San Diego’s Star Must Give Up Part of His Contract
The San Diego Padres signed Fernando Tatis Jr. to a $340 million contract extension for 14 years, the third-largest deal in MLB history. However, an investment firm called Big League Advance also scored big on Tatis’ extension, snagging nearly $30 million off the deal. How did a start-up company manage to cash in on baseball’s biggest star? Here are all the details.
What is Big League Advance?
Big League Advance (BLA) is an investment firm with a goal to increase economic stability for minor leaguers. The company provides minor league players upfront payments in exchange for an agreed upon percentage of their future MLB earnings.
BLA supports rising players, but the payments are not loans. Since only about 10 percent of minor leaguers end up in the majors, they expect to take a loss on most of their investments. Even if a player never goes pro, they still keep the down payment and do not owe BLA any money.
In other words, Big League Advance bets high on top prospects and hopes they hit the jackpot.
According to their website, BLA uses a similar philosophy as other technology venture capitals that “make numerous investments in start-ups that fail in hopes of finding the next Amazon or Google.”
The creators use their own statistics to determine the worth and reliability of minor leaguers. They offer certain players incremental payouts, and players then choose what percentage of their earnings they want to give in return. An average deal with BLA usually results in a $350,000 cash advance to a player, with eight percent of the player’s future earnings signed over.
Reports indicate that the company invested $26 million among 77 minor league players in 2017, including Fernando Tatis Jr. Luckily, BLA found their jackpot.
Tatis Jr. signs with Big League Advance
When Tatis Jr. was 18 years old playing in Double-A, he was not on anyone’s radar––let alone a top prospect. BLA ran their algorithm and saw his potential as a future star. They took a chance and offered him a deal. The details of the payout have not been released, but if Tatis’ deal looks anything like the average, he will send roughly $27.2 million (eight percent of his contract) over to BLA.
Tatis told The Athletic in 2018 that he signed with Big League Advance initially so that he could afford a “personal trainer, better food, and a better apartment” during his time in the minors.
Unfortunately, at the minor league level, MLB teams hardly provide those resources. It’s ultimately up to the players to invest in themselves. That’s exactly what Tatis’ plan was, and it’s quite literally paying off.
Pay Structure of Minor League Baseball
BLA was created by former Philadelphia Phillies reliever Michael Schwimer in 2016. Schwimer spent three years in the minors before his debut. He understands the struggles that hundreds of minor league players endure on their journeys to the top.
In 2019, the average minor league salary was slightly over $10,000 per year. Keep in mind, the federally-recognized poverty line was $12,140 per year for single-individual households that year. Their salary typically goes towards meals, buying equipment, paying for housing, and extra clubhouse dues. The amount of sacrifice these players make for the minuscule chance of making it to the top is jaw dropping. This year however, minor leaguers will finally receive the pay bump they’ve been waiting for.
Overdue Salary Bump
Last February, MLB revealed a new pay structure for the minor league starting this season that will raise salaries of minor league players from a range of 38 to 72 percent. A weekly minimum salary for Class A players is $400 (up from $290); Double-A players is $600 (up from $350); Triple A players is $700 (up from $502).
They are all paid from Opening Day until the last game of the season. This means players in Class A will make around $10,500 for a five-month season, Double-A players will earn $12,600 and Triple-A players will earn a minimum of $14,700. MLB also shortened the draft and cut 40 affiliate teams. Fewer minor leaguers to pay means more money in players’ pockets.
These numbers are stark compared to other sports leagues. The NBA pays it’s minor league players a minimum of $35,000 for a five-month season, and the NHL shells out a minimum of $52,000 for an 80-game season. Of course it’s reasonable for farm systems to pay their players fractions of what the pros make, and MLB did increase salaries at the development level. However, more work can be done to make these wages healthier and more livable.
Opinions vary on whether or not deals with Big League Advance, or other investment firms should be allowed. If MLB matched their minor league salaries to those of other sports leagues, maybe BLA agreements would not be needed at all. At the end of the day, Tatis still walks away with heavy pockets––and some change thrown BLA’s way.
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