Jake Arrieta Warns Young Players as Gap Grows Between Revenue, Payroll

Major League Baseball set a new record for gross revenue this past season, bringing in $10.3 billion. That followed a season in which the league tallied $10 billion and doesn’t even include the $2.6 billion windfall from Disney’s purchase of BAMTech. According to Maury Brown of Forbes, inflation-adjusted gross revenues have increased by 377 percent since 1992, when Allan Huber Selig took over as commissioner.

Player compensation, however, has not increased at a commensurate level. It’s hard for some fans to fathom when they see what seems like astronomical sums being handed out even to those players they deem mediocre, but it’s all relative. And as Brown further reported, teams spent a lower percentage of revenue on payroll last season (54.2) than in any year since 2012 (53.7).

Image via Forbes

And while we’re only talking about a drop of 4 percent or so from the previous season, there’s something wrong when the the players’ share isn’t at least remaining static. We’re not just talking about last season, either, since the percentage of MLB revenues going to payroll has decreased over each of the last four seasons.

The specifics of these increasingly owner-friendly economics are myriad and diving into all of them is a task for someone much smarter than I. Suffice to say the players didn’t do themselves any favors by accepting perks like extra room on team flights and better clubhouse amenities in exchange for concessions on qualifying offers and the competitive balance tax.

Whether the penalties are legitimate deterrents (meh) or simply convenient excuses behind which ownership can hide (yup), it’s pretty evident that something is going to have to change in the new CBA. That’s not as simple as it sounds, since owners aren’t going to want to suddenly give up all those extra millions of dollars and the players seem to have learned their lesson after getting hosed during their last trip to the bargaining table.

And after consecutive stagnant free agency periods in which even the most sought-after players sat around, veterans are really starting to feel the pain of being squeezed. Belying the implication of his surname, Nationals reliever Sean Doolittle has been among the most vocal in expressing his displeasure with the current economic system. And that goes for the gross underpayment of minor leaguers as well.

Jake Arrieta, who saw his own market crater last winter as free agency froze up, has added his voice to the chorus as well. Addressing those players not yet eligible for arbitration, let alone free agency, Arrieta urged his young colleagues to “be paying attention to what’s going on in your game.”

The disparity in revenue and payroll is difficult for many fans to digest because they see multi-million-dollar salaries and make a full stop. At various points Friday, I was told that Mike Montgomery ($2.44M), Kyle Schwarber ($3.39M), and Kris Bryant ($12.9M) were not worth the salaries they’d agreed to. That’s an awful take in general, but the overriding point of the players’ gripe is that their efforts are not being compensated properly relative to the money they’re generating for owners.

One of the ways in which that gap is widened is via the “file-and-trial” arbitration strategies being increasingly adopted by teams. Baseball has become increasingly specialized and advanced metrics illustrate player performance more accurately than ever, but most arbitration panelists abide by the more tried-and-true stats. Which means teams possess an innate advantage and can thereby bully players when it comes to arb settlements.

In whatever form it takes, arguing that players make too much money is arguing that owners aren’t making enough. Even though owners are making more now relative to players that at nearly any point over the last decade. Think about the rationale behind siding with billionaires over millionaires and feel free to explain it in the comments (if they actually show up, that is; thanks, Disqus!)

The simplest solution to this growing quandary would be a salary floor based on a percentage of revenue, which would prevent a trend like the one we see in the chart above. It’d also insulate ownership — as if that should really be a concern — against the bursting of the revenue bubble from decreased attendance and broadcast revenue. Of course, an influx of $5.1 billion coming in 2022 from an extension with FOX could keep the bubble inflated for a while yet.

The current CBA runs through the conclusion of the 2021 season, at which point you can expect some very contentious negotiations. Even though that’s still three years away, a work stoppage feels inevitable at this point unless something changes in the numbers. So yay, that’s fun.

I don’t expect everyone to be paying attention to the undercurrents of labor unrest when there are so many other surface issues to pay attention to, but this is going to come to a head eventually. And because the seeds for the battles in the next CBA have already been planted, it doesn’t hurt to keep an eye on how they grow over the next couple years.

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Evan Altman

Evan Altman is the EIC and co-founder of Cubs Insider and has proclaimed himself Central Indiana's foremost Cubs authority. He is a husband, father, homebrewer, and award-winning blogger with entirely too much pop culture knowledge. Evan's greatest accomplishments include scoring 400 points in Magic Johnson's Fast Break, naming all 10 members of the Wu-Tang Clan in under 3.5 seconds, and winning the Meese Literary Award at Hanover College.

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16 Comments

  1. I’d like to see a version of that graph with the Y-axis running from 0 to 100 percent, instead of from 51 to 58 percent.

    1. The Cubs didn’t make much of an attempt to sign Arrieta during his walk year. I wonder why. Was his demand unreasonable? Were there clear signs of an aging arm? Was he bad in the clubhouse? All or none of the above?

      1. A lot of that had been predetermined by Arrieta and Boras, who very much in favor of hitting the market two years prior to Arrieta becoming a free agent. I wrote during spring 2017 that he had one foot out the door, and his initial demands were such that it wasn’t making sense to the Cubs at the time.

      2. The Phils paid Arrieta $30 million in ’18, for 172 innings and a 3.96 era (that was more like 5.50 for Aug/Sept). His salary now goes down for the next 2 seasons – but I believe he still gets $25 mil this year. I actually think Theo deserves credit for letting him walk.

      3. Jake’s demands of being paid like an ace, when he clearly was not, for a ridiculous amount of years, is on HIM. The days of paying players for past performance is waning. Now if we can just develop a system to pay the younger players a better share when their value is tremendously better than their salary.

