2016 — Has A New Diamond Age Begun for Baseball?

Introduction

THE 2016 BASEBALL WINTER Meetings were held at the Gaylord National Resort and Convention Center in National Harbor, Maryland (December 4–8). The meetings took place 32 days after a thrilling Game Seven of the World Series between the Chicago Cubs and the Cleveland Indians. The game went into extra innings tied 6–6, and then was held up by a 17-minute rain delay. When play was resumed, Ben Zobrist’s double and Miguel Montero’s single scored two runs in the top of the 10th inning to lead the Cubs to an 8–7 victory, their first World Series Championship since 1908.

Hall of Fame and Other Announcements

The Eras Committee (formed in 1937 as the Veterans Committee) of the Baseball Hall of Fame evaluates managers, executives, umpires, and players passed over by the votes of the Baseball Writers Association of America. Four eras are evaluated separately: Early Baseball, 1871–1949; Golden Days, 1950–1969; Modern Baseball, 1970–1987; and Today’s Game, 1988-present. Eligible candidates for the two most recent Eras are nominated and voted on every five years, and must receive 75 percent of the votes of the 16-member committee.

The Committee chose Allen H. “Bud” Selig and John Schuerholz as its 2017 inductees.1 As Chairman of MLB’s Executive Council, Selig acted unofficially as Commissioner from September 9, 1992, to 1998. He officially became Commissioner in 1998, and served in that office until 2015, making his tenure the longest since that of Kenesaw Mountain Landis.

Under Selig, the 1994 postseason and World Series were cancelled because of a 232-day players’ strike that began on August 12, 1994, and ended on April 2, 1995. Since the signing of the 1995 Collective Bargaining Agreement, however, and its subsequent agreements, there have been no baseball strikes or lockouts. Major league revenues, estimated at $1.2 billion in 1992, were projected to be $10.5 billion in 2016. Four franchises (Colorado, Miami, Arizona, and Tampa Bay) were added in 1993 and 1998.

The American and National Leagues had each been divided into two divisions for a quarter of a century, but under Selig’s direction, a third division was added in 1994 and a Wild Card team was added to the playoffs in 1995, expanding the postseason to three rounds. A second Wild Card team was added in 2012, necessitating a one-game playoff.

Financial measures were implemented to increase competitiveness of smaller markets. Revenue Sharing, the Luxury Tax, and equal shares of increasing national television, internet streaming and internet servicing revenues have allowed 28 of the 30 Clubs to play in the postseason in the past ten years. According to Forbes, television revenues now exceed attendance revenues.2

Prior to the meetings, it was announced that the Walt Disney Company would acquire a 33 percent interest in MLB Advanced Media’s spinoff media company, BAMTech, for $1 billion. Disney also received an option to become the majority owner in the future. BAMTech will work with ESPN in internet live-streaming of sports and other Disney content separately from MLB Advanced Media’s own continuing live-streaming operations. BAMTech revenue will not be subject to revenue sharing, because it will not be baseball-related revenue.3

Before Theo Epstein’s Cubs won in 2016, John Schuerholz was the only General Manager to win a World Series in both leagues — as GM of the AL Kansas City Royals in 1985, and the NL Atlanta Braves in 1995.

Claire Smith became the first female recipient of the J.G. Taylor Spink Award from the Baseball Writers Association of America for meritorious contributions to baseball writing.4 The late Bill King received the Ford C. Frick Award for excellence in baseball broadcasting.5

Annual Awards

The John H. Johnson Award for outstanding franchise was presented to Fort Wayne of the Midwest League. The Rawlings Woman Executive of the Year Award was presented to Brandy Guinaugh of the Dayton Dragons (Midwest League). The Larry MacPhail Award for best promotion efforts was presented to Midland of the Texas League. The John H. Moss Community Service Award was presented to the Round Rock Express of the Pacific Coast League. The Charles K. Murphy Patriot Award for support of servicemen and women and veterans was presented for the first time, and awarded to the Charleston RiverDogs of the South Atlantic League.6 The Warren Giles Award for League President was presented jointly to Charlie Blaney of the California League and John Hopkins of the Carolina League. The King of Baseball Award for longtime dedication and service was presented to minor-league operator David G. Elmore. The Sheldon “Chief ” Bender Award for player development was presented to Dan Lunetta of the Detroit Tigers. The Mike Coolbaugh Award for work ethic, knowledge and mentoring was presented to Donald “Spin” Williams of the Washington Nationals.7

