Why are MLB salaries rising?

The average MLB player made more than $4.2 million last season, according to the players union. Here's how salaries have increased over the years.
Posted at 4:34 PM, Mar 23, 2023

The play on the diamond garners the spotlight, but these days, Major League Baseball players' salaries are dazzling too, with figures teams of past eras would balk at. 

The New York Yankees inked reigning American League MVP Aaron Judge to a nine-year $360 million contract this off-season. That's $76 per minute for the next nine years. 

Senior baseball writer for The Athletic, Keith Law, says big-time big-league contracts were unheard of in baseball's early years. 

"It was just a few dollars per game, essentially," he said. "And it would rise where the best players in baseball in the '30s, '40s and '50s were making maybe $10,000 or a few tens of thousands as an annual salary."

That's a long way from today's mega deals. 

This past off-season alone, 10 players signed multi-year contracts worth at least $100 million. That happens now due to different rules. 

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"Players in the early days had no mobility. So once they were under contract to a team because of something called the reserve clause, the team held their rights, essentially, in perpetuity," Law said.

That meant players had little bargaining power.  

It all changed following the 1975 season, after an arbitrator's ruling in favor of two players nullified the reserve clause. 

The league and players eventually reached a deal, allowing players to become free agents after six years of major league service.

"After that, the floodgates opened and free agency as we know it now began," Law said. 

In the years that followed that decision, teams bid for talent and players moved.  

Reggie Jackson signed a five-year deal worth nearly $3 million with the New York Yankees in 1976. 

Three years later, Nolan Ryan inked a $4.5 million four-year free-agent contract with the Houston Astros, making him the first player to sign a deal worth more than a million dollars per year

But those numbers, while historic at the time, were pale in comparison to what today's major leaguer earns. 

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Law says that's in part due to growing revenue, thanks to media rights deals.  

"In our sports leagues, as TV revenues grow, the league's revenues grow and player salaries tend to follow," he said.

Major League Baseball's current national television media rights deal tops $12 billion. That money is shared between all 30 teams and trickles down to players. 

"In general, the players are the product. They get paid what we call in economics, the marginal revenue product of their labor," Law continued. "What is an hour of your time worth? Or in this case, in baseball, what is, say, a games worth of your time worth to the owners? Almost every dollar that the owners take in is generated by the labor of the players. So, when money flows into baseball — whether it's from television, online streaming or some other source — we expect most of that to ultimately flow through to the players."

And player contracts could continue to grow as league revenue does.  

According to Forbes, league revenue topped a record $10.8 billion in 2022.  

While Major League Baseball isn't the most profitable professional sports league, it is the only major American league with no salary cap, meaning there's no limit to how high these historic salaries could go.