Today marks the end of the regular season for Major League Baseball. For the 18 MLB teams that didn’t make the playoffs, it also marks the beginning of the 2016 offseason, an offseason that may reshape the landscape for player salaries. On December 1st, the Collective Bargaining Agreement (CBA) between the League and the Players Union (MLBPA) is set to expire. Negotiations loom large over what exactly is considered to be “baseball related income.”
Over the past 20 years, overall revenues within baseball have grown exponentially. As noted in The Fields of Green, MLB gross revenues have now exceeded $9 billion, a six-fold increase since 1994. While the size of the pie is exploding, not everyone is getting a fair slice. Nathaniel Grow of Fangraphs has tracked the players’ portion of MLB revenues over time and noted that, as of 2014, the MLBPA received just thirty-eight percent of total MLB revenue, the lowest share it has ever received. To provide some context, the MLBPA cut was as high as fifty-five percent in the early 2000’s. This disparity has been, and will continue to be a focal point during the ongoing CBA negotiations.
There are a myriad of potential explanations for the MLBPA’s shrinking revenue share over the years, but one of the most intriguing areas to explore is the significant revenue growth generated by MLB Advanced Media (MLBAM). The media-focused wing of MLB was one of the very first players in the now ubiquitous OTT (over the top) streaming space and has reaped enormous benefits of being a first-mover. Not only does MLBAM take in revenue via the popular MLB.TV service, they also generate significant revenue by providing a “white-label” service to HBO, WWE, and the NHL among others.
The revenue generated from this white-label business is now so large that late last year, MLBAM spun-off the business into its own entity called “BAM Tech”, which will focus exclusively on providing white-label service to other companies with a need for streaming capabilities. As reported by Maury Brown, the 2016 revenues generated by MLBAM and BAM Tech are expected to exceed a billion dollars. As more and more content providers adapt to the OTT streaming model, MLBAM and BAM Tech are in prime position to see that billion in revenue grow significantly. The Walt Disney Company clearly agrees, as they invested $1 billion in BAM Tech this past August.
While the MLBAM revenue stream has been a windfall for the owners, it has exacerbated the disparity in revenue share between the league and its players. Determining how much, if any, revenue generated by MLBAM and BAM Tech will trickle down to the players will be a contentious focal point of these negotiations. Revenue must be considered “baseball related” for the Players Union to have any claim on it, and it is up in the air as to whether MLBAM revenue can be considered baseball related at all. The MLBPA will argue that without the players, the MLB would never have made the investment in the MLB.TV streaming technology that has led to the profitable BAM Tech. The League will counter that, in the most literal sense, revenue generated from the streaming of hockey games and wrestling matches is certainly not baseball related.
The MLBPA has long been considered the most power sports labor union. These negotiations will stress test that theory. The CBA will be a significant opportunity for Tony Clark and the union to flex their muscle and reverse the players’ declining share of revenue. Staking a claim to a portion of the MLBAM revenue is essential to their fight.