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Major League Baseball: What Caused The Major Player Contracts In The MLB?

ByAmanda Tylka

Published on Fri Apr 22 2022

|

3 min read

Major League Baseball: What Caused The Major Player Contracts In The MLB?

The highest-paid baseball player in Major League Baseball is pitcher Max Scherzer from the New York Mets.  Scherzer will be bringing in 130 million dollars on a 3-year contract.  That’s a whopping $43.33 million a year, guaranteed!

In 2021, the Los Angeles Dodgers racked up the highest Major League Baseball payroll ringing in just below $270 million.  The New York Yankees ranked second in MLB payroll for 2021 rounding out just above $200 million.

The numbers are incomprehensible to the average joe, but how does the MLB afford these massive player contracts?  Follow along to consider the biggest factors that give MLB teams the ability to pay their players hundreds of millions of dollars.


Player’s Union

The MLBPA represents all major league baseball players for all 40 MLB teams.  Along with players, the union covers and protects anyone who has a signed contract with an MLB team including managers, coaches, and even trainers.  Each member of the MLBPA pays a daily price for protection under the player’s union.

MLBPA is in charge of collective bargaining for each member as well as group licensing to ensure players are being paid for the use of their names, numbers, nicknames, signatures, and other personal aspects of Major League Baseball Players.

The player’s association is meant to increase player’s salaries, protect their individual rights, and provide support with any issues on contract agreements or rights to impartial third party independents to settle disputes, also known as arbitration.

The player’s union also gives MLBPA members the ability to strike until their demands are meant for a variety of factors within the MLB season.  It gives players, coaches, and staff the right to fight for their earnings and dedication to a highly competitive, long, and demanding season that generates billions of dollars in revenue.

As the 2022 owner’s lockout demonstrates, the union gives rights to members to protect their revenue.  Recently, MLB players were demanding revenues returned to them based on owner behaviors, and owners want to prevent this from happening.  It’s all about the benjamins baby!


Revenue Sharing

If you keep up with MLB news, you are likely privy to the recent dispute on revenue sharing in the MLB.  Revenue sharing is when all teams combine a percentage of their yearly local revenues (currently 48-percent) - this includes television contracts, game-day revenues like ticket sales, concessions, parking, merchandise, etc. - and compiles them to be shared among MLB teams evenly.

The goal of revenue sharing is to ensure equality among teams.  In turn, this is a huge contributor to smaller-level MLB teams being capable of paying massive contracts to their players, regardless of how much revenue their team curates in a year.

Revenue sharing is quite controversial depending on who you are talking to, but it prevents more lucrative franchises from dominating the league by using their higher revenues to offer higher contracts to the best players and in turn create a franchise that dominates the league.

The recent collective bargaining agreement between owners and players was taking place because players felt they were losing money because of revenue sharing.  As a result of the sharing organizations were not making an effort to offer competitive salaries to players because revenue sharing results in players being worth less than their salaries demonstrate, even without the issue of no salary caps in MLB.

No Salary Cap

The MLBPA will not agree to a salary cap for Major League Baseball because it could easily result in more money for owners and less money for players.  The MLBPA is meant to protect MLB players, coaches, and other affiliates from being lowballed or cut off from payouts by team owners.

A salary cap would mean a definite amount of money each organization in MLB would be able to spend per year on its player’s salaries.  The MLB is the only major professional sport in America that does not use a salary cap.  The NHL, NFL, and NBA all have salary caps.

Naturally, owners continue to push for a salary cap because this means they won’t be able to overextend their payouts for players' salaries and in turn, make more money themselves.

The Business of MLB

As with all professional sports, it’s important to remember that MLB is a business that wants to make profits.  The best way to make profits is to have the best team, create the largest fan base, and use that fanbase and team to have the most games to generate the most revenue.  The longer your team plays, the more money your team will make.

The MLBPA, revenue sharing, and the lack of salary caps are the greatest factors that contribute to MLB associations being able to offer massive contracts to their players.  Each of these factors is also some of the most controversial topics in MLB and is addressed regularly in both league and player negotiations.

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