With baseball’s Collective Bargaining Agreement set to expire this December, owners and players began labor discussions earlier this month. Today, the union made their first formal proposal to owners that includes several changes to the financial structure of the game.
The union’s opening proposal would dramatically reshape revenue sharing, payroll incentives, and player compensation, changes that could significantly affect small-market clubs like the Royals.
Increased revenue sharing
The union proposes increasing local TV revenue sharing among clubs, while decreasing revenue sharing from ticket sales, as a way of incentivizing teams to improve their product and attract more fans at the gate. Currently teams allocate 48 percent of all local revenues – TV and ticket sales – into the revenue-sharing pool. Each team then receives a distribution primarily based on market size and local income. Large market teams like the Yankees are net payors, while small market teams like the Royals are net recipients. Revenues from national TV deals with partners like ESPN, Apple, and NBC/Peacock are split equally among all clubs.
The union argues that under their proposal, each small market club would be guaranteed a minimum of $240 million in revenue every season. Forbes estimated the Royals brought in a total of $332 million in revenues in 2025.
The changing TV landscape has presented challenges for many teams, with MLB now producing broadcast for 14 teams, including the Royals. That has led to a drop in revenues for some clubs, while large market clubs like the Yankees, Red Sox, and Cubs thrive with their regional sports networks. Complicating matters is an agreement that the Dodgers made in bankruptcy court back in 2011 that shields them from having to pay out their full share.
Addressing competitive balance
Some have argued that much of the competitive balance problems stem from some clubs failing to spend enough on player payroll. The MLBPA proposal would impose a “competitive-integrity tax” for any team with a payroll below $150 million. According to figures from Spotrac, 13 clubs – including the Royals – would fall under that threshold this season. The Miami Marlins are at the bottom, spending just $78 million on player payroll.
The proposal would also expand the draft lottery to disincentivize tanking. MLB instituted a draft lottery in 2022 to reduce the incentive to field a bad team to net a higher draft pick. Currently, the order of the top six draft spots are determined by a weighted lottery system. The Royals benefitted from this in 2025, when they landed the #6 pick in the draft, despite finishing with a winning record.
Revenue sharing funds could also be increased or decreased based on a team’s commitment to trying to win. Under the proposal, teams could forfeit some revenue sharing money if their payroll is too low. Other teams could earn more revenue sharing money if they win games. Depending on the specifics, this could incentivize smaller market teams to make a more concerted effort to invest in players and win games, instead of just taking a revenue sharing check.
The players also suggest raising the Competitive Balance Tax from $244 million to $300 million and removing many of the nonmonetary penalties for going over, such as draft pick losses. Nine teams exceeded the tax in 2025, but only two teams are projected to have payrolls over $300 million this year. The tax was meant to serve as a “soft cap”, but even escalating fees for multiple seasons over the tax has not deterred many large spending clubs from avoiding the tax.
The union proposed several changes that would increase compensation for players. They propose increasing the MLB minimum salary from the current $780,000 to $1.5 million in 2027. They also propose expanding the pre-arbitration bonus pool that was instituted in 2022 to better compensate exceptional performances by players in seasons before they are eligible for arbitration, such as Bobby Witt Jr., Maikel Garcia, and Cole Ragans early in their careers. The players propose expanding the pool from $50 million to $180 million.
The union also proposes a $3 million minimum tender amount for arbitration-eligible players. Relievers and role players are frequently tendered less than that amount, and a high minimum could result in more players being non-tendered. More players would be eligible for arbitration under the players’ proposal. Currently, all players with three years of service time are eligible, as are the top 22 percent of players with two years of service time. The proposal would double that to the top 44 percent.
Free agency could also change under the proposal. The players propose eliminating the Qualifying Offer that serves as a deterrent to signing certain free agents. Under the current system, teams can offer their free agents a Qualifying Offer set at the mean salary of the top 125 players, and if the player rejects the offer and signs elsewhere, the team is entitled to draft pick compensation, with the signing team giving up a pick. The proposal reportedly does include more compensation for lower revenue clubs if a free agent depart, although the details are not public.
Players also propose allowing free agents with five years of service time that are over the age of 30 to become eligible for free agency. Currently, players are not eligible for free agency until they have hit six years of service time, regardless of their age. This could affect players that make their MLB debut at an older age.
The owners responded with a statement arguing that the proposal does not do enough to address competitive balance.
“We appreciate the union making a set of proposals and we look forward to continuing the bargaining process and working towards solving the competitive balance problem our fans are telling us needs to be addressed. We understand their proposals are designed to benefit players. Unfortunately, they do not address and in fact exacerbate the competitive balance problem our fans are telling us we must address. The MLBPA’s proposal would reduce the amount transferred to lower-revenue Clubs, weaken the Competitive Balance Tax, and lead to even more payroll disparity than exists today. For example, under the Union’s proposal, the Dodgers would pay less in luxury tax payments, giving them an additional $70 million to spend on payroll.”
Owners are expected to counter with a hard salary cap/salary floor proposal on Thursday. They are reportedly more determined than ever to implement a salary cap in this labor deal. A proposal floated by reporter Evan Dreilich of The Athletic back in February would cap spending at $240 million, while requiring teams to spend at least $160 million. Interim MLBPA executive director Bruce Meyer has held the union position against a salary cap. A salary cap has historically been a non-starter for the players, and was the primary reason why they went on strike in 1994.
With owners expected to pursue a salary cap and the union historically unwilling to accept one under any circumstances, the early proposals suggest the sides remain far apart on the fundamental question of how baseball’s economic system should work. As the expiration of the current agreement approaches, the sport could be heading toward its most consequential labor fight in decades.
2:17 p.m. update: The owners have countered with a proposal that includes a $245.3 million salary cap, and a $171.2 million floor. All local revenues would be centralized and divided equally, with revenues split 50/50 with players.
3:56 update: The union responds that the cap is a non-starter.
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source www.royalsreview.com ’
