For Royals and other clubs, MLB economics on deck after health and safety discussions
During a television interview with CNN’s Anderson Cooper last week, Major League Baseball commissioner Rob Manfred described himself as “hopeful” that Americans will get to watch some form of baseball this summer and expressed “great confidence” that the economic issues between the owners and the players would be resolved.
The resolution of those issues will certainly affect all MLB clubs, including the Kansas City Royals, this year and beyond.
Manfred said the economic effects of a lost season would be devastating to baseball: “If we don’t play a season,” he said, “the losses for the owners could approach $4 billion.”
While MLB’s intentions to reach an agreement on a 50-50 revenue split between the owners and players has been reported, a formal economic proposal was not part of the initial presentation to the players’ union, according to The Associated Press.
Last week, MLB presented an initial 76-page proposal for health and safety measures aimed at potentially starting an abbreviated season without fans in July. The AP reported that MLB teams were expected to review and respond to the initial plan by this Friday.
The economics of a shortened season without fans in a year sideswiped by the COVID-19 coronavirus pandemic appears to be the next big topic for discussions between MLB and the MLB Players Association.
The owners and players reached an agreement on reduced payroll if no games are played, and had previously agreed to a deal that would pay players a prorated portion of contracts during a shortened season. The specter of playing all games without fans has put that agreement in question.
The Royals, purchased by an ownership group led by Kansas Citian John Sherman in November for $1 billion, stand to lose $113 million if an 82-game season is played in empty ballparks, according to figures provided by MLB to the players’ union, per AP.
The New York Yankees stand to lose the most of any team, $312 million, while the Detroit Tigers are slated to lose the least, at $84 million, according to the presentation.
However, those figures are based on earnings before interest and taxes. They also exclude distributions from the MLB central office, including shares of a projected $1.34 billion in media revenue.
Plenty of uncertainty
The Royals, like other MLB clubs, are certainly enduring a financial hit because of the pandemic. Forbes had previously projected revenue for the Royals to reach $251 million in 2020. Actual revenues will surely fall short of that projection.
The Royals were in the middle of finalizing a new local cable television deal with broadcast partner Fox Sports Kansas City when MLB suspended spring training and delayed the start of the season. The team and FSKC still have a handshake agreement in place, but it’s not clear how the pandemic will affect that deal.
MLB.com reported that the new TV contract could pay the Royals between $48 million and $52 million per year. The Royals’ previous 11-year deal reportedly paid an average of approximately $20 million annually.
An empty Kauffman Stadium is certainly taking a large chunk of the club’s bottom line. According to the event and ticket search engine website TicketIQ.com, the Royals project to lose $52.6 million in ticket revenues for home games missed through what would have been the MLB All-Star break in early July.
The club announced it’s ticket refund/exchange policy at the end of April.
The Royals have committed to paying full-time employees through the end of May. Each MLB team, including the Royals, pledged $1 million toward paying stadium workers in March, though it’s unclear how and when that money will be distributed.
The Royals’ signing-bonus pool for next month’s shortened, five-round amateur draft sits at $12,521,300.
This year’s international signing-bonus pools have not been announced, but last year, the Royals’ international signing-bonus pool was $6,481,200.
While player compensation for this season will be hashed out by MLB and the MLBPA, the Royals have relatively few long-term contract commitments on their books. Many of their players are arbitration-eligible but remain under club control, and their only current major-league contracts beyond the 2020 season belong to pitcher Danny Duffy, catcher Salvador Perez and utilityman Whit Merrifield.
If nothing else, the club has a measure of roster flexibility going forward.
This story was originally published May 22, 2020 at 5:00 AM.