Contract Extension

Before the Winter Meetings started, the New York Mets reached a four-year $110 million contract extension with outfielder Yoenis Cespedes. This annual average salary of $27.5 million is the second highest ever for a position player, after Detroit’s Miguel Cabrera ($31 million).8

Free Agents

During the meetings, outfielder Carlos Beltran signed for his 20th major-league season with a one-year deal with the Houston Astros for $16 million. Previously, the Astros added catcher Brian McCann and outfielder Josh Reddick.9 The Los Angeles Dodgers re-signed left-handed pitcher Rich Hill to a three-year $48 million contract. The Colorado Rockies agreed to a five-year $70 million deal with shortstop-center fielder Ian Desmond. The San Francisco Giants signed the former Pirates’ All-Star closer righty Mark Melancon to a four-year $62 million contract.

Shortly after the meetings, the New York Yankees signed closer Aroldis Chapman to a five-year deal worth $86 million. The Chicago Cubs lost their center fielder, Dexter Fowler, to their rivals, the St. Louis Cardinals, who corralled him for a five-year, reported $82.5 million. The Yankees signed outfielder-first baseman Matt Holliday to a one-year deal for $13 million. The Tampa Bay Rays signed catcher Wilson Ramos to a two-year contract worth $12 million.

Trades

In the biggest trade, the Chicago White Sox sent their ace left-hander, five-time All-Star Chris Sale, to the Boston Red Sox on December 6 for infielder Yoan Moncada (the best minor-league prospect according to Baseball America), right-handed pitchers Michael Kopech and Victor Diaz, and outfielder Luis Alexander Basabe.10 On the same day, the Red Sox acquired right-handed reliever Tyler Thornburgh from the Milwaukee Brewers for infielder Travis Shaw, two minor-leaguers (infielder Mauricio Dubon and right-hander Josh Pennington), and a player to be named later.

The White Sox then traded outfielder Adam Eaton to the Washington Nationals for right-handed pitching prospects Lucas Giolito, Reynaldo Lopez, and Dane Dunning. The Chicago Cubs traded outfielder Jorge Soler to the Kansas City Royals for right-hander Wade Davis, who had been the Royals’ closer.11

The New Collective Bargaining Agreement

The regular meeting activities were preceded by the conclusion of negotiations between Major League Baseball and the Major League Baseball Players Association for a new Collective Bargaining Agreement. The deal was reached only four hours before the existing CBA was set to expire. The new five-year agreement will expire on December 1, 2021, giving MLB 27 years of uninterrupted labor peace without a lockout or strike since 1994.12

The MLB Players Association unanimously ratified the new CBA contract on December 14. It was approved by 29 of the 30 club owners. Tampa Bay Rays owner Stuart Sternberg voted against it, and said “[A]n opportunity to address the extraordinary and widening competitive gap…between higher and lower revenue clubs….was missed here.”13

Major changes in the new contract:

Competitive Balance Tax (CBT or “Luxury Tax”) — The Competitive Balance Tax was first introduced in 2003. The CBT payroll thresholds increase to $195 million in 2017, $197 million in 2018, $206 million in 2019, $208 million in 2020, and $210 million in 2021. As a trade-off, the base CBT rates will increase from 17.5 percent to 20 percent for first-time payers, remain at 30 percent for second-time payers, and increase from 40 percent to 50 percent for third-time or more payers; and an additional new surtax will be applied as follows:

In addition to the Base Tax Threshold for each Contract Year, there will be two Surcharge Thresholds. A Club with an Actual Club Payroll that exceeds one or both of the Surcharge Thresholds applicable in that Contract Year will be assessed an additional Competitive Balance Tax on the amount by which its Actual Club Payroll exceeds the Surcharge Threshold(s), as set forth below.

(i) First Surcharge Threshold: The First Surcharge Threshold shall be $215 million in the 2017 Contract Year, $217 million in the 2018 Contract Year, $226 million in the 2019 Contract Year, $228 million in the 2020 Contract Year, and $230 million in the 2021 Contract Year.

