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MLB owners have made their first move towards formally negotiating a salary cap into the next collective bargaining agreement with players.
On Thursday afternoon, MLB owners sent their first proposal to the players detailing what a salary cap could look like under the next CBA. The league’s current agreement with the MLBPA expires on December 1 of this year, and many experts anticipate a fraught negotiation that could result in a work stoppage. It’s the first time since 1994 that the owners have proposed a salary cap. Of course, that proposal resulted in the longest work stoppage in MLB history and the cancellation of the 1994 World Series.
It’s a stark picture to paint some 32 years later, with the stakes higher than ever.
Owners are proposing a $245.3 million salary cap for the 2027 season and a $171.2 million salary floor, along with a clean 50-50 split of revenues with the players. It has long been conventional wisdom that, to get players to consider a salary cap, MLB would need to implement a salary floor as well.
Here’s where things get interesting, particularly from a media perspective. According to multiple reports about MLB’s initial proposal, all local media revenues across the league’s 30 clubs would be classified as central revenue and subject to the league’s revenue-sharing arrangements. Under the current system, each club contributes 48% of local media revenues into the shared central revenue pool and retains the other 52% for itself.
It’s a pretty big sacrifice from the large-market teams. Think about a team like the Los Angeles Dodgers, which pulls in a ludicrous $334 million per year from its local broadcast deal, more than double what the next-highest-earning club, the New York Yankees, makes annually. As it stands, the Dodgers get to keep more than half of that for themselves (and are actually afforded a more favorable rate than the 48% most teams contribute, due to an agreement struck with MLB during its 2012 bankruptcy proceedings). Should this salary cap arrangement move forward, the Dodgers would be sacrificing hundreds of millions in local media revenue over the term of its SportsNet LA deal and putting it into the revenue-sharing pot with 29 other clubs.
Why?
Well, that’s just how valuable implementing a salary cap is to owners, particularly those of large-market teams. After accounting for the luxury tax, the Dodgers are estimated to pay approximately $580 million for their star-studded roster in 2026. That’s over double the proposed 2027 salary cap.
That expensive roster has been effective at buying championships, but it has come at the cost of the bottom line. Every large-market owner realizes that you don’t want to get into a bidding war with other billionaires over baseball players. They’re all willing to sacrifice an edge on the field to ensure a more sustainable payroll for their pocketbooks.
But what about the small-market teams? 11 MLB clubs currently have payrolls under the proposed 2027 salary floor of $171.2 million. A salary cap puts hundreds of millions of dollars back into the pockets of large-market owners, but it doesn’t do much to help the less-wealthy billionaire owners of small-market teams. (Yes, even at billionaire status, there are levels to this shit.)
That’s where the local media revenue sharing comes into play. It’s a wealth transfer from the league’s biggest brands, which stand to benefit the most from a salary cap, to the league’s smaller teams. It’ll help the 11 clubs that would come in under the salary floor afford a more expensive roster.
Crucially, all of this plays into MLB’s big-picture ambitions. For one, the league would like to improve its competitive balance.
“The biggest issue we need to solve next to continue to grow the game off the field is fixing the payroll disparity unseen in any other major U.S. sport,” league spokesperson Glen Caplin said in a statement to The Athletic. “Ultimately, the game is about hope and competition, and too many fans in too many markets have too little hope their team has a fair chance to win. Fans overwhelmingly support a salary cap and floor like in the other leagues because they don’t believe a $446 million spending gap from top to bottom is a fair fight.”
What makes the NFL so successful? Well, at least in part, it’s because the league’s strict salary cap and near-total revenue sharing puts each team on an even financial playing field. There’s a reason for almost every fanbase to have hope every year. Green Bay Packers fans don’t have to worry about the New York Giants buying up all the good players.
MLB wants to tap into this. The 11 clubs that are operating this year under the proposed salary floor shouldn’t have any excuse to cheap out when they’re earning exactly the same media revenue as every other franchise.
In addition to competitive balance, implementing the salary cap/floor system in conjunction with the local media revenue-sharing sets the league up perfectly to execute its plan to centralize local broadcast rights in a single hub for all 30 teams. Without this type of revenue sharing in place, there was little incentive for teams like the Dodgers or Yankees to join the league’s platform; why would they willingly sacrifice their lucrative media rights deals with regional sports networks and give up a competitive advantage? But when the revenue is fully shared, there’s no reason for any team to abstain.
So, beyond competitive balance, the league could set itself up to vastly simplify its local broadcast model by aggregating all 30 clubs onto a single platform under the proposed system.
The question now, of course, is whether MLB can get its players to agree. The MLBPA has long stood firmly against the implementation of a salary cap. And out of every players’ union in major sports, the MLBPA has historically been the most effective.
But these changes are seen by the owners as crucial to the league’s health and future success. In their minds, restoring competitive balance and simplifying how fans watch games are two of MLB’s biggest priorities. To the owners, these are issues that warrant a work stoppage, perhaps even an extended one.
How long will the players be willing to miss game checks, especially when the owners could be in the rare position of having fan support on their side? Fans want a fairer system where every team has a chance to secure the league’s top talent. They also want it to be easier to watch games. The league’s proposal seems to address both.
Enjoy your baseball now, folks, because we could be in for a long, drawn-out labor negotiation once this season ends.
About Drew Lerner
Drew Lerner is a staff writer for Awful Announcing and an aspiring cable subscriber. He previously covered sports media for Sports Media Watch. Future beat writer for the Oasis reunion tour.