Article: MLB Shift Driving Market Realities

[Ted Schwerzler]

This offseason free agents across Major League Baseball have felt a squeeze of sorts. Now into February, more than 50 quality big leaguers still remain out in the cold with respect to playing destinations for the upcoming season. While I will always argue in favor of millionaire players over billionaire owners, the complaints of the job seekers seem to be somewhat shallow given the current marketplace.Looking at the list of the top 25 free agents for 2018 from MLB.com, only four of the top 10 players available have been inked to deals. Shohei Ohtani chose the Los Angeles Angels in a deal that was never going to reflect true market value. Wade Davis inked the largest relief contract ever with the Rockies, Jay Bruce rejoined the Mets, and Lorenzo Cain entered the National League with the Milwaukee Brewers. However, the battle cry continues to be that money is scarce on the market, and players demand better.

 

In a tweet from agent Brody Van Wagenen, threats regarding a strike were made, and indications of former $200 million and $300 million deals were alluded to. It's absolutely fair on one hand to see players band together; being represented by a union, that's what should take place. That being said, the threat of a strike while failing to realize market indications seems somewhat like misplaced frustration. First and foremost, a strike would effectively squash all positive momentum the sport has, which is currently experiencing popularity at its peak. The players stand to gain nothing in the long run from a strike, and comparing the current landscape to that of 1994 couldn't be further from level ground. The second part of the equation however, is what both market factors and available commodities are telling us.

 

There're two real situations at play this offseason in my mind. Situation number one is that the crop of free agents is, for lack of better descriptors, rather week. Jay Bruce was a top ten name, Yu Darvish is truly the only ace, and as good as he is, J.D. Martinez as a true designated hitter becomes a top three get (this coming from someone who genuinely supports the DH, and believes it ought to be universal). No doubt owners have revenues to disperse, but there is a lack of players worthy of the funds to be allocated, in a sense.

 

The second situation is that the impending free agent class represents one of the greatest to ever hit the open market. Brian Dozier, Josh Donaldson, Manny Machado, Charlie Blackmon, Byrce Harper, A.J. Pollock, and Andrew McCutchen highlight the bats. On the mound, names like Gio Gonzalez, Clayton Kershaw (likely), Dallas Keuchel, Klevin Herrera, Craig Kimbrel, and Zach Britton all get the engine running. As harsh of a reality as it may be, the money allocated for those players should be significantly more than what's currently available.

 

I'm absolutely in favor of a player being paid whatever they can get, and your worth as far as a contract goes should be whatever someone is willing to pay you. However, it seems that agents are overreaching while players are lulled into a false sense of reality. When it comes to a free market structure, it's generally the market that dictates valuations. One player commanding an unrealistic amount would effectively throw off the valuations surrounding the entirety of a current class or one in the future.

 

We have heard reports of Darvish seeking something north of seven years and $175 million, while someone like Hosmer has been reported to have seven year deals on the table, but holding out for eight. There've been notes reporting Martinez is looking for $200 million, and Arrieta could be commanding as much. Sure, given the current availability of free agents, those numbers might not be ridiculous in a vacuum. The problem however, is that organizations are trying to create a culture of consistent winning. By offering Martinez $200m or Hosmer eight years, the correct structure of a Machado or Harper deal becomes $600m or 15 years. At some point, there has to be reality to the sliding scale matching talent or return, with valuation.

 

Throw into the equation that front offices are also now more intelligent than ever before. Analytics may not have entirely taken over the on-field product, but you can bet that algorithms are run for virtually every dollar amount thrown into a discussion. No longer does a team want to get stuck paying Albert Pujols $240m over 10 years, while he limps through two-thirds of the deal. The Zack Greinke's and Giancarlo Stanton's over the world make the money easier to wrap your head around given the age factor (similar to what Machado and Harper will experience), but massive paydays spread across significant time commitments for players into their 30's has long been a negative proposition.

 

At the end of the day, I expect a dam to break, and it's the players that probably need to do some budging. Sure, there's absolutely money to be spent, and the sport should continue to foster payroll growth. What can't happen however, is for talent to hold money hostage until market inefficiencies are forced. The future viability of contracts relies upon a level of consistency year over year. