“There’s no limit possible to the expansion of each one of us”.—Charles M. Schwab
While the quote above could certainly speak to our waistline measurements during the COVID-19 quarantine it’s likely Mr. Schwab had other things in mind. He also probably didn’t think his line could apply to the powers that be in Major League Baseball, however. More on that in a bit as MLB expansion could be on the mind of Rob Manfred.
The COVID-19 pandemic (or “the ‘rona” as Blake Snell, my teenage daughter, and her friends call it) has thrown most of the globe into an economic tailspin and created an environment where no one seems to agree on how to balance the need for safety and the necessity of life to proceed outside one’s couch area.
Major League Baseball is not immune from the tumult. The last few days have shown us getting a consensus on how to proceed with re-starting the sport to limit the economic damage isn’t going to be easy.
Players have concerns about their salaries getting reduced and about their health. These won’t be easy to resolve in a fashion that also satisfies owners. However, according to MLB Commissioner Rob Manfred, the league stands to lose $4B in revenue this season if play is unable to resume.
The bet here is some agreement to play will come about and some portion of the $4B will be earned by the league. Make no mistake though, the owners will take a bath in red ink on some level this season even if they play 82-games and a full playoff slate. The question is then…how will MLB react in a post-COVID environment?
MLB Expansion Has Come Through in the Past
The answer, judging by history, is going to be expansion. Since the late 1950’s, whenever MLB has really found itself in doubt as to how to grow past a problem it’s often chosen expansion as the path forward.
Why? Expansion is a very lucrative endeavor. Franchise fees have only gone one way. Up. It’s easy money in the owner’s pockets. Expanding the league has also helped with television revenues split among owners.
Yes, MLB had a one-time dalliance with “contraction” during the post-‘94 strike when it launched its big market/small market crusade. But contraction ended up being a drunken one-night stand everybody would like to forget. Expansion, ah sweet Expansion, has been the long-standing affair MLB runs to for comfort when it’s marriage is shaky.
The Continental Divide
In 1959 legendary baseball executive Branch Rickey was leading a legitimate charge to establish a third major baseball league—the Continental League—which was going to fill the baseball void in markets the American League and National League didn’t serve plus fill the gaping chasm left in New York City after the Dodgers and Giants has recently fled The Big Apple for the west coast. Rickey’s proposed league also had an influence on politicians in D.C. suddenly taking an interest in reviewing MLB’s anti-trust exemption…which has always and will always send raging shivers down owner’s collective spines.
MLB acted quickly. The Continental League (CL) was an afterthought by August of 1960. Why? Expansion. MLB put a plan in place to expand into markets the CL was looking at and involving possible CL club owners to have a taste of ownership in some of the new clubs.
In 1961, for franchise fees estimated just over $2M per team, the Houston Colt .45’s (Astros) and the Washington Senators were created followed in 1962 by the Los Angeles Angels and the New York Mets. There were very strong hints made to satisfy politicians that further expansion into other markets was likely. This expansion took place in 1969 when San Diego, Montreal, Kansas City, and Seattle entered MLB.
These moves in expansion took the pressure off on the anti-trust side and avoided the upheaval of competing with a third league.
The Slew of Seattle Money
However financial issues cropped up again quickly. The Seattle Pilots struggled on numerous fronts in its inaugural season. So much so, the bankrupt franchise was sold to a Milwaukee car dealer named Bud Selig. The Pilots moved to Wisconsin to become the Brewers. This led to a lawsuit from various government agencies in Washington state against MLB for violating leases and contracts. MLB lost a $33M suit but the money was voided when MLB agreed to….EXPAND!
Seattle was promised a new franchise and in 1976 the Mariners were born. To keep the number of AL teams even the Toronto Blue Jays debuted alongside the Mariners. MLB pocketed the franchise fees and saved having to pay the Seattle lawsuit settlement.
The Seitz Ruling and the Collusion Debacle
In 1975 an arbitrator named Peter Seitz made a ruling setting pitchers Andy Messersmith and Dave MacNally into free agency. Seitz’s decision killed “the Reserve Clause” which was a one-line note in each player contract which kept the player bound to his team in perpetuity. Free Agency set the old guard of ownership’s world on fire.
Suddenly teams were competing for talent. Salary figures, while tame looking now, we’re looking absolutely bonkers for the era. (4-years…for $7M! Is there a fainting couch nearby?)
A funny thing happened in the ensuing decade. The 1980’s was one of the most competitive decades in baseball history. There were no dynasties. A different team won the World Series each year. Free agency wasn’t the death of the sport.
But MLB owners saw it differently. The market for free agency absolutely dried up from 1985 through 1987. Some of baseball’s greatest players were finding no quality offers. The problem? It was a poorly kept secret that Commissioner Peter Uebberoth was leading a cabal of owners to stand to a gentleman’s agreement to not sign free agents. Eventually, the player’s union was able to get this in front of an arbitrator and won convincingly. MLB was going to be on the hook for $280M in 1990 paid to the union and the players hurt by the collusion.
Care to guess what happened when MLB was hit with that bill? You know it. Another round of expansion with large fees attached to cover the tab run up by the awful decision to collude against free agency. In 1993 the Florida Marlins and Colorado Rockies appeared on the scene. In ‘98 it was the Tampa Bay Devil Rays and the Arizona Diamondbacks. The franchise fee take from the four new clubs was an estimated $450M, more than covering the collusion case settlement.
Jump ahead to 2021. Assuming baseball has found a way to start again by then, it’ll still be recovering from the COVID Quarantine. Whether they’ve lost $2B in revenue or $4B in total, the number will hurt. Owners will be looking for a way out.
If they could pocket around $115M per team in the 1990’s it seems all but certain they could blow that number away in today’s market assuming the country finds its way out of the COVID abyss as well. Could MLB put a price tag on a franchise fee at $1.5B per team? It seems like a starting point given team valuations around MLB.
In a post-pandemic MLB get ready for a 30 team league to grow to 32 in short order…you will see a re-birth of the Montreal Expos or the addition of the Portland Mavericks. Maybe the Nashville Knights and the Las Vegas Desert Saints.
MLB will have a myriad of challenges rebooting after COVID. Many of them won’t even be financial. But many will and expansion will likely be a route taken to recover lost revenue.