Sports

Why MLB Declared War on the Minor Leagues

Baseball’s plan to kill off dozens of affiliate teams is a clear act of collusion.

Reyes stands on the mound in a lunge, his right arm extended behind him as he throws a pitch.
Durham Bulls starting pitcher Arturo Reyes at a regular-season game between the Durham Bulls and the Toledo Mud Hens on July 15 at Fifth Third Field in Toledo, Ohio. Scott W. Grau/Icon Sportswire via Getty Images

Last week, baseball’s winter meetings in San Diego—normally a hotbed of trade activity—were also abuzz with talk of an even higher-stakes deal: Major League Baseball’s proposal, first revealed in October, to eliminate 42 minor league affiliates once the current operating agreement between the majors and minors expires following the 2020 season. When minor league owners, local elected officials, and Bernie Sanders decried the possibility that all these teams—having received hundreds of millions of dollars in stadium subsidies, and in some cases having rich histories dating back to the 19th century—could be snapped out of existence, MLB Commissioner Rob Manfred upped the ante. First, Manfred railed against minor league teams for making a stink. Then he threatened to cut the majors’ ties with the minors entirely.

Why did MLB, an enterprise that brings in around $10 billion a year, declare war on the minor league system that has been developing young players on its behalf for well over a century? And is this a serious existential threat to the minors, or just the kind of saber rattling that sports leagues like to do when headed for a bargaining table?

MLB executives have given multiple, not always consistent reasons for the contraction plan. Franchise owners have griped about the cost of covering minor league player salaries for a long time—MLB agreed to foot the bill in 1963 to help keep the minors afloat in the face of declines in attendance—and even more so since minor league players began demanding to be paid minimum wage and filing lawsuits to secure it. (While some top prospects can earn high salaries in the minors, most are paid only for games and not practices or spring training, a point driven home when a pitcher for the Triple-A champion Sacramento River Cats tweeted a photo of his meager pay stub.) MLB officials have indicated that they’d like to move minor league teams closer to their big league home offices to reduce travel costs and to ensure that all teams have facilities that are up to par. There’s also been speculation that MLB is hoping to increase its take from minor league profits—currently, minor league owners tithe 8 percent of their ticket revenues to their big league partners—perhaps by charging “affiliation fees.”

These are a mixed bag of goals that do not necessarily dovetail neatly, and the list of targeted teams doesn’t make MLB’s rationale much clearer. Some affiliates marked for death have recently upgraded their ballparks, while the sole Carolina League team on the hit list, the Frederick Keys, just led the league in per-game attendance.

“It does sound like there’s multiple objectives here,” says Nola Agha, a sports economist at the University of San Francisco. “Maybe to reduce the costs, maybe there are too many minor league players—maybe they do feel there is too much pressure to start paying them a living wage. It could just be a lot of different things at the same time.”

Certainly, taking actions without fully thinking them through is an age-old baseball tradition. But the minor league contraction plan follows another long-standing MLB practice: Once some team owners decided that axing minor league teams might be a good idea, they jumped to figuring out how to use the league’s cartel power to make it work.

The relationship between the major and minor leagues has a long and contentious history, dating back to the early years of the 20th century, when minor league teams were fully independent entities that stayed in business by selling young players to big league teams at a profit. (Babe Ruth, for instance, began his career with the then–minor league Baltimore Orioles before being sold to the Boston Red Sox with two other players for $16,000.) But after legendary executive Branch Rickey built the St. Louis Cardinals into a 1930s powerhouse by buying minor league teams and stocking them with players on the Cards’ dime, “farm systems” became the norm, with big league franchises either owning outright or signing affiliation agreements with virtually all of the minors’ teams.

As of 1990, the last time the Professional Baseball Agreement between the majors and minors was revised, the number of affiliates was fixed at 160, at the time a little more than six clubs per MLB organization. (Teams in the MLB-run Arizona and Gulf Coast leagues aren’t included in the number.) That seemed to serve everyone fine, but in recent years some MLB organizations, most notably the Houston Astros—relentless innovators in everything from advanced analytics to creative use of trash cans—began wondering: Why do we need to keep paying players to play in the minors anyway? Wouldn’t it be cheaper to swaddle young prospects in sensors and use the resulting data to determine whom to reward with a ticket to the majors?

