Why baseball teams are spending so much — and why it's about to end

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The amount of money being thrown around is staggering. Already this off-season, Major League Baseball teams have committed close to $1.5 billion US to free agents. $407 million was spent just on Sunday. On Monday, the New York Mets handed 37-year-old pitcher Max Scherzer $43.3 million a year for three years — shattering the record for average annual salary by 20 per cent. In a span of 24 hours, the Texas Rangers alone dropped half a billion on two players — shortstop Corey Seager (10 years, $325 million) and second baseman Marcus Semien (7 years, $175 million). Those moves instantly gave Texas the best middle infield in the game. But still — half a bil! For two guys!

The Toronto Blue Jays opened their wallet too, doling out the two richest pitching contracts in club history. The seven-year, $131-million extension for Jose Berrios and $110M over five years to lure Kevin Gausman from San Francisco were somewhat offset by the departures of Semien and Cy Young winner Robbie Ray, who got a five-year, $115M payday from Seattle. But look at the Jays, shedding their tired self-image of a hamstrung smallish-market team (that plays in the fourth-biggest TV market in North America). They're right up there with the biggest spenders.

Clearly, the baseball business is booming. And yet, MLB's first work stoppage in a quarter century is around the corner — and a lot of people are worried it could drag on for a long time. So what's going on here? Has baseball lost its mind (again)? Let's try to unpack:

It sounds bad.

Baseball's collective bargaining agreement expires at 11:59 p.m. ET on Wednesday. A lockout will almost surely follow, putting a freeze on signings and trades for the foreseeable future. That's why we saw so much action over the last few days. Once the clock runs out, no one knows when they'll get another chance to bag a life-altering payday or land the player of their dreams.

Barring an extremely unlikely 11th-hour deal, this will end a 26-year run of labour peace — pretty remarkable for a sport that saw eight work stoppages between 1972 and '95, culminating in the 7½-month strike that wiped out the 1994 World Series (and dealt a mortal blow to the Montreal Expos). It's comforting to believe that such a devastating war, ignited by the owners trying to ram through a salary cap, may have shaken those who fought it into a sense of Never Again responsibility, and maybe it did to a degree. But really, baseball owners and players have been making so much money over the past couple of decades — especially in recent years, as TV rights deals continue to skyrocket — that it wasn't really worth it to fight anymore. MLB revenues hit a record $10.7 billion US in 2019, the last year before the pandemic. 

Now, though, the players seem hardened by the idea that their slice of the pie, rich as it is, has actually been shrinking. As the owners' revenues have climbed to unprecedented levels over the last few years, their average salary has stayed flat. Their anger over this helped fuel the squabbling over how (or even whether) baseball would squeeze in a 2020 season in the earlier days of the pandemic. The sides eventually struck a deal, but only after a bitter fight over how much of the players' "guaranteed" salaries the owners were obligated to honour when the season was cut to only 60 games and played in empty ballparks, without ticket- and concession-buying fans. In some ways, that hardened the owners too. They can now credibly say their end of the business isn't without risk.

Another thing contributing to the players' economic anxiety is baseball's statistical revolution. Nobody seemed to mind back when it was just curious fans cracking open Moneyball and learning that on-base percentage is actually a useful stat. But it's mutated to the point that seemingly every team is now run by ruthless, efficiency-obsessed management consultant types. Unlike the tobacco-spitting GMs of old, these guys are probably not romantic about baseball — and definitely not about overpaying for mid-level veterans when a younger guy can do 85 per cent as good of a job for a much tinier fraction of the price. Those vets make up a good chunk of the players' union, and they're tired of getting squeezed after years of paying their dues.

With that in mind, the players want to be paid more in the early stage of their careers (which could in turn help veteran free agents attract better deals). They also want to end service-time manipulation — the shady practice of keeping a major-league-ready prospect in the minors a bit longer to delay his eventual free agency — and to discourage the trend of teams tanking for a better draft pick (and thus not signing good players). Plus, more traditional asks like softer luxury-tax penalties for teams with high payrolls and the elimination of draft-pick compensation for teams that lose a free agent — both of which put a drag on spending.

The owners would be happy if everything stayed the same as it is now — especially in regard to spending on players. But they'd also like an international draft, expanded playoffs (that's more national TV money) and some rule changes aimed at improving the flow of the game. They're always sure to leak the elements of their proposals that will sound fun to fans — such as a draft lottery and letting the best teams pick their first-round playoff opponents. So, yeah, there's plenty to fight over, if you're looking to fight.

But it's probably not as bad as it sounds.

OK, both sides are asking for a lot. But the optimistic view is that none of this sounds existential. No one is demanding a seismic shift in the economic rules of the game, like in '94. Or threatening the contraction of two teams, like in 2001. If everyone can keep their cool, it seems like there's a deal-space here.

And there's plenty of time. Sure, it would be nice to keep that long labour-peace streak going — not to mention the momentum from all the hot-stove action of the last few days. But there's nothing tangible to lose until spring training opens in mid-February. And nothing really to lose until Opening Day of the regular season, scheduled for March 31.