(ii) Second Surcharge Threshold: The Second Surcharge Threshold shall be $235 million in the 2017 Contract Year, $237 million in the 2018 Contract Year, $246 million in the 2019 Contract Year, $248 million in the 2020 Contract Year, and $250 million in the 2021 Contract Year.

The following chart summarizes the Competitive Balance Tax rate a First-, Second-, and Third-Time CBT Payor would incur on the portions of its Actual Club Payroll exceeding the Base Tax Threshold, the First Surcharge Threshold, and the Second Surcharge Threshold.

Previously, clubs exceeding the threshold, even in consecutive years, never paid a tax on excessive payroll of more than 50 percent. Beginning in 2018, clubs with a payroll $40 million or more above the CBT threshold will have their highest selection in the Rule 4 Draft (the basic amateur draft) moved back 10 places, except that the top six selections will be protected, and those clubs will have their second highest selection moved back 10 places. Changes to the CBT will take full effect in 2018, and will be phased in for 2017.14

Some observers have described the overall effect of these changes as a “soft salary cap.” Union Executive Director Tony Clark said, “The premise of the CBT altogether was a drag at the top to keep teams from running away from the group.” Commissioner Rob Manfred said, “There’s two dynamics around the threshold: stopping people from running away but also having them low enough that people can aspire to spend a little more to be a little more competitive. … This agreement aims to further improve the game’s healthy foundation and to promote competitive balance for all fans.”15

Revenue Sharing — The total percentage of industry revenue subject to sharing remains the same, but the formula by which individual club revenue sharing is determined was revised. According to Forbes, top-paying clubs will not be subject to the multiplier in the current formula.16 The number of clubs disqualified from revenue sharing will be reduced from 15 to 13, with Oakland phased out over four years beginning in 2017. Atlanta and Houston were unofficially indicated to become eligible for revenue sharing.

Free Agency Club Compensation — 1) a club may not tender a Qualifying Offer to a player who has previously received a Qualifying Offer, 2) the time period during which a player can accept a Qualifying Offer is extended from 7 to 10 days; and 3) a club signing a free agent subject to club compensation will no longer forfeit a first-round draft selection, but will surrender picks based on their position regarding the Luxury Tax threshold, market size and revenue sharing status, number of qualifying-offer free-agents signed, won-lost records, and whether the free-agent signs with another club for $50 million or more; and 4) a club signing a free-agent subject to club compensation will forfeit between $500,000 and $1 million in its international amateur pool limitation (see below), and/or forfeit one or more Rule 4 Draft selections, depending on its Luxury Tax position, and the number of free-agents signed. Competitive Balance Round picks are exempt from forfeiture, unless obtained through an assignment from another club.

The effect of these new rules is predicted to reduce the incentive for a Club to make a qualifying offer to a borderline player, because it would not receive a high draft pick as compensation, if he rejects the offer and is signed by another club.17 The rules also might encourage smaller market/revenue clubs to be more active in the free-agent market. They might discourage larger market/revenue clubs from free-agent activity, given the multiple picks and international pool money at stake.18 These rules take effect after the 2017 regular season.

Minimum Salaries and Assignments — The major league minimum salary increases from $507,500 in 2016 to $555,000 in 2019. The minor-league minimum salary increases to $45,300 in 2019 for a player’s first contract, and to $90,400 in 2019 for a player’s second contract, for a player in his second year on a 40-man roster or for players with at least one day of major-league service time. The time period for a club to designate a player for assignment to a minor-league team is shortened from 10 to 7 days. Clubs no longer must place a player on optional assignment waivers prior to optioning them to the minor leagues.

Major-league players cannot be traded during the final week of the regular season.

International Players — Foreign professional players (mainly Japanese and Cuban) who are at least 25 years of age, with a minimum of six seasons of service in a recognized foreign league, will not be subject to a “signing bonus pool” limitation. This was intended to give them the same free-agency status as domestic players of comparable age. Signing of amateur players will be subject to a “hard cap” signing bonus pool limitation of $4.75 million to $5.75 million, depending on the club’s status as a recipient of a Luxury Tax compensation Rule 4 Draft pick.

