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Now that the pandemic-shortened 2020 season is over, Major League Baseball has gone right back to where they were when they were negotiating the playing of a season in the first place: complaining about how expensive baseball is. Commissioner Rob Manfred didn’t even wait for the World Series to conclude before granting an exclusive interview to Sportico where he could discuss how much debt the poor owners had taken on just to give you, the fans, something to watch during the coronavirus pandemic.
Manfred claimed that MLB would post up to $3 billion in debt for the 2020 season, raising MLB’s total debt to over $8 billion. That sounds bad, just in an inherent, Billion-with-a-B sort of way, but there are quite a few qualifiers you need to consider before you contribute to MLB’s GoFundMe for a 2021 season.
For starters, even if we take the $3 billion in debt at face value, that’s spread out among 30 teams. That’s an average of $100 million: a $3 billion debt sounds massive until you remember that two-thirds of the league’s teams have principal owners who are billionaires, some many times over, and the other third is damn close. And that’s just the principal owners: if the $3 billion is accurate, it wasn’t just split up among 30 principal owners to around $100 million each, but all the minority owners, of which there are many and more all the time, as well. This isn’t quite as big of a figure we’re talking about now, is it?
And another thing, we can’t really trust that figure for debt for the 2020 season, anyway, not when MLB isn’t forced to report on all of their revenue, including, as The Athletic’s Evan Drellich already pointed out earlier this week, “their stake in regional sports networks.” It’s easy to say you’ve lost $3 billion (or each team lost $100 million) when you don’t include money that would lower that figure in the equation. And that’s a time-tested ploy of MLB owners, too: back in 1985, when Peter Ueberroth was commissioner, he actually handed the teams’ books over to the MLB Players Association, so that the players could see how much red there was and then presumably listen to the pleas of the owners for things like a salary cap and a maximum arbitration payout. The union handed the books over to economist Roger Noll, and, well (per Lords of the Realm):
As the Lords presented it, twenty-one of twenty-six teams lost money in 1984, for a combined operating loss of $41 million. As Noll saw it, baseball had made $25 million.
He found bookkeeping tricks at every turn. [Ted] Turner’s Braves were paid only $1 million for TV rights by Turner’s SuperStation WTBS. They should have been getting at least the league average of $2.7 million. The Cardinals reported no revenue from parking and concessions, but another Anheuser-Busch subsidiary was raking in $2.5 million from that. The Yankees’ $9 million loss included [George] Steinbrenner’s real estate investments in Tampa and $500,000 worth of charity contributions.
Remember, too, that MLB put the 2020 season in danger rather than given in to the PA’s demand that the books be opened up once more in order to prove that the players needed to take a second pay cut in addition to the one they had already agreed on back in March. Now, given the past, how the rich operate in general, and how the present-day owners felt secrecy and risking the cancellation of the 2020 season was the more palatable option to them, tell me what you think the chances are that there aren’t any shenanigans in the bookkeeping in the present.
MLB said back in the spring that they’d lose money by playing the 2020 season without fans. They then kept floating cries of how the pandemic would probably impact finances for a good three years, and that was before they knew it would still be ongoing at this point in time. They’ve been planning a Woe Is Us tour for months now, which was introduced without providing any proof that it would actually happen, and now that the season is over, they’ve gone back to talking about debt without providing any proof the debt exists like they say it does.
There is an entire other issue, too: debt for an entity like an MLB team is a whole lot different than debt is for you or me, as Rob Mains explained at Baseball Prospectus earlier this week. Mains presented a scenario where he wanted to take a $25,000 European vacation, and how he would pay for that, explaining that the debt he’d rack up in the process would be very different depending on whether he paid for the vacation with his Visa and the 14.99 percent interest rate there, or instead took out a home equity loan, which would result in one-fourth the annual interest payments.
One kind of debt is a lot less burdensome than the other.
And the same goes, in spades, for companies. If you’re strapped for cash, you’re going to pay Visa-level rates, because lenders have to price in the risk that you won’t be able to pay them back. (My grandfather was a small businessman, and he once commented, “The only way the bank will loan you money is if you prove you don’t need it.”) On the other hand, if you’re a big corporation, money is exceptionally cheap now. In August, Apple issued $5.5 billion in bonds. It’ll pay an interest rate of about 1.77 percent on it. One point seven seven. That’s a far cry from 14.99, or even 3.5.
So there’s debt that’s onerous. There’s debt that isn’t.
And there’s debt that’s deceptive.
Mains would go on to explain that much of MLB’s debt is likely from the kinds of things that actually make teams more valuable and richer, like the teams that are investing in the area around their ballparks, which is why they’re able to borrow the money to pay for those investments in the first place. And at the kinds of rates that Apple is able to buy those billions in bonds at, too.
MLB doesn’t have to show you or the media if that’s the case in order to prove it, but they’re hoping, as they so often do, that you have no idea how anything works, and will just take them at their word. So that they can do things like, oh, I don’t know, decline the 2021 option on basically everyone with one in order to flood the free agent market with additional players they can then underbid on and underpay, claiming that this is all financially necessary because of all the debt, you see.
You might want to check Thursday’s transaction news if you haven’t done so yet.
We’re in for an entire winter of The Mike Moustakas Treatment for every player who can be similarly exploited. MLB was already going to whine about their finances, as they always do, before collective bargaining begins on a new CBA in time for the 2022 season. The pandemic gave them reason to start all of that process sooner (like with everything else on their pre-pandemic agenda), and while there are certainly losses to incur — or, at least, revenues lower than their projections that MLB teams will call losses — you can’t trust that MLB is going to be accurate in representing or stating what those losses look like. They’ll do what they always do, which is bend and twist the truth as much as possible to benefit themselves, at the expense of someone else. It has already begun, and with this being the last year of the current CBA, and no end to the pandemic in sight, their crying poor is not going to stop any time soon.
- Justin Turner running out of isolation and onto the field to celebrate the World Series is so infuriating on so many levels. Like this one from Bradford William Davis, which makes you wonder why Turner was even in the lineup in the first place instead of scratched with an inconclusive test (that further testing returned as positive).
Or this, from Jen Mac Ramos, which was written from the point of view of someone who knows they will die if they contract coronavirus.
And while I think Albert Burneko lets Justin Turner a little too much off the hook here, as I explained in a mini Twitter thread, he’s spot-on that this was an inevitable outcome of a structureless, directionless year.
It is a weird feeling to be mentioned in a Washington Post article, but not by name. See if you can spot the reference to me!
- R.J. Anderson wrote about how a World Series win adds to Andrew Friedman’s complicated legacy.