Players Unions are Big Business, Failing to Treat Them as Such is Costing Players Millions

Players Unions are Big Business, Failing to Treat Them as Such is Costing Players Millions

Major League Baseball Players Association executive director Tony Clark and deputy director Bruce Meyer were reportedly the targets of a ‘coup’ attempt in March. The push for change atop the union stems from the players’ frustration with the relative lack of free agency spending this past offseason.

The duo managed to beat the resurgence back–for now. However, calls for an audit on union finances persist, and plans to resume conversations about the organization’s direction after the season remain.

While the palace intrigue drove headlines, few following the MLBPA drama comprehend the sheer number of dollars at stake; that includes many of the union members, their agents, and fans.  

The MLBPA “is not your mom and dads’ auto workers union. This isn’t [just about contracts], strikes and lockouts anymore,” one prominent athlete representative said. Sports unions today have “much broader responsibilities, and these organizations have evolved into multi-billion-dollar sports businesses based on the amount of revenue and value they’re creating.”

The problem is the former players and labor lawyers historically tasked with running these entities are often unqualified to maximize their commercial efficiency. 

The model is “just set up for mediocrity in that sense,” the athlete rep said.

Having the proper leadership in place could lead to hundreds of millions, if not billions, of additional dollars for the players over the course of a decade.

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The coup attempt Clark and Meyer faced seemingly came out of nowhere.   

“Everybody was caught off guard because historically, at least dating back to Marvin Miller and the ‘70s and ‘80s, [the MLBPA] was always perceived as the strongest sports union,” the athlete rep said. “They’re still the only league in North America without a salary cap.”

One could argue the organization’s reticence to adapt to the times and adopt a new collective bargaining stance is the root of the revolt. 

The lack of a cap means the absence of a floor. And MLB clubs spent just $2.9 billion on free agents this past offseason, down from $3.9 billion last year.

The players initially directed their ire towards Meyer, and proposed replacing the union’s lead negotiator with Harry Marino (a young lawyer who helped to organize the MiLB players and get them admitted to the MLBPA in 2022).

But Clark, the only individual able to make the swap, resisted. So, the players decided they would replace him too (in theory, that would clear the way to bring in a new union leader and hire Marino).

Cooler heads ended up prevailing. The players came to realize they would be better off running a proper search if they were going to bring in new leadership, and that it was unrealistic to make such an important decision so quickly with the season getting underway.

However, discontent within the organization reportedly remains. 

As do lingering calls for an audit. The players have expressed concerns that the MLBPA may not be operating as efficiently as it could. 

Much of the discussion has centered on Clark’s $4.25mm annual salary, a figure in-line with other sports union chiefs. But a deeper dive into the organization’s publicly available LM-2 filing sparks some additional questions.

Like why does a sports union have a $1.5mm Vanguard-managed donor advised fund? Unions can and do donate directly to charities. In fact, the MLBPA did so in ’23. 

DAFs tend to be formed when a windfall is received and the recipient wants to reduce long-term capital gains. Did the MLBPA take in a large payment last year? And if so, why didn’t it just distribute those funds directly to the players?

There are also questions regarding One Team Partners, the company co-owned by the MLBPA, NFLPA, and USWNTPA. At last check, the MLBPA owned 20% of the licensing giant. However, the recently filed LM-2 states its stake is worth just $7.5mm today. Did the union sell some of its interest?

Of course, the outputs of an audit are only as good as its inputs. And it’s not clear if an auditor tasked with looking into the MLBPA’s financials will be given the green light to look beyond the non-profit labor union and into all its affiliated non-profit and for-profit interests.

“They’re not Marvin Miller’s MLBPA of 1985 anymore,” the athlete rep said. 

But even if all the questions posed can be answered sufficiently, the players seem to be leaving meaningful money on the table by failing to place seasoned business executives in charge.

RedBird exited OneTeam at a $1.9 billion valuation in ’22. The MLBPA could have done the same, or sold a portion of its equity at the time. And might have–had leadership recognized the ongoing macro trends. 

The markets were on fire, interest rates were near zero, and the NFT craze (which had been driving newfound licensing revenue) was at its peak. 

Borrowing against its lucrative stake and buying out RedBird, or forcing the private investment firm to retain its interest through the end of the lockup period (see: 2027) were among its other options.

Instead, the union never hired a banker and relied on its board to evaluate the opportunity. The group settled on a preferred equity structure that included $250mm of variable interest rate debt and $500mm in preferred equity.

Naturally, interest rates have since skyrocketed, and the mid-teen IRR guaranteed to OneTeam’s new investor consortium has become an anchor on a once fast-growing business. 

The decision likely cost the players hundreds of millions. 

However, there will be much more money at stake in the years ahead, which is why having the right leadership in place has become so critical. These organizations already generate hundreds of millions in annual revenue–on par with a sports franchise.

For context, the majority of MLB’s ~700 players took home distributions of $54,289 in ’23 (payments are based on years of service). 

And if a players association is generating revenues like a team would, logic suggests its commercial arm should also be valued in the billions of dollars. 

“That’s part of the reason they created One Team and spun it out in the first place,” the athlete rep said. “To get the independent capitalization and valuation, and have equity value.”

But few are currently being run by accomplished business people who have profitability in mind, like a team would be.

That will change in the years ahead. 

As those voting learn that “these individuals are running multi-billion-dollar businesses, the presumption is they’ll recognize the roles and its responsibilities have changed,” the player rep said.

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