MLB free agency is so broken a salary cap would actually help

The MLBPA has resisted a salary cap for ages, but it may be what the sport needs the most.

Baseball’s offseason has been about as cold as much of the country finds itself this month. While NBA and NFL fans are overloaded with news of signings at the advent of their free agent seasons, the MLB off-season has moved at a glacial pace. With a month to go before spring training, 14 teams have doled out less than $30 million in free agent contracts and five clubs have yet to sign a single MLB free agent. At the other extreme, the Dodgers, Yankees, and Mets have combined to spend $1.5 billion on free agents this off-season.

The wide gulf in how different teams approach the offseason stems from a fundamentally broken system where some teams have an incentive to spend and others do not. Large market teams have protected monopolies and duopolies that allow them to reap massive revenues by investing in elite talent. Small market clubs with less revenue upside in their given markets are given revenue-sharing checks for doing nothing. It is no surprise that under this system there is such a disparity in spending.

The player’s union has vociferously fought a salary cap for years, and for good reason. Free agency was a hard-won concession, and the free market has been very generous to ballplayers over the years. The ham-handed attempt by owners in 1994 to unilaterally impose a cap on players nearly wrecked the game.

But the game has evolved. Multi-billionaire owners have discovered how to leverage profits from large markets maximally. Executives have figured out cost/benefit analysis to spending on free agents doesn’t add up. This has led to a largely dormant market, with many significant free agents unsigned heading into spring training. Although it may seem counterintuitive, a salary cap combined with a salary floor and greater revenue sharing may be the solution for players.

A salary cap and floor allows players to control spending

A common response to the dormancy of many teams is that nothing is stopping those teams from spending money, and that is absolutely correct! Those teams should be spending money. Also, I should exercise more, political parties should get along to fix our problems, and movies should start at their listed showtime. But until there are structural incentives to make those things happen, they won’t (okay fine, I’ll do some sit-ups).

Players have relied for decades on a free market system to drive contract values higher and higher. But like any free market, there gets to a point where consumers decide prices are too high, and change their behavior. This is what many teams have concluded in baseball, figuring that free agents on the wrong side of the aging curve are not worth spending limited resources on. Even worse, many teams have little incentive to get better. Why spend money on players when you receive a fat check from the larger clubs for doing nothing? This is why a salary floor is needed to force small market teams to stop being revenue-sharing freeloaders.

NFL players are guaranteed 48 percent of revenues after deductions, while NBA players get half of all revenues. It is hard to get a full sense of MLB’s financials, but according to numbers from Sportico and Sportrac, players get about 51 percent of revenues. Will that continue? Only if owners open their wallets, which they seem hesitant to do.

But if there was a collectively bargained salary cap and floor, players could negotiate exactly how much of the pie they get, without relying on the whims of owners. Would owners try to hide revenues, like ancillary developments near ballparks? Of course! But they’re doing that already - there is nothing requiring them to spend that money. With a salary cap and floor, the union could negotiate what is included in the revenue pot - NBA players, for example, just won the right to include licensing revenues.

The point is, players could have a say in how much is spent on them, rather than ceding that power to owners.

A salary cap and floor are necessary to create a market for free agents

Each of the last few off-seasons has seen some very good players unsigned at the advent of spring training. Last year it was Blake Snell, Jordan Montgomery, and JD Martinez. This year over 150 players remain unsigned.

Forcing teams to spend will create much more of a free agent market for players. The current uncapped system has been great for elite players - all you need is two or three large market teams to drive up bidding. But it’s not clear it has been as good for the middle class of free agents. While salaries are not capped, roster limits certainly are. The Dodgers can only pay so many players, and while depth is nice, they don’t need to spend on two starting first basemen. But if you force all the bottom payroll teams to spend as well, suddenly you have a lot of suitors for mid-tier free agents.

Even if a team wanted to “tank” to rebuild, forcing them to spend opens up markets for them to take on bad contracts and get something of value in return, like prospects. That, in turn, frees up money for contending teams to spend on free agents. Governments frequently try to goose demand in the markets by putting more money into the pockets of consumers. Baseball can do the same by forcing teams to spend.