These amounts will grow with MLB revenues. Previously, pool limitations were based on the previous year’s won-lost record, but it was a “soft cap,” in that clubs could pay a monetary penalty for exceeding the limitation. Other rules will apply to acquisition of such players by trade and to a limited two-round draft for clubs with lower revenues and finishes in the standings.

It is likely that the salary cap rules will be of most benefit to clubs with the best international scouting and academies in Latin America. Some also believe that the hard cap is intended to prevent future deals like the reported Boston Red Sox 2015 contract with then 19-year-old Cuban National Series infielder Yoan Moncada. Moncada received a $31.5 million signing bonus, and the Red Sox paid MLB another $31.5 million tax for exceeding their bonus pool limitation.19 (As reported above, Moncada was traded to the White Sox during the Winter Meetings for pitcher Chris Sale.)

Postseason Play, Scheduling, and Disabled List — 1) Home-field advantage in the World Series will now be awarded to the club with the higher regular-season winning percentage, rather than based on the result of the All-Star Game; 2) the regular season will start earlier and cover 187 days to provide four extra offdays for players; 3) start times of games on getaway days will be moved up (likely to the afternoon hours) to allow players to arrive in their next city at an earlier time; and 4) a 10-day disabled list will replace the current 15-day disabled list.

All-Star Game — 1) all players on the active roster of the winning team will share equally in a $640,000 bonus ($20,000 per player); 2) each team will have 32 players, with 20 position players and 12 pitchers; 3) following fan and player voting, instead of manager selections, the Commissioner’s Office will select seven National League and five American League players; and 4) the Home Run Derby format will remain the same, with increasing player prize money.

Drug Testing — 1) the number of in-season random urine tests will increase from 3,200 to 4,800; 2) the number of offseason random urine tests will increase from 350 to 1,550, making all 40-man roster players subject to at least one random offseason test; 3) the number of in-season random blood tests (for human growth hormone) will increase from 260 to 500, and the number of offseason random blood tests will increase from 140 to 400; 4) the penalties for performance-enhancing substance violations will be an 80-game suspension for a first violation, 162-game/183 days of pay suspension for a second violation, from 80 to 100 games for a third violation, and permanent suspension for a third violation, with the right to apply for reinstatement after two years; 5) the penalties for stimulants violations will be follow-up testing for a first violation, a 50-game suspension for a second violation, a 100-game suspension for a third violation, and up to a permanent suspension for a fourth violation; 6) the penalties for dehydroepiandrosterone (DHEA) violations will be follow-up testing for a first violation, a 25-game suspension for a second violation, an 80-game suspension for third violation, and up to a permanent suspension for a fourth violation; and 7) an arbitration panel will have more discretion to reduce penalties based on mitigating circumstances. Any player who violates the drug testing rules will no longer receive major-league service time credit during his suspension, unless reduced by 20 or more games. This new rule was motivated by the suspensions of Alex Rodriguez and similar players.20

Pension and Medical Benefits — Players will continue to receive the maximum allowable pensions under IRS rules. Players become eligible for minimum benefits after 43 days of major-league service. After 10 years of service time, they are eligible for $200,000 per year, beginning at age 62. Players with four or more years of service time can continue their health care coverage at a cost of at least 60 percent of their chosen plan. Players will also receive a guaranteed minimum contribution to their individual retirement accounts based on accrued service time.

Under the new CBA, clubs will increase their total annual contribution for medical and pension benefits to about $200 million per year.

Smokeless Tobacco — Use of tobacco products on the field will be banned in all ballparks where it is prohibited by local law or ordinance. Any player making his major-league debut in 2017 or later will be prohibited from using smokeless tobacco on the field in every ballpark. It is already banned in the minor leagues.

Translators — Every club will retain a bilingual media relations professional, and will provide additional English language learning opportunities for Spanish-speaking players.

Anti-Hazing and Anti-Bullying Code of Conduct — The commissioner’s office will implement an Anti-Hazing and Anti-Bullying Code of Conduct as a supplement to the Workplace Code of Conduct. A report of an abusive hazing incident involving Texas Rangers prospects surfaced in the weeks prior to the new CBA agreement.21

The new code bans “requiring, coercing or encouraging” other players to participate in “dressing up as women or wearing costumes that may be offensive to individuals based on their race, sex, nationality, age, sexual orientation, gender identity or other characteristic.” In addition, making players “consume alcoholic beverages or any other kind of drug, or requiring the ingestion of an undesirable or unwanted substance (food, drink, concoction)” is prohibited.

