Why Baseball Has More Money Power than Football

6:04 | The MMQB
24 Hours … with Sean McVay
Tuesday July 11th, 2017

Welcome to Baseball Week. As training camp approaches and baseball takes a break for its mid-summer classic, The MMQB presents a week of stories on the crossover between hardball and football.

I recently wrote about the annual rubbernecking at the size of NBA free-agent contracts and illustrated the stark differences between NFL player contracts from those in pro basketball. Now, during The MMQB’s Baseball Week, I examine the same structural differences between NFL contracts (insecure) and MLB contracts (rock-solid), followed by an assessment and prediction regarding Kirk Cousins’s contractual situation.

It’s Not the Money, It’s the Security

To me, the critical marker in valuing a business deal—in sports or elsewhere—is allocation of risk. After the early portion of a typical veteran NFL contract is over (one or two years), the assumption of risk shifts entirely to the player with unsecured, non-guaranteed, often illusory monies (essentially team options). Amounts written on paper can turn to dust with a simple phone call to the player and email to the league terminating the contract.

When I was in the Packers’ front office, I remember one time when a loan officer from a bank was desperate to find a recently released player who had defaulted on a large loan. I felt so bad for that loan officer who, in looking for a sympathetic ear, told me, “Well, his contract said he was making $6.5 million this year!” I had to politely tell him: “Sir, that contract no longer exists.” The silence on the other end of the phone was deafening; his career as a loan officer may have been flashing before his eyes.

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When an NBA or MLB player signs a veteran contract, the money is real (and often spectacular). Derek Carr’s $125 million sounds very similar to Jrue Holiday’s $126 million or Gordon Hayward’s $128 million, but they are very different. Carr has $40 million guaranteed at signing, with the rest essentially at the mercy of the Raiders. Holiday and Hayward have the total value of the deal secure at signing. And when a player such as James Harden signs an extension, as he just did for an astounding amount ($228 million), the extension years are simply added to an existing contract that is already guaranteed. NFL extensions have the entire contract reworked; otherwise, with no future guarantees, there would be no reason for a player to do an extension as he could be cut before it kicks in.

Again, it is not the amount of these NBA and MLB deals that distinguish them from NFL contracts (although they are staggering): rather, it is the security.

Capless in Baseball

While MLB owners do have potential limitations on spending, with luxury taxes at certain upper levels of team spending, they are the only owners in major professional sports without a salary cap.

Without a cap to provide meaningful governors on team spending, disparities in team payrolls are much more stark than in other sports. The chart below illustrates high and low team-spending differences for the most recent (or current) seasons, in millions.

League High Low Disparity
NHL $81
(Capitals)
$48
(Coyotes)
$33
NBA $137
(Heat)
$79
(Nuggets)
$58
NFL $210
(Eagles)
$113
(Browns)
$97
MLB
 
$252
(Dodgers)
$78
(Brewers)
$174

The MLB team spending disparity is $77 million more than the next closest sport, the NFL. Also, the difference between the Dodgers and Brewers alone is $20 million over the league spending average and more money spent than all but eleven MLB teams.

Many ask why MLB owners have been unable to impose their will and implement a cap. Well, it is much harder to negotiate new terms than to continue the existing ones, and the Major League Baseball Players Association, under leaders such as Marvin Miller and Don Fehr, has successfully kept the status quo all these years. Indeed, the MLB’s CBA negotiations seem to have gone as smoothly as any of the leagues’; the owners’ lack of insistence on a cap is a big reason why. Were MLB owners insistent on imposing a salary cap, I would tell them: Good luck with that.

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A final word on this topic: with more and more players facing financial distress later in life, I try to present an informed landscape on the financial security of player contracts, or lack thereof.

Yes, I know that other sports have smaller rosters and more games (MLS players do as well, should they make more than NFL players?), but NFL players, many with largely illusory contracts, face the shortest careers, the greatest injury risk and work for the league that has, by far, the most revenues. But when it comes to security and allocation of risk, NFL players are underserved compared to their peers in other major professional sports.

Brandt’s Rant: Captain Kirk’s Choice

With next Monday’s deadline for franchise-tagged players to sign long-term deals, all eyes turn to the Redskins’ consecutive (for now) tagging of quarterback Kirk Cousins. Although I have no insider knowledge of each side’s position, I predict that Cousins will ink a long-term deal—and that it will be for considerably less than many have suggested.

There is a reality to this negotiation beyond the theoretical discussion of how much leverage Cousins has, and the massive future franchise or transition tag amounts ahead, etc. Beyond the theory here is the reality: Cousins can 1) play for $24 million guaranteed this year with an uncertain future, or 2) agree to a long-term deal with guaranteed money far beyond that amount, albeit not at the level that many—including, perhaps, Cousins and his agents—think he should make. Cousins would indeed have the leverage many suggest if he were a true free agent, but he is not, and the Redskins don’t have to “pay retail.” Does that mean they won’t offer a contract that Cousins would accept, if not be over the moon about? No.

My sense all along has been that the Redskins’ negotiating position has shown that they very much like, but do not love Cousins. Last year they did not really negotiate with him; a year later there is still some trepidation, but the tag allows them to negotiate on terms they are comfortable with. They also know that Cousins’ preternaturally kind disposition would never allow him to show any rumbles of discontent, another advantage the Redskins have.

We are now beyond the noise this offseason about how Cousins was “unhappy”; about how he was going to be traded to San Francisco (one report as part of a three-way deal involving Tony Romo); about how he has as much leverage as any NFL player ever. We are now in the reality phase, and my sense is that the deadline will spur action on both sides. Perhaps a new contract would even allow Cousins to have another bite at the free agency apple at a relatively young age.

Fantasy will soon turn to reality. Stay tuned.

Question? Comment? Story idea? Let us know at talkback@themmqb.com

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