KC Royals Midweek Musings: Shutdown odds and ends

As the baseball shutdown continues, this edition of KC Royals Midweek Musings considers some draft implications, business issues and other matters.

Some KC Royals Midweek Musings while hoping Major League Baseball and the Major League Baseball Players Association are discussing issues immediately affecting the game and the matters they need to tackle before the current collective bargaining agreement expires in December 2021:

To draft or not to draft?  Major League Baseball and the Major League Baseball Players Association (the players’ union) have reportedly negotiated the answer to that question–the annual amateur draft, usually held in early June, will most likely occur in July. Significantly, however, only 5-10 rounds, a drastic reduction from the usual 40, will be held, meaning far fewer players will be drafted. The implications are wide-ranging for the drafted and undrafted alike.

First-round picks will still cash in, although clubs may seek to sign those selections for less money than in the past–paying full slot value will increase the negative impact of significant revenue losses occasioned by the pandemic. However, significant portions of each player’s signing bonus will be deferred.

Stars can, of course, elect not to sign and head instead for college, but that option is fraught with its own uncertainty. Most college programs heavily emphasize fall workouts and intrasquad games but no one knows if campuses will open in August and September, much less whether athletic programs will be restriction-free if they do.

And some players may be reluctant to go the college route because they assume schools will be top-heavy with returning seniors taking advantage of the NCAA’s recent ruling allowing spring sport athletes an additional year of eligibility. That move, however, adds more than roster room and scholarship allocation to the confusion–the ruling actually doesn’t grant another season of eligibility, it simply allows a school to offer that additional season if it chooses to. Universities then will make those determinations themselves, irrespective of the athletes’ wishes.

(The University of Wisconsin, for example, recently announced it would not grant additional eligibility to any of its spring sports participants).

Undrafted players who might otherwise consider signing free agent contracts (which pay pittances compared to the bonuses first-rounders typically command) might be more inclined to head to school, a route draft projections may have already dictated for them.

Finally, a draft slashed by 30-35 rounds won’t help the minor leagues. Although they have enough players to fill rosters this season, the next and subsequent campaigns may be different–fewer players will be in the pipeline, a factor MLB may exploit to support its arguments for drastic reductions in the number of minor league teams. Expect MLB to push hard considering they’re responsible for player salaries and will be eager to offset pandemic-related revenue losses.

Do clubs have insurance to cover losses caused by COVID-19?  Unlike the “to draft or not to draft?” query, this question is far more difficult to answer. If one thing is certain about major league franchises, it’s that they fight almost to the death to guard financial information they’re not required by law, or union contract, to disclose. Although teams like the KC Royals obviously carry some types of insurance, such as premises liability, errors and omissions, and accident, we can only assume they have business interruption policies.

Insurance policies and coverage issues, however, can be complicated. Even policy documents for small business can be extraordinarily lengthy, convoluted, and difficult to understand–insurance law is shrouded in its own unique legal lingo and court decisions interpreting that language are countless.

Descriptive labels applied to coverage potentially applicable to baseball’s stoppage–business interruption, event cancellation/loss, and others–are less important than language prescribing specific coverages, which must be applied to each team’s coverage questions. For example, insurance contracts that appear to cover losses caused by canceled games attributable to the pandemic may, in fact, exclude such losses from coverage if “pandemic” isn’t defined as a specific triggering event, isn’t encompassed by another category, or is expressly excluded from coverage.

Coverage is also highly dependent on contract definitions. For example, do typical “acts of God” and “disaster” exclusions include pandemics and epidemics in any given policy? We can expect some carriers and insureds across the business world to battle over coverage clauses and underlying definitions when policies don’t expressly address pandemic causation issues. Insurance companies will seek to minimize losses while insureds seek to recoup losses.

Hopefully, major league teams have in place and in effect policies like tennis’ Wimbledon championships and golf’s The Open Championship (British Open) have to cover some of their losses–both events have been canceled.

Baseball-Reference simulation update.  Kings of Kauffman’s David Scharff recently wrote about the 2020 season simulation baseball-reference.com is conducting using Out of the Park Baseball 21. Daily summaries are available, typically by noon.

When we left the simulated KC Royals last week, they were 5-5, trailing the AL Central-leading White Sox by 2.5 games. Through Tuesday’s 3-1 loss to the Sox, who still lead the division, the Royals are 8-9 and in third place, four games behind.

Whit Merrifield leads the club with a .329 average; Hunter Dozier leads in home runs with four and RBIs with 14.

Danny Duffy surrendered all Chicago’s Tuesday runs in the first inning, took the loss and now stands 2-1. Ian Kennedy (six appearances) and Richard Lovelady (eight appearances) have been superb out of the bullpen–neither has given up a run, Kennedy has five saves and Lovelady has a win and a save.

One final note: player transactions are also simulated. Kyle Zimmer has been released.

That’s our KC Royals Midweek Musings for this time. We’ll be back next week with more; until then, be safe and be healthy.