Social Responsibility Outreach

Major-league activity at the Winter Meetings, under the rubric “social responsibility,” included a “Pathways to Careers in Baseball” panel featuring Kim Ng, MLB Senior Vice President for Baseball Operations, Dodgers General Manager Farhan Zaidi, Mariners scout Amanda Hopkins and others; a panel on inclusion focusing on minor-league executives; a panel on environmental sustainability in ballpark operations; a “Supplier Diversity Summit” panel; and a “Women in Baseball” networking reception.

“On big things like diversity and social responsibility, you have to keep beating people over the head at meetings,” said Dan Halem, MLB’s Chief Legal Officer. “Baseball people are so busy, and they’re so focused on other stuff, you have to keep reinforcing it in whatever you do. That’s why the winter meetings are a good place for it. … Look, we need more diversity at every level, and the only way to get more diversity at the senior level is to have more diversity below, and at the entry level, and by focusing on developing people.”22

Under Armour and Fanatics Uniform Deals

Under Armour, Fanatics and MLB announced a 10-year partnership naming Under Armour as the official uniform provider to MLB. It will begin in 2020 and it will be Under Armour’s first professional league uniform deal. Under Armour became the official performance footwear partner of MLB in 2011. It has more than 400 individual athlete partnerships across the major and minor leagues. Fanatics will receive consumer product licensing rights.23

Areas of Disagreement

The owners and players failed to agree on 1) a proposal to expand the regular season roster from 25 to 26 players in return for limiting the September rosters to 28 players, including minor league call-ups; 2) new rules on pace of play, including a proposed 20-second pitch clock that has been used in minor leagues; 3) an international amateur draft, which was opposed by several Latin American players who attended the CBA negotiations, because they believed it would lower salaries for foreign players, who can now receive larger bonuses than American amateurs can receive.24 The Rule 4 Amateur Draft covers only players from the United States, Canada and Puerto Rico.

Has a New Diamond Age Begun for Baseball?

The business of baseball has never been better. Attendance and television revenues are stronger than ever. Legal challenges by minor-league players over wages (Senne v. Kansas City Royals Baseball Corp.), and by San Jose over MLB rejection of a proposed Oakland Athletics relocation (City of San Jose v. Office of the Commissioner of Baseball) have been repulsed. The unique antitrust exemption of baseball that was granted by the Supreme Court in 1922, and partially legislated by Congress in 1998, continues.

Challenges loom, however, for the health of the business and the game. The demographics of baseball fans are the oldest of the major sports. The game is disappearing from the playing fields of American (and Cuban) youth. As younger audiences defect from cable television subscriptions, sports networks reconsider their multiyear contract commitments to baseball games.

The inevitability of success cannot be assumed, whether for society or the recreational ethos of a nation. The continued success of baseball will depend on navigation by wise leaders through the challenges that often grow in the shadows of bright, shining triumphs.

NOTES

1 Barry B. Bloom, “Selig, Schuerholz elected to Hall of Fame,”m.mlb.com/news/2016/12/05/210231272/bud-selig-john-schuerholz-elected-to-hall, accessed December 16, 2016.

2 Maury Brown, “MLB Sees Record Revenues Approaching $10 Billion for 2016, ”forbes.com/sites/maurybrown/2016/12/05/mlb-sees-record-revenues-approaching-10-billion-for-2016/#7ce96de91845, accessed February 20, 2017.

3 Maury Brown, “Disney Buys $1B Stake in MLB’s BAMTech, to Launch ESPN Streaming Service,” forbes.com/sites/maurybrown/2016/08/09/disney-co-makes-1-billion-investment-becomes-minoritystakeholder-in-mlbams-bamtech/#4d7dad221597, accessed December 16, 2016; Maury Brown, “MLB Sees Record Revenues Approaching $10 Billion for 2016”.