Players in capped sports are doing better than MLB players

The first American athlete to earn a million dollars per year in a team sport was Nolan Ryan. Baseball players earned the right to free agency before other sports, and have enjoyed an uncapped market, leading to extremely lucrative salaries. Even now, Juan Soto has the largest contract in North American sports, eclipsing even that of NFL star Patrick Mahomes.

While stars still continue to get their money, there is evidence that well is beginning to run dry for less elite free agents as teams are run by more analytics-based executives that do not value free agency. The amount teams are spending on players in baseball has not kept up with capped sports like the NBA and NFL.

In 2024, NFL teams spent $8.8 billion on player salaries, more than double the $4.2 billion the league spent on players in 2014, according to Spotrac. NBA teams are spending $5.2 billion on player salaries this year, more than double the $2.2 billion they spent in 2014-15. In 2024, MLB teams spent $5 billion on player salaries, up from $3.2 billion in 2014, just a 56 percent increase over that time.

The average NBA player makes double that of an MLB player, which makes sense considering there are far fewer players on a roster. But while the average MLB player salary has gone from $3.8 million in 2015 to $4.5 million in 2024, an 18 percent increase, the average NBA salary has doubled in that time, from $4.9 million to $9.7 million. NFL salaries meanwhile, have risen 40 percent from $2 million in 2015 to $2.8 million in 2024.

And the league minimum in baseball has not kept up with other leagues. MLB players made a minimum of $720,000 last year while NFL players made $795,000 and NBA players made a minimum of $1,157,153. Heck, even the NHL pays players at least $775,000.

This isn’t because of slow revenue growth in baseball. Revenues swelled from $9 billion in 2014 to $11.6 billion in 2023 (a 28 percent increase), which Commissioner Rob Manfred said was topped in 2024. Owners are making more money, but they’re choosing not to share it with players.

A salary cap and floor require greater revenue-sharing

Small market teams should definitely be spending more, but even for those that try, the game is stacked against them. The Kansas City Royals were one of the most active teams last off-season, spending over $110 million on free agents. They improved by 30 wins, one of the largest improvements in baseball history, reaching the playoffs for the first time in nearly a decade.

The team benefitted from the two home playoff games, and hopefully the run improves their season ticket numbers this year. But the cost/benefit analysis of spending that much money for a small market doesn’t really add up (it might have if the team had been successful in convincing voters to approve a downtown ballpark measure that failed in April). The fact is, there are just way more wallets in New York City than Kansas City.

Travis Sawchik of The Score compiled the “Scrooge index” to evaluate how much each team was willing to spend on players to win. Steve Cohen’s Mets led the league in salaries as a percentage of revenues, spending more than they took in (it helps to have an owner worth close to $20 billion, which most small markets won’t have). The small market Royals were the fifth-highest spending team at 59 percent (and they made the playoffs! I enjoy mentioning that as much as I can!) But even had they wanted to be as profligate as the Mets and spend all their revenues on salaries, their payroll would have been just 60 percent of what the Mets spent.

The Mets and Yankees get to split the spoils of New York without any further competition. London supports seven Premier League soccer teams, but the New York baseball market is split into two. The Royals could make a LOT more money if they moved to Brooklyn. But MLB forbids this. I certainly don’t want the Royals to move to the Big Apple, but in return for getting to split the largest market in the country to themselves, those two teams should split some of the spoils with the rest of the league.

This isn’t about competitive parity, or giving each team an equal shot. This is about creating 30 healthy franchises so that baseball can be a national game, where fans in Pittsburgh are as invested as fans in Los Angeles. Otherwise, it will recede into becoming a niche coastal sport.

This may be where the sport is headed when the CBA expires after the 2026 season. Writer Marc Normandin has speculated this is why the Dodgers are spending now - they expect greater revenue-sharing. Many think MLB is trying to collect all the local TV rights to bring them in-house for a single package where the revenues can be distributed equally.

I was against a salary cap for a long time. Players have a unique talent and deserve to be paid handsomely for it - better them than the rich owners in the luxury suite. But it has become clear to me that the current system is not serving them as it was, and it is not good for the long-term health of the sport. Players shouldn’t just give this negotiating chip away - get more compensation for pre-free agency players, more money for pensions, chocolate chip cookies on every chartered flight!

But a salary cap, salary floor, and greater revenue sharing can be in the players’ best interest and for the good of the game.