  2. The lower percentage of MLB and MiLB revenues paid to players in 2018 is due to fines and suspensions to misbehaving players, not owner miserliness. According to the Washington Post, “Spending on Major League Baseball payrolls dropped last season for the first time since 2010, an $18 million decrease attributable to drug and domestic violence suspensions and a player retiring at midseason.” Robinson Cano’s suspension alone knocked $11.7 million off the total. You’ve based your article and argument on a statistic which, while true, is misleading.

    1. The comment above is wrong on several levels, but the main point, that the lower percentage of revenues paid to players is due to their own misbehavior, is so pernicious that it really ought to be ripped up in detail.

      The total amount paid to players incorporates several figures, the most obvious being normal salary payments, but is also affected by things like suspensions, retirements, etc. as noted above. But to arbitrarily blame a year-over-year total decrease in the amount paid, on one set of those factors, in this case players being suspended for PEDs, without bothering to note how those factors played into the previous years’ calculation, is absolute nonsense.

      It’s like if you had a lemonade stand, and one summer you sold $100 worth of lemonade, and had to shell out $10 for cups, for a profit of $90. The next year you only sold $90 worth of lemonade, and paid $9 for cups, for a total profit of $81. Bob’s argument above is like saying “Well, yeah, we made $9 less this year, but that’s cause we paid $9 for cups!”

      There were actually MORE suspensions for PED usage in 2017, and while Cano’s figure was high it’s a good bet the total amount forfeited from ‘misbehaving players’ is nearly a wash from 2017-2018. It’s certainly nowhere near enough to account for the decrease in the amount players saw.

      The fact that an AP writer is putting out such clear bad faith argumentation, and people like Bob are repeating it, unwashed, when the only beneficiaries are the billionaire owners who then get to cut payroll, should give every reader pause.

    2. The total drop was indeed $18M, but to attribute that solely to suspensions and a retirement is wildly irresponsible. Players retire and are suspended every year, so you can’t simply cite one season and not compare it. It also ignores the very real mechanisms of the luxury tax and arbitration strategies that lead to reduced offers. And the lack of a salary floor to mitigate the reductions in payroll spending is another big factor.

  3. There is a number of things to be re-worked in the 2021 CBA (at least from the players perspective), although a real good start would be a spending minimum/floor. To do it right however (again from a players perspective – to get the most team 4 allocated to player salaries) they would need to set minimums by team. Teams like Colorado, Philly, Texas would then have higher minimums than teams like Milwaukee and Kansas City.

    Of course MLB rationalizes it away, citing spending patterns that run in cycles. Which is not holistically untrue, and trend lines like the chart above should really be looked at in increments of 5 years rather than one to allow some statistical smoothing. No matter how you slice it though, it doesn’t change the basic truth that overall – total baseball revenue keeps going up, but player income is not keeping pace.

    How is it that we don’t hear any players calling for Tony Clark to be fired, instead of extended?!

    https://www.si.com/mlb/2018/02/06/players-union-tony-clark-president-statement-free-agency

  4. Its a very delicate situation. Owners deserve to make the most money. They have the most invested and the most to lose. Small market teams, Twins, Rockies, Reds, etc, still have to pay players to be competitive on the field. There is also the question, how much is enough? An agent’s answer to that question is “just a little bit more”. The .300 major league hitter getting 20+ million per year and the .250 hitter getting 3 million per year. The .300 hitter is getting one more hit per 20 AB’s……is that worth an extra 17 million per year? There are not enough Karl Malone’s in sports who negotiate their own salary without an agent. Let go back to Andre Dawson…just write me a check, whatever it is, I will play for the Cubs!

    1. Tom, with all due respect, the comment “Owners deserve to make the most money. They have the most invested and the most to lose” has absolutely nothing to do with this column.

    2. Owners do still make the most money. But when hundreds of players across multiple levels of an organization are losing the share of total revenues that should be going to payroll, the system is failing. These owners generally aren’t just subsisting in MLB revenue to make money, either.

      1. Agreed that the system is failing. I think a big part of the problem is that even when the players were getting a bigger percentage of the revenue, the majority of that was going to the top 10% of the players. Now that owners are showing more restraint and not giving out as many long term albatross contracts, not as much revenue is going to the players overall. Hard to blame the owners for getting smarter, but also hard not to blame the players for not wanting a lesser percentage of the growing revenues.

  5. Paying anyone ridiculous amounts of money to play anything is obscene, disgusting and repulsive. Having said that I totally understand what the writer is saying in his story and I agree in principle. Funny thing is if people did not pay the unaffordable ticket, souvenir and concession prices there would be no money to get stupid with.

  6. I have had a number of friends that played in the minors and they all said the “meal money” (per diem) is the difference maker in a player’s development years. It allows a tax-free allotment to supplement their income that often isn’t reported in salary comparison. So when we are discussing player pay, all of the medical, subsistence and educational (high school/college undergrads are often given a “degree completion” clause) benefits have to be compiled to give a true picture of income. These same benefits are given to major league players with the added income of baseball collectible shares (in the 90s, it equaled to salary) and video game licensing. I’m not in the owners corner, just stating a more comprehensive look at all of the variables may need to be gathered to justify any outrage of millionaires to billionaires.

  7. ive been having this exact conversation with my son, which started with the question does bryce harper deserve 300 million plus. His argument: no one deserves that much money. My argument: if there’s that much money in the game, it shouldn’t all go to the top.

    Props to Sean Doolittle for speaking out. and Arrieta i guess

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