4 Barry M. Bloom, “Smith first woman to win Spink Award,”m.mlb.com/news/2016/12/06/210386718/claire-smith-wins-jgtaylor-spink-award, accessed December 16, 2016.

5 Barry M. Bloom, “Late A’s voice King Honored With Frick Award,, m.mlb.com/news/2016/12/07/210538326/bill-king-wins-2017-ford-c-frick-award, accessed December 16, 2016.

6 Baseball Winter Meetings 2016 Minor League Baseball Awards, milb.com/milb/events/winter_meetings/y2016/awards.jsp, accessed December 16, 2016.

7 Major Award Winners, milb.com/milb/history/awards.jsp, accessed December 16, 2016.

8 Jeff Todd, “Mets Re-Sign Yoenis Cespedes,” mlbtraderumors.com/2016/11/mets-to-re-sign-yoenis-cespedes.html, accessed December 16, 2016.

9 The Astros traded minor-league right-handers Albert Abreu and Jorge Guzman to get McCann; Reddick was signed as a free agent.

10 Alex Speier, “An inside look at how the Red Sox landed Chris Sale,” bostonglobe.com/sports/redsox/2016/12/10/how-chris-sale-deal-came-about/y54iJcIAj4vtbDvRb8LLLP/story.html, accessed December 17, 2016.

11 Transactions, mlb.mlb.com/mlb/transactions/?tcid=mm_mlb_news#month=12&year=201, accessed December 16, 2016.

12 Richard Justice, “Peace & Glove: Owners, players reach CBA deal,” m.mlb.com/news/article/209969472/mlb-owners-playersagree-to-new-labor-deal/, accessed December 16, 2016.

13 Associated Press, “Report: Rays only franchise to Vote Against Ratifying CBA,” espn.com/mlb/story/_/id/18272683/mlb-owners-ratify-labor-deal-29–1-tampa-bay-rays-voting-against, accessed December 16, 2016.

14 Details of MLB, MLBPA labor agreement, m.mlb.com/news/article/210125462/details-of-mlb-mlbpa-labor-agreement/, accessed December 16, 2016.

15 Associated Press, “MLBPA Backed Out of Deal to IncreaseRosters to 26 players,” espn.com/mlb/story/_/id/18189604/mlbpa-backed-deal-increase-rosters-26-players, accessed December 16, 2016.

16 Maury Brown, “Breaking Down MLB’s New 2017–21 Collective Bargaining Agreement,” forbes.com/sites/maurybrown/2016/11/30/breaking-down-mlbs-new-2017–21-collective-bargaining-agreement/2/#d38e11d3d1f2, accessed December 16, 2016.

17 Chelsea Janes, “How Will Baseball’s New Labor Agreement Affect the Nationals?” washingtonpost.com/news/nationals-journal/wp/2016/12/01/how-will-baseballs-new-laboragreement-affect-the-nationals/?utm_term=.0a8ac820c0df, accessed December 16, 2016.

18 Jonathan Mayo, “How CBA affects Draft, free agency, international market,” m.mlb.com/news/article/210035584/mlb-cba-affects-draft-international-prospects/, accessed December 16, 2016.

19 Ibid.

20 Maury Brown, “Breaking Down MLB’s New 2017–21 Collective Bargaining Agreement.”

21 SI Wire, “Report: Rangers Investigating Prospects for Sexually Hazing Underage Teammate,” si.com/mlb/2016/11/21/texas-rangers-prospects-sexual-assault-hazing-investigation, accessed December 16, 2016.

22 Dave Sheinin, “With New Diversity Goals, MLBTries to Change Its Image as an Old [White] BoysClub,” washingtonpost.com/news/sports/wp/2016/12/13/with-new-diversity-goals-mlb-tries-to-change-its-image-as-an-old-white-boys-club/?utm_term=.c1d2183a0661, accessed December 16, 2016.

23 Alyson Footer, “Under Armour, Fanatics, MLB strike uniform deal,” m.mlb.com/news/article/210264854/under-armour-to-make-official-mlb-uniforms/, accessed December 16, 2016.

24 Ben Badler, “Top Prospects Voice Opposition to International Draft,” baseballamerica.com/international/top-prospects-voice-opposition-international-draft/#m0CcfwBsP0ugfAgc.97, accessed December 16, 2016.