Why baseball's new CBA could ultimately hurt the players
Baseball has labor peace, but at what cost?
By Ken Rosenthal
An instant analysis of a new collective-bargaining agreement is as risky as an instant analysis of a trade involving prospects. In both cases, the outcomes are not always clear, the effects not always understood, until years later – and a CBA is far more complex than a trade.
That said, some player agents raised immediate concerns about the long-term impact of baseball’s new five-year CBA as details of the agreement began to emerge from sources late Wednesday night.
Not all of the details are known. And some of the agents have something of an axe to grind: They believe that the new head of the union, Tony Clark, did not effectively communicate with them during the negotiations.
But two of the agents’ concerns -- that the new luxury-tax rules could amount to more of a salary cap than in the past, and that the new caps on international spending will reduce the future earnings of foreign amateurs – appear valid.
The first of those concerns is more significant, given the union’s historic opposition to anything resembling a cap and the limits that the new luxury-tax penalties will create for the sport’s biggest spenders.
And while the union successfully held off an international draft, the new spending limits on international amateurs – starting at $4.75 million per team annually, according to The Associated Press – could give the clubs even greater cost control than a draft would have.
The good news for the players is that they gained at least one major concession in the CBA, in an area that greatly concerned them: No longer will teams that sign qualifying-offer free agents lose a first-round pick.
Other QO rules remain same: Player must be on team entire season to be eligible. Amount will be determined by average of top 125 salaries.
Under the new system, starting next offseason, a team over the luxury-tax threshold would lose second- and fifth-rounders, plus $1 million in international bonus money.
A team under the luxury-tax threshold would lose only a third-rounder, and players now will be eligible to receive a qualifying offer only once. It’s not complete, unrestricted free agency, which the owners offered the players in exchange for an international draft. But it’s the closest the players ever have come, and it could lead to a greater number of teams pursuing top players, spurring competitive balance, helping the game.
The players also gained concessions on the schedule – starting in 2018, the season will begin in the middle of the week, to build extra days off into the 162-game season. And in the days ahead, we surely will learn other details and hear other explanations that present a fuller portrait of the new deal.
And on schedule: Starting in 2018, season will start mid-week, helping create extra off-days in schedule.
With the luxury tax, the thresholds will rise in relatively small increments, increasing from the current $189 million to $195 million at the start of the new agreement and then $210 million at the end.
(Low-revenue teams generally want the thresholds lower, so the penalties for big spenders kick in sooner. High-revenue teams, as well as the players, generally want the thresholds higher, to allow for greater spending).
The difference in the penalties are more striking.
Previously, the maximum tax for a third-time offender such as the Yankees or Dodgers was 50 percent for every dollar by which they exceeded the threshold.
Under the new system, a third-time offender will pay 50 percent on the first $20 million it spends over the threshold, 62.5 percent on the next $20 million over and 95 percent on $40 million over and beyond, according to a source involved with the talks. Such a team also will see its top draft pick fall by 10 spots.
The Yankees would have paid a $36 million tax on a $250 million payroll in the first year with the new rates, the source said, as opposed to the $30 million they paid this past year.
The stiffest penalties obviously will apply only to the biggest spenders – and only starting with the second year of the CBA; transition rules will apply this offseason, and the penalties in 2017 effectively will be an average of the new and old rates.
The agents’ concern, however, is that the biggest spenders generally drive the market, raising salaries for all. If the spending power of those teams is reduced, the players ultimately will suffer – something that should not happen at a time when the sport’s revenues have never been higher.
The question is whether the Yankees, Dodgers, et al, are even going to continue spending in the $250 million range. Those teams are becoming more efficient, incorporating younger, more inexpensive players. They are not necessarily upset with the new tax rates, believing they eventually will avoid the harshest penalties.
And who knows? Perhaps the limits on international spending will leave high-revenue teams with pent-up dollars that they will redirect to paying the penalties.
One thing is clear: The union agreed to greater spending limits, for both major leaguers and international amateurs, than ever before. It’s reasonable for some agents to be concerned about where this CBA will lead. We just don’t know the full impact yet.