Understanding MLB’s New CBA

Major League Baseball and their players agreed to a new CBA last night that will insure labor peace in the sport through 2021. With this deal, baseball will have gone a quarter century without a strike, something that would have been unthinkable in the 1990's. The economics of the game are going to see some changes though, most of which will favor the smaller market teams.

The players did not manage to get rid of draft pick compensation for teams that lose a free agent whom they made a qualifying offer to, as it was said they hoped to. In general, teams will get a third round pick in exchange for a player they offered the qualifying offer to, if they leave. If a team is over the luxury tax and signs a player who received a qualifying offer, they will lose a second and fifth round pick. In other words, if the Yankees or Dodgers sign your free agent away (since they are often times in the luxury tax penalty), they will pay a higher price than if the Athletics do. This is fairly substantial. Losing one third round pick may not be considered as harsh of a penalty as the old system prescribed for taking another team's player. On the other hand, if the big markets take from you, they give up a price that is equivalent to potentially the next Jimmy Rollins (a second rounder for the Phillies) and Ryan Howard (a fifth rounder for the Phillies). That hurts most clubs, but there is one more catch- the contract the player signs with his new club has to be $50 million or more. So the number of players this will apply to will be diminished.

While the owners did not get the international draft that they wanted, they did curtail international signings from being as expensive. If you are in the top 15 revenue teams, you will have $5 million to spend on international free agents. If you are in the bottom 15 teams, you will have $6 million to spend on international free agents. Most Cuban baseball players will count towards these numbers, unless they have six years experience and reached 25 years old. The winners in this deal are those from Japan, Korea, and Taiwan- they have no cap.

In both of these cases, I wouldn't call these "losses" for the players, but they weren't victories either. The rosters were not expanded to 26, which is a loss for the MLBPA, since it means less members. Even so, the players didn't do so bad- there were no changes to their guaranteed contracts. 

One of the unintended (we think?) consequences of the CBA will be more trade deadline action. With compensation for losing a free agent normally only being a third round pick, more teams will consider trading away their players approaching free agency, as they can probably get a better deal on the market, and won't make the calculation that a first or second round pick is better compensation than a fair package.

The season will now start in the middle of the week moving forward, not on a Monday. This means the season will run a few days longer, though no games were added or subtracted from the 162 game schedule. MLB wants to have regular season games outside of the United States and Canada, and needed a few more days built into the schedule in order to do that, while complying with standards of rest days built into the CBA. Look for an MLB regular season series in London or Mexico City in 2018.

Smokeless tobacco is a loser in the new CBA. Current players are grandfathered in, and will be allowed to chew, but moving forward, smokeless tobacco is banned on the field. In other words, you'll never again see a Lenny Dykstra wad of chewing tobacco spit out onto an outfield. 

The All-Star Game will no longer matter for the World Series either, thank goodness. The game will have a pool of money attached to it for the winning team, but at least a last place team's lone All-Star can't decide which league gets home field advantage. For what it's worth, that will go to the best record between the two teams who win their league titles.

In general, this deal is good competitive balance, and not so good for large markets buying good teams. The Yankees will still be able to deduct the construction costs on their relatively new stadium for a few years, reducing their payments to MLB. Even so, stricter luxury tax rules and caps on international spending tend to favor the Milwaukees of the world, more than the Bostons. With that said, the Athletics are in a position to actually lose competitive balance money, and now desperately need a stadium.

The new CBA shouldn't dramatically alter the MLB landscape, based on what's been released. It is a significant development though in that it insures labor peace for a few more years, stretching past a quarter century. It's impact on my Phillies should be relatively small (given that they begin the agreement with a much lower payroll than we're used to), but could matter a lot to the team later in the agreement, when they should be competitive. In the immediate though, it means the Winter Meetings are on for next week, free agency can now proceed with certainty, and we'll have a season beginning in April.