Striking out with COVID: A Case Study on Negotiation and Baseball

By Ehsan Ali and Alnoor Maherali

PwC projects the sports market in North America will be worth $83.1 billion by 2023. Major television networks spend almost $20 billion on sports programming, with 85% of that on live sports. So when COVID-19 shut down sports in North America, it was a major event to which leagues scrambled to adjust. The NFL season had just ended and MLB was yet to start. But the NHL had already completed 85% of its regular-season games and the NBA 79%. Both had generated profits and were about to start playoffs, where leagues create additional revenue and excitement. Instead, they were forced to suspend play and figure out what to do next.

With creative thinking and thoughtful concessions, both the NHL and NBA agreed to fair ways to complete their respective seasons later this summer and share the revenues between their stakeholders. But there also existed a framework of how to respond to a crisis in both leagues.  The NHL had a provision in place to modify salaries in the case of a revenue shortfall or unforeseen event and the NBA had a similar provision. Baseball was not so lucky and the owners and players remain embroiled in conflict. What was different?

MLB had yet to start its season and had neither the inertia nor the revenues to incentivize a quick agreement. It was unclear how many games they would be able to play and how much revenue there would be to share. Additionally, MLB is the only one of the four leagues without a salary cap system, which constrains how much owners can pay their players. Lastly, its collective bargaining agreement is set to expire after the 2021 season (as opposed to 2022 for the NHL and 2024 for the NBA). Arguably, the dispute right now is positioning for the much bigger fight coming in 2021. 

But back in March, when shelter-in-place orders were first shutting down American cities, MLB owners and players were able to agree to terms to postpone the start of the season, with both sides making concessions to get a deal. However, as COVID conditions worsened, it became evident that a return to play would (a) take longer than expected and (b) would be without fans in stadiums. A new deal was required and this time the two sides could not agree. While the NHL and NBA discussions were private and quick, MLB’s discussion played out publicly. The owners proposals ended up in the news and players criticized those proposals on social media. 

The result is that while the NBA and NHL are likely to resume in the coming weeks, MLB is at risk of losing its entire 2020 season and turning away some fans forever - as happened after the 1994 strike-shortened season. That would result in lost revenue for all involved and begs the question, how did things get so bad? From a mediator’s perspective, several factors contribute to the state of negotiations: communication is poor, trust is low, and each side has interests that have not been addressed.

For example, two issues that the players’ union has been fighting for are appropriate health protocols and salary protection. However, the underlying interest that has emerged is that the players feel that they are taking the greatest risk in returning by playing and exposing themselves to the virus. Most players know that they have a ‘shelf-life’ and thus strive to maximize their earning potential before they can no longer play. Thus they want that risk acknowledged and to be compensated for it. And they want to be appreciated and respected as the reason fans come out to watch, which has not been addressed so far. 

Meanwhile, the owners are business people who are trying to protect their profits. They know that revenues are going to be seriously impacted from COVID-19 this year and believe the burden should be shared between them and the players. Much of the profit comes from fans in the stadiums, which will likely not be possible this year. And an underlying interest for them appears to be the fear of starting the regular season but having to cancel the lucrative postseason in the fall because of a potential second wave of COVID-19. Some owners would rather have no season, than a season with no playoffs.

This is a snapshot of the respective interests, which are more complicated, and have been compounded by distrust between the two sides. As such, the players do not agree with MLB’s projected losses and MLB refuses to share its finances. As with any dispute, resolution can be hard when there is no trust between parties. This is part of what a mediator works with parties to build.

Talks resumed between the two sides on May 12, which was followed by a series of meetings, offers and counter-offers, focused on setting the number of games and the division of revenues (the adjusted salary players would receive). As the two sides drifted further apart and the season seemed unlikely to happen, Commissioner Rob Manfred invited Tony Clark, head of the players union, for a private meeting. According to reports, they spoke one-on-one for five hours, the first time they had spoken directly since March 14. After they finally spoke about the issues in play, they appeared to arrive at a framework that is closer to a deal; though they’re not there yet.

Imagine if they had spoken sooner and had a trained mediator to guide the discussion - someone to create a safe and confidential space for information sharing, to clarify and confirm  their concerns, and to foster understanding? Mediators, like at Venn Mediation, work with disputes such as these, to help parties identify and communicate their interests, to generate options creatively, and to find common ground. Many disputes remain unresolved when one or both parties are unable to articulate what is important to them and/or are unable to hear what is important to the other party. MLB may come to an agreement, but they have already suffered much bad press, cut into their potential revenues, and done little to build trust between the two sides. Which does not bode well for their 2021 negotiations. But we remain hopeful that at some point this year, the words, “Play Ball” will ring out in stadiums and provide a little normalcy in this topsy-turvy year. 

Commercial and interpersonal disputes big and small can benefit from a trained mediator. Sometimes we all need a little help communicating. If you or someone you know has a dispute that seems stuck, contact Venn Mediation. We are based in New York but do online mediations as well. We would love to help.

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