Ever since we first heard that Major League Baseball was trying to cut the minor leagues down from 160 teams to 120 teams we’ve been wondering which teams wouldn’t survive the purge. We’ve since found out a lot of the details – most of the teams that lost their minor league affiliation were teams from the non-complex level rookie leagues, most of which have now either become college wood bat summer leagues or “partner” independent league teams. Both the Billings Mustangs (now a “partner” independent league team) and the Greeneville Reds (now a summer wood bat college team league) are gone from the Reds farm system chain.
It’s been over a year now since we first saw the initial list of possible cuts. We know that list has changed over time. And we’ve seen several teams acknowledge that they are already affiliated moving forward – but were only talking about 10 teams of the 120 that will be getting a Professional Development License. Rumors last month were first that we’d get “the list” on December 1st. A report from Baseball America later noted that we’d probably hear about the list the first week of December.
On Thursday we had two new reports about when we could hear things. Kevin Reichard of Ballpark Digest reported that we wouldn’t hear anything until “December 8th at the earliest”. A little bit later in the day, Evan Drellich of The Athletic came out with a report that Major League Baseball was still finalizing their picks for “the 120”. In his report, though, he brings up something that has been talked about here on the digital pages of this website – not every team extended a Professional Development License could accept, noting “Not all teams are expected to accept MLB’s offer to remain under the umbrella.”
Why would a team decline an opportunity to procure a license to remain in affiliated baseball instead of either try to go it as an independent league team or simply fold? There are a few reasons, but in the end, it’s about the money. Major League Baseball’s taking over has led to putting in place of facility standards that are far more extensive than they were up to last year. So much so that even newer ballparks are going to need to upgrade certain aspects. Major League Baseball officials don’t believe that will be an issue that keeps a team from turning down a license given that they feel they’ve been open about what teams should be expected to do and there will be no surprises here.
However, Drellich notes that there hasn’t been a back-and-forth, necessarily, on what will be in the Professional Development License that is handed out to each team. Nor is it known if each license will be the same, or if they will be tailored to specific teams/locations/levels. It’s not just about adding to the facilities, that could cost teams millions and millions of dollars of investment, but Major League Baseball is also changing the terms of what is being paid for by the big league clubs and the minor league clubs, and from a minor league club standpoint, it seems that it’s going to be more expensive to run a team moving forward on a yearly basis than it has been in the past.
For some teams more expensive means unable to operate. It’s been reported by Baseball America in the past that just a few rain outs in a season will be the difference between a minor league team making or losing money for the year. That doesn’t apply to every team, of course, but some teams are indeed working on margins so thing that losing three games off of their schedule means they lost money in a given year.
If the new financial details are off just a little bit, some teams may not feel comfortable enough to accept the deal. At that point there are some options that both sides could take. The first would be to negotiate, or try to negotiate terms that are a little better that make it viable. That only works if enough teams say no – otherwise Major League Baseball will just pull the offer of a license and hand it out to a team that was on the outside looking in. The next step could simply be to close up shop or to try and go things as an independent league team – though that may be difficult for some teams if there isn’t a league for them to join that makes the travel aspect feasible.
Another option, we’ll call it the nuclear option because there’s almost no coming back from it, is to sue Major League Baseball. The Staten Island Yankees are the first to go down that road, filing their lawsuit on Thursday against both the New York Yankees and Major League Baseball. The lawsuit is for $160M. There are some very interesting notes from the lawsuit that may not apply to many other minor league teams, but one key thing from the lawsuit may to apply to any team that is left out if their purchase agreement is the same. From the filing, which you can see in full here:
Most significantly, owning an MiLB team gave the owner a “guaranteed” PDC with an affiliated MLB team that provided “players, coaches, and trainers” at “no cost”:
“The acquisition of the SI Yankees provides an investor with a unique opportunity to own and operate a MiLB member club and to participate in the changing economics, expanding profitability, and double digit annual growth in core club values currently being experienced in MiLB. It is generally considered among sports finance experts that MiLB has the best business model available in professional sports providing a unique investment vehicle that provides its owners with the opportunity to earn superior rates of return on invested capital with modest risk to principal. The continued value proposition provided by MiLB entertainment has historically resulted in attendance, revenue, and club values continuing to grow even through difficult economic conditions.
MiLB member clubs operate within league structures that work to protect each club’s exclusive operating territory, to ensure consistent adherence to applicable baseball rules and regulations, and to maintain and enhance each member club’s franchise value. Each of the 160 MiLB franchises is guaranteed a PDC with a MLB club, under which the MLB club provides players, coaches, and trainers to its MiLB “affiliate” at no cost. . . .
. . . Properly operated, other than the upfront cost of acquiring the club, individual MiLB franchises require little or no ongoing investment other than nominal working capital or additional capital assets allowing owners the opportunity to distribute excess available cash flow on an annual basis.”
The “guaranteed PDC” line is where things seem to hinge. I’m not a lawyer, and I certainly haven’t had the chance to talk to any of them about this, and there doesn’t seem to be any proof (re: the actual contract) of it, though it would be terrible lawyering to not actually have it.
It’s probably going to be next week before we start to hear more about who winds up where. But it may be even longer until things are official if some teams decide that they aren’t going to accept the terms of the license. After 14 months you would think that things would be going a bit smoother at the end, but here we are, with more than a few organizations still just sitting around wondering, waiting, and trying to figure out the answer to so many questions about what their future looks like.