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How MLB’s Business And Labor Perfect Storm Created $1.77 Billion Of Player Contracts In Less Than A Week


It won’t happen every year. It may not happen again for some time. But a confluence of factors created a record feeding frenzy in Major League Baseball during the 2022 Winter Meetings that saw player contract agreements approach $2 billion.

Yes, you read that right. From Monday to Thursday of this week, agreements or outright signings by 23 players with half of the league’s 30 clubs totaled $1,770,316,666.

Within this eye-popping number were three contracts that were in nine figures (Aaron Judge at $360 million, Xander Bogaerts at $275 million, and Trea Turner at $300 million) with two of these 11 years in duration. According to Jayson Stark of The Athletic, in the first 46 years of MLB free agency, just one player (Bryce Harper with the Phillies in 2019 for 13 years) had a contract over 11 years in length. Between Monday and Thursday, Turner and Bogaerts both went a decade, plus one.

And it wasn’t just total outlay. The average annual value (AAV) which is the total contract amount divided by the years in it, soared. The Mets already had Max Scherzer with an AAV of $43.33 million, the highest in the league. Not content with that, owner Steven Cohen dolled out the same figure to 2022 AL Cy Young winner Justin Verlander with a two-year, $86.66 million deal. When adding in other signings by the Amazins the AAV by their signings came to a mind-numbing $86,583,333. To place this in perspective, the entire 2022 Luxury Tax player payroll for several clubs (Orioles, Pirates, A’s, and nearly the Reds) would fit inside this.

Spending by five clubs might make a drunken sailor blush. The Phillies and Yankees allocated over $350 million each, with Philadelphia approaching $390 million ($387 million). Along with the Red Sox, Padres, and Mets a staggering $1,435,166,666 was allocated to 12 players.

But how did this happen? Why, when so many Baseball Winter Meetings have been snoozers? A combination of factors created the perfect environment for owners to spend lavishly.

New Labor Deal Creates Calm

Remember that 99-day lockout by MLB’s owners that pushed the start of the 2022 season out? Seems like a distant memory based on this past week. But the pain of the labor negotiations creates a sense of certainty for the owners as they know the parameters of things such as minimum salary, how the Luxury Tax is structured, and that they have four more years of labor peace.

Gross Revenues Will Be Close Or A New Record In 2022

Commissioner Rob Manfred said the league was “just shy” of $11 billion in gross revenues for 2022, a sign that the league has turned the corner from the pandemic. The last time the league saw record revenues was just before the pandemic in 2019 when it hit $10.7 billion. When final numbers are released, the league may match or exceed the robust figure.

National Media Rights Increased

The 2022 season saw the start of new media rights extensions with FOX, ESPN, and TBS that increased by nearly $250 million annually. Over the life of the agreements that run to 2028, MLB will see $12.24 billion. Throw in streaming deals with Apple
AAPL
and NBC for Peacock, and the league’s 30 owners each saw bottom lines increase.

Adding Additional Playoff Teams Incentives Owners To Compete

One big change with the latest labor deal is the addition of two more Wild Card teams – one each in the AL and NL – that is giving clubs a reason to try and compete. With a total of 12 teams how making the playoffs, clubs showed to be more aggressive at the trade deadline as buyers, not sellers as ownership saw the odds of reaching the postseason increase.

Owners Collect An Additional $900 Million From Disney

While it’s not a baseball company, MLB’s 30 owners invested in the creation of a streaming service to sell in the form of BAMTech. That was sold to Disney, where it was rebranded Disney Streaming which hosts Disney+, ESPN+, and Disney-owned Hulu. Disney purchased the last 15% MLB owned for $900 million in November. While some funds may go to the Commissioner’s general fund, it added approximately $30 million extra to the wallets of all 30 owners giving them some extra incentive to spend in free agency when they otherwise might not.

MLB Owners Continue To Diversify

Call them “ballpark villages”. Call it ancillary development. But owners continue to take on real estate risk by developing outside ballparks that don’t count as baseball-related revenue but benefit from the fans going to games. Don’t think these are important? Look at how A’s owner John Fisher is playing hardball with not only Oakland, but Las Vegas to get development around a new ballpark.

Baseball Isn’t “Dying”. Six Clubs Will Exceed The Luxury Tax Threshold In 2022

While Major League Baseball has a system that taxes clubs for exceeding a payroll threshold, so much revenue is pouring into clubs that a record six clubs are projected to break the $233 million basic threshold for 2022. Those clubs are projected to be the Mets, Dodgers, Yankees, Phillies, Red Sox, and Padres. The only other time six clubs went over the Luxury Tax threshold was in 2016 (Dodgers, Yankees, Red Sox, Cubs, Giants, and Tigers).





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