The MLB Offseason Has Shown How Finances Can Impact the Outcome of the League
12 months ago, the 2021-22 MLB lockout began. The first meeting between the MLB and the MLB Players Association didn’t take place until January, and the lockout continued until March when free agency reopened.
As a result, the storylines of last year’s MLB offseason mainly concerned the lockout and negotiations. The lockout had a negative effect on the sport and took away attention from normal offseason storylines.
However, this year’s offseason has been extremely positive for the league. The Winter Meetings led to several of the most important free agents in the sport agreeing to contracts, and the attention and interest generated as a result of these storylines will benefit the league next season.
While this offseason has been a positive for the league, it has also revealed how MLB’s financial structure, specifically the league’s luxury tax system, will continue to impact the outcome of games on the field.
Dramatically Different Offseasons
Sports fans, no matter what league they are most interested in, are not interested in collective bargaining agreements or the negotiations that take place over them. Lockouts are among the most unpopular events that take place in sports, and they can have a dramatic, negative effect on leagues for years, and even decades, after they take place.
After the COVID-19 pandemic, several franchises in every sport were significantly impacted financially; both due to the loss of television revenue and the lack of fans in stadiums. This led to significant disagreements between the MLBPA and MLB team owners during negotiations during last offseason. If the 2022 season had not included 162 games or had been delayed more than it was, it could have been catastrophic for the future of the league.
While the agreement reached in March meant 162 games were played last season; contracts agreed to last offseason weren’t as significant as many expected. Carlos Correa, who was widely expected to receive a contract exceeding $300 million after the lockout ended, instead agreed to a three-year, $105 million contract with the Minnesota Twins that allowed him to opt-out and become a free agent this offseason.
Carlos Rodon, one of the best pitchers available last offseason, signed a two-year $44 million contract with the San Francisco Giants that allowed him to opt-out of the contract after the first season. Again, this was in part due to the value of contracts not matching the expectations of many before the offseason began.
As teams financially recovered from the pandemic, it was expected that the value of contracts would dramatically increase. However, in March, it was unclear when that would take place; nine months later, MLB free agency this offseason has seen more than $2 billion in contracts be agreed to over the past few months. Correa and Rodon, who both opted out of their contracts to become free agents again, agreed to $315 million and $162 million contracts respectively.
What to Expect in the Future
In the future, teams willing to spend more money in free agency will likely see their competitive advantage continue to grow. Major League Baseball does not have a salary cap, and while the luxury tax system has limited spending in the past, multiple franchises seem increasingly more comfortable exceeding the luxury tax limits to improve their roster.
The New York Mets are this offseason’s best example of this trend. Steve Cohen, who became the owner of the Mets in 2020, has overseen an offseason in which the Mets have committed more than $800 million to free agents.
New York’s payroll will be the largest in MLB history next season, and the amount of money the Mets pay as a result of the luxury tax will likely exceed several franchises’ total payrolls. The Mets’ offseason, after a 101-win season in 2022, is likely to make them one of the favorites, if not the favorite, to win the World Series in 2023.
Each franchise’s differing financial situation has always had an impact on the MLB, but it is becoming an increasingly significant factor within the sport. The increase to the luxury tax limits, which was part of the collective bargaining agreement completed in March, is undoubtedly having an impact on the increasing contract values within the sport, and the increasing difference in each team’s payroll across the MLB.
Teams with the financial strength to exceed the luxury tax limits have always been more likely to have the most success within the sport. However, as the MLB moves into the future, the effects of the league’s financial structure are likely to become increasingly more significant.