How much cheaper has been the subject of much debate. When MLB Deputy Commissioner Dan Halem argued that, in total, MLB clubs pay minor league players nearly $500 million each year, Baseball America reporter J.J. Cooper pointed out that more than 80 percent of that figure came via signing bonuses for top prospects—a figure that wouldn’t decline at all if MLB eliminated the salaries of late-round draftees. Stanford University economist Roger Noll estimates the true savings of cutting 42 teams at about $22.5 million, or slightly more than the combined cost of one minimum-salaried player on every major league team.

There’s nothing magical about the current number of 160 minor league franchises, a figure that before 1990 fluctuated wildly from year to year, with unaffiliated teams occasionally playing alongside major league–sponsored ones. And there’s nothing stopping the Astros from cutting back the number of teams in their own organization if they want to: They did eliminate their Greeneville, Tennessee, Rookie-level team in 2017, which was subsequently replaced by a Cincinnati Reds affiliate that is now on the chopping block.

There’s also nothing stopping MLB from negotiating with MiLB to remove the floor on the number of affiliated teams and allow it to float freely, as was the case before 1990. Instead, MLB came up with the contraction plan: no more than four affiliates per franchise, which meant that 40 teams would have to go. (The other two cuts were to make room for the introduction of the independent-league St. Paul Saints and Sugar Land Skeeters into affiliated ball—a plan that might have gone better if the majors had called those teams’ front offices first.)

There is one huge benefit to the league killing teams en masse as opposed to each MLB club making life-or-death decisions separately: It means that every team can cut costs without worrying that its competitors will gobble up more potential big league players, as Rickey did with the Cardinals 90 years ago. “The point of a cartel is to coordinate cooperative behavior,” notes Noll, “to help members ignore the incentive to compete.”

MLB teams have used collective action to rein in their most free-spending impulses before. In the 1980s, owners colluded to not offer contracts to one another’s departing free agents, leading to two winters when almost every player settled for returning to their original teams. (Three-time All-Star outfielder Andre Dawson ended up signing a blank contract with the Chicago Cubs to escape the Montreal Expos, which resulted in him playing for a 30 percent pay cut while winning the National League MVP award.)

Collusion didn’t end well for the owners, who ended up having to pay a $280 million settlement to players, requiring the creation of the Colorado Rockies and Florida Marlins to bring in expansion fees to pay the owners’ tab. But conspiring as a cartel against fellow business owners has important legal distinctions compared with conspiring against your employees: Minor league owners can’t file a contract grievance and force an arbitrator to rule on their claims, as the players’ union did in the ’80s. MLB, then, faces less of a legal threat now than it did 30 years ago. Instead, minor league teams will have to resort to political pressure. While some of that is already evident—Sanders was just one of more than 100 members of Congress who sent a letter to MLB last month hinting that they could seek to repeal baseball’s antitrust exemption if teams in their districts aren’t spared—it remains to be seen whether Washington will have the stomach for a battle over baseball in a year when it’s distracted by other matters.

None of which means that the contraction plan was well thought out. Even though the MLB vote on the plan was reportedly unanimous, there have been multiple reports of major league teams being upset when they learned their teams were on the contraction list, including New York Yankees President Randy Levine declaring that he was not pleased by the inclusion of the Staten Island Yankees farm team, which is part-owned by the parent club.

The Orioles have told me they want to stay in Frederick and continue to state that,” says Frederick Keys owner Ken Young. “We have no idea why Frederick would be listed.” While it’s always possible that Baltimore officials are just trying to play good cop—hey, we don’t want to annihilate your team! It was the bad old MLB that did it!—Young believes it was more a matter of a rushed process. “It was just purely, an individual came up with that list,” he says. “Honestly none of us know how it came about.”

All signs, in fact, are that the 42-team plan was just an initial gambit, with Manfred last Wednesday saying it’s “by no means a fait accompli” even as he railed against minor league owners for going public with their complaints. All signs, including Friday’s threat to jettison the affiliated minors entirely, indicate that MLB owners are determined to use the expiring PBA to wrest some kind of concessions from their minor league partners—even if the big leagues’ side may not be sure yet which concessions it’s after the most.

But if the specifics were slipshod, the underlying strategy remains standard operating procedure. “Where is there a profit opportunity, and how can I take the market power that’s given to me by lax social policy and bring it to bear so I get more than I used to?” says University of Michigan sports economist Rod Fort. When your only tool is the hammer of cartel power, every obstacle—whether players, minor league owners, or elected officials—tends to look like a nail.