbitration with these players, the clubs simply release them. The engine that used to drive salaries upwards has gone silent for these unfortunate middle and lower-middle class of baseball players. Significantly, the Owners have characterized even modest modifications to the arbitration system (such as arbitration at 2 years and free agency at 5 years) as “extreme” and not up for discussion, much less negotiation.
The relevant question here is: can this even be remedied? The owners and their front offices, influenced by the “Moneyball” generation executives, have become much more skilled at putting the dollar sign on the muscle for non-star players. Why should the Major League front offices bid or drive up the salaries of the more fungible Major League players when it is much cheaper to simply replace them with cost-controlled pre-arbitration players? There would obviously be some degradation of level of talent playing. But would it even be noticeable to the average Fan? The only way the Players Union can really protect the non-star Players is by raising the cost to the Owners of the Minor League and non-arbitration qualified Major Leaguers. There are several ways that the Union can do this: 1) raising the minimum salary of the players who are not yet eligible for arbitration; 2) lowering the minimum amount of player service time to be eligible for arbitration; or 3) penalizing the teams for releasing players once they have qualified for arbitration. All of this could be done. But it will have to be fought for by the players who are not affected by it: the Star Players.
Party #3: Star Major League Players
The Major League Stars, as shown by the spending frenzy by Major League teams right before the Lock Out, will always get paid. Whether the long term drag on all the other player’s salaries will eventually affect them in turn is an open question. As Jim Bouton pointed out long ago in his book Ball Four, the baseball player hierarchy is completely star oriented. Your production on the field directly reflects your influence among the Players for the most part. This is a two-edged sword. For instance, Player Union Representatives (if they are star players) are basically immune to any type of retribution for their Union activities. But they are also farther removed from the concerns of the rank and file. Star Players, whose careers may span 20 years or more and include multiple contracts for their services, have a different outlook than the normal player who will wash out of the Major Leagues in five years and may only get one shot at selling their services to the highest bidder. In many ways, the key question for how strong the Players Union stands is just how committed these Star Players are to less fortunate members. On the other hand, the Owners, who are basically making the star players very rich men, have a tightrope to walk. They must give just enough to seem to be reasonable without insulting or awakening the competitive instincts of the Star Players
Party #2: Large Market Team Owners
Years ago in 1992, the Large Market Team Owners ceded their power to the Small Market Owners by electing Bud Selig, the consummate Small Market Owner, as Acting and later Full Commissioner of Baseball. At the time, this decision certainly seemed to be contrary to the best interests of these Large Market teams. But the decision was rewarded by sky-rocketing team values, ever-increasing profits, often times publicly subsidized Stadiums, and actual victories over the Players Union. So at this point, there is little to no hope that the Large Market Teams will do anything but continue to follow the lead of present Commissioner Rob Manfred, the protegee of Bud Selig and a Small Market Team protector. And, to be fair, why shouldn’t they? When the Lock Out is over, the Big Markets will go back to minting money under whatever system is agreed to. There is no real reason for them to act right now.
Party #1: Small Market Team Owners
Of course, the Small Market Team Owners are the actual power behind the empty throne of the Baseball Commissioner.* Rob Manfred is their man and Bud Selig is their patron saint. Their objective in these negotiations, as it has been since 1995, is to retain and protect their right to make an enormous profit no matter how poorly they run their teams or how little they actually try to compete. To return to the initial question of: “How long will the Lock Out last?” It all depends on how intransient the Small Market Team Owners are. So far, the signs of their intransience are immense. Through Manfred, they have informed the Players Union that they will not negotiate on: 1) changing the revenue sharing between Small and Large Market Teams, 2) allowing any Players to reach free agency earlier; 3) shortening the period that it takes for players to qualify for arbitration; or 4) bringing a multitude of other issues to the table. If the messaging signals the intent, the Small Market Owners are prepared to fight a Second Baseball World War to protect their right to make a profit regardless of their own incompetence.
* An empty throne in the sense that the Commissioner supposedly was hired to rule in the best interests of Baseball, not just the Owners themselves.
Parameters of the Negotiation
For the first time in a long time, the Major League Owners are beginning the negotiations for a new CBA on the defensive. If they were given the chance to resign the previous CBA, they would probably leap quickly for the pen. So far, their counter-proposals have been somewhat ludicrous, such as: 1) tying arbitration awards to the Wins Above Replacement statistic, 2) Lowering the Luxury Cap to 180 million per year while putting in a soft salary floor of 100 million per year per team , 3) installing a basic lottery for draft picks. etc. If the Player Union’s reports that the Owners are not actually negotiating at all yet are true, the 2022 Lock Out will basically become a blinking contest. As blinking contests are inherently stupid, the outlook for this Lock Out is not good, not good at all.
Lock Out Prediction
The Major League Baseball Owners did not have to institute the Lock Out at midnight on December 1st, 2021. But it was clearly in their best interest to do so. The negotiations for the new Collective Bargaining Agreement [CBA] with the Players were inevitably going to be extremely difficult. The Owners had not only clearly won both the preceding 2011 and 2016 negotiations; but they had also, according to the Players themselves, violated the “spirit” of their past agreements. There is palpable anger amongst the Players. Negotiations with another party that feels tricked or lied to are exceeding difficult. And, in the 1994-95 Strike, the Owners did not lock out the Players. The Players then went on Strike at the time of maximum benefit to themselves, deep into the season and threatening the World Series. By striking when they had received most of their paychecks for the season but before the Owners most lucrative event, the Players exerted maximum leverage. By locking the Players out now, the Owners maximize the time to negotiate before the Players can threaten the World Series again. You cannot blame the Owners for having institutional memory.
We believe that the Lock Out will last, at the very least, deep into the 2022 Spring Training and that there is a more than 50/50 chance that some actual early season games will be canceled. The Owners have defeated the Players again and again since 1995. At some point, the Players will settle for what is being offered. Most likely, the settlement will include mostly superficial issues such as: 1) Adopting the universal DH, 2) Some type of lottery for draft pick order, 3) Elimination of the draft pick compensation for teams that lose free agents, and 4) Raising the Luxury Tax Threshold. But the core issue, the fact that Baseball teams can win by losing, will be untouched. The Owners will almost surely not give more than an inch on their exploitation of non-Union players too. And the Owner’s will probably insist on some things simply by claiming that they need to get something too (for instance: expanded play offs, even greater penalties for exceeding the Luxury Tax Threshold, and/or advertising patches on uniforms). The basic fact is that, while the Players are fighting for things that indirectly harm them, the more cohesive Owners are struggling with issues that directly benefit them.
Our prediction, the Players Union will end up with some concessions. But the Owners will win this round too, simply by giving up very little and still getting a lot back.