Talk of revenue losses throughout the sport has been prominent since the outset of the Covid-19 pandemic, but commissioner Rob Manfred put some more concrete numbers on the concept this week. In an interview with Barry M. Bloom for Sportico, Manfred claimed that the league’s 30 teams have amassed a collective $8.3 billion in debt and will post anywhere from $2.8 to $3.0 billion in combined operational losses.
Manfred’s comments come at a time when many clubs throughout the league have made sweeping layoffs to both business-side and baseball operations employees. The Athletic’s Alex Coffey reported last week that the A’s, for instance, are preparing to lay off upwards of 150 employees who were furloughed throughout much of the 2020 season. They’re far from the only club making such broad-ranging cuts, although Oakland certainly figures to be on the more extreme end of the spectrum.
Evan Drellich of The Athletic wrote yesterday that a league official claimed Major League Baseball’s EBITDA — earnings before interest, taxes, depreciation and amortization — showed a loss of $2.7 billion but also noted that with the league’s books closed, such numbers can’t be independently verified. A league official claimed to Drellich, perhaps more dubiously, that even under normal conditions the league would have expected $10 billion in revenue against $10.2 billion of expenses — a rather eye-opening and frankly questionable assertion when considering last year’s widely reported $10.7 billion of revenue for MLB.
In that sense, the claims put forth by Manfred and the unnamed league official(s) who spoke to Drellich on the condition of anonymity call back to the ugly standoff between MLB and the MLBPA during return-to-play negotiations, wherein the players repeatedly called for ownership to open its books and provide quantitative evidence of the extent of the damage they were facing. Detractors will surely question the veracity of the league’s figures, which Drellich notes do not account for “ancillary” revenue streams like stakes in regional sports networks.
Regardless, there’s no doubting that revenue losses felt by clubs in the absence of fans is enormous. The job cuts throughout the sport are but one way for ownership to soften the blow, but the most direct means of correcting course for owners is expected to be via club payroll. For months we’ve heard expectations of a bloated group of non-tendered players and a tepid market for free agents. To that end, Bloom notes that some club executives have already signaled that they won’t be able to commit salary to players this winter.
Some clubs will surely still spend money. The purported $2.8 to $3 billion in operating losses isn’t necessarily divided evenly among the league’s 30 clubs, and tolerance for loss varies from owner to owner (or ownership group to ownership group). Still, on a macro level it’s wise to anticipate large-scale reductions in team payrolls.
Most concerning for players, remaining club employees and the health of the sport is the potential for additional revenue losses in 2021. While the obvious hope is that fans will be back in the park for a full 162-game slate next season, that’s wholly dependent on the status of the coronavirus and the associated public health guidelines in place. To this point there’s no clear timeline on when a vaccine will be produced, approved, scaled and distributed such that clubs could expect business as usual. And while Manfred has previously taken an optimistic tone on that front, he struck a different chord in speaking with Bloom this week.
“[I]t’s going to be difficult for the industry to weather another year where we don’t have fans in the ballpark and have other limitations on how much we can’t play and how we can play,” Manfred told Bloom. “…It’s absolutely certain, I know, that we’re going to have to have conversations with the MLBPA about what 2021 is going to look like. It’s difficult to foresee a situation right now where everything’s just normal.”
