Why Do MLB Players Make So Much Money?

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It seems as if every year there’s a new MLB player who becomes the “highest paid player in baseball history”. Teams just continue to pay stars more and more money each year prompting more and more parents to sign their kids up for Little League in hopes that their son will be the next big star.

The answer to this question is pretty simple. MLB players make so much money because the sport generates a lot of revenue, and the league has no salary cap. According to Forbes, In 2019 Major League Baseball brought in the most revenue it has ever seen at $10.7 billion.

You heard that right. BILLION with a B. If you think that is a lot of cash for a single industry to generate, just wait until you see some of the numbers that individual players bring home.

Team Revenue and Salary Cap

The MLB is a capitalist league with no salary cap. A salary cap puts a limit on how much each team can spend on its players’ salary. Major League Baseball is the only one of the four major professional sports (NFL, NBA, and NHL) without a salary cap.

This allows each team to decide how much of their own team revenue they’d like to spend on their players. Teams with more revenue obviously have more flexibility. For example, the New York Yankees brought in the most revenue of any Major League team in 2019 with $683 million. The Miami Marlins ranked last in the league bringing in $222 million.

While $222 million is a large amount of cash that many of us will likely never see in our lives, it puts the Marlins at a big disadvantage when it comes to signing some of the game’s most talented free agents.

Teams like the Yankees, Dodgers, and Red Sox seem to be the ones that most often pay the biggest bucks for the biggest stars. That is because of the no salary cap rule, and these teams have more money to throw at these guys. They all have brands worth upwards of $4 billion giving them the flexibility to sign players to rich, long term deals.

Forbes’ 2020 rankings for MLB teams’ revenue can be found in The Business of Baseball. Be warned: your eyes may pop out when you see some of these numbers.

Industry Revenue

Not only do individual teams bring in mountains of cash, the league as a whole is extremely profitable.

2019 was the 17th year in a row that the MLB had seen an increase in revenue. Bud Selig took over as the commissioner in 1992 when the league’s total revenue was $1.2 billion. A $9.5 billion increase over 27 years isn’t bad.

Forbes writer Maury Brown credits media rights, sponsorship deals, and attendance with helping the league increase its profits each year. The MLB’s television deal with FOX alone has been valued at around $5.1 billion, and it goes through 2028.

In 2020, a uniform deal with Nike kicked in and has been valued at just over $1 billion according to Forbes.

Rich Contracts

Take a look at this list from baseballprospectus.com to see the top 10 richest contracts for individual players in MLB history:

1. Mike Trout, $426,500,000 (Los Angeles Angels, 2019-30)

2. Mookie Betts, $365,000,000 (Los Angeles Dodgers, 2021-32)

3. Bryce Harper, $330,000,000 (Philadelphia Phillies, 2019-31)

4. Giancarlo Stanton, $325,000,000 (New York Yankees, 2015-27)

5. Gerrit Cole, $324,000,000 (New York Yankees, 2020-28)

6. Manny Machado, $300,000,000 (San Diego Padres, 2019-28)

7. Alex Rodriguez, $275,000,000 (New York Yankees, 2008-17)

8. Nolan Arenado, $260,000,000 (Colorado Rockies, 2019-26)

9. Alex Rodriguez, $252,000,000 (Texas Rangers, 2001-10)

10. Miguel Cabrera, $248,000,000 (Detroit Tigers, 2016-23)

Notice that three of these deals were signed by the New York Yankees, the team with the most revenue year in and year out. Two of those three deals are current deals that run through 2027 and 2028. Needless to say, the Yankees are always willing to pay their stars big money.

Eight of the top ten players on this list are currently playing in the MLB. When Alex Rodriguez signed his 9 year $252 million deal with the Rangers in 2001, he was by far the richest man in baseball history. He followed that up by signing a deal with, of course, the Yankees, that broke his own record.

Only three of the players on this list (Mike Trout, Nolan Arenado, and Miguel Cabrera) signed their rich contracts as extensions with their current team.The other seven were signed from another team out of free agency or, in the case of A-Rod and Mookie Betts, were given extensions after being traded to a new team.

Also of note is the fact that only 2 players on the list have won World Series titles with their respective team during the stint of their top dollar contracts: Alex Rodriguez with the Yankees in 2009 and Mookie Betts with the Dodgers in 2020. It is no coincidence that these two organizations are the top two revenue producing franchises in the MLB.Because of this, many have questioned whether paying big bucks to one star is a recipe that will produce a World Series championship caliber team given the fact that it leaves little to no money to spread around to the rest of the team.

For the full list of the top contracts in MLB history, visit this link.

League Minimum

Even the players who aren’t stars make good money compared to the rest of us average Joes. The 2020 league minimum is $563,000, well above the average cost of living in the major cities in which Major League teams are located.

When minor leaguers are promoted to the Major Leagues, their pay is prorated for the time at which they spend at that level. This is a big pay raise for many of these prospects, not to mention the added benefits for which they are eligible.

Spending just one day on an active MLB roster allows the player to be fully vested in their pensions and covered by the league’s full comprehensive medical benefits plan. 43 days on the active roster would qualify the player to receive full pension benefits of around $9,000 per year. The more time the player spends on the active roster the more pension benefits they can earn.

The MLB is considered to have one of the best pension plans in all of professional sports, so not only are the players compensated well during their career, they are covered for their life after baseball.

Minor Leagues = Minor Pay

While the players in the Major Leagues get to profit abundantly off of their talents, Minor Leaguers do not see the same benefits. A 2019 article by Daniel Gallen, a sports writer for Penn Live, cites an average yearly salary of $15,000 for Triple A players, $9,350 for Double A, and $6,000 for Single A.

You heard that right. What many Major Leaguers make per game Minor Leaguers earn per season. That does not include the offseason and spring training. They are often forced to work jobs in the offseason to help make ends meet.

The good news for Minor Leaguers is that the MLB has agreed to raise Minor League salaries starting in the 2021 season. While this may seem great for Minor League Baseball, it does come with a price. The MLB also decided to cut the draft from 40 rounds to 20 and many Major League teams cut their Minor League programs.

So yes, Minor Leaguers will now receive more pay, but there will be fewer opportunities for pro baseball hopefuls going forward.

Frequently Asked Questions

Why do the Yankees and Dodgers bring in so much money?

The market a team is in has a lot to do with the revenue. New York City and Los Angeles are two of the biggest sports markets in the country. Even the Mets and Angels, whose brands are not worth near the same value as the Yankees and Dodgers, rank in the top third of the league in revenue.

Who is the lowest budget team to win a World Series?

The Florida Marlins beat, ironically, the New York Yankees in the 2003 World Series to become the lowest budget team to ever win a title. Their payroll of $48.8 million ranked 25th out of 30 MLB teams that year. Their highest paid player that year was future Hall of Fame catcher Ivan Rodriguez who made $10 million.

Where does the MLB rank compared to other leagues in revenue?

The MLB ranks 2nd behind the NFL and just ahead of the NBA in revenue generated. The NFL brought in just over $13 billion in 2019 while the NBA registered just over $7 billion.

Who could sign the next big MLB contract?

The 2021 free agent class is loaded with young talent. Kris Bryant, Javier Baez, Francisco Lindor, Carlos Correa, and Corey Seager look to be the next young players to sign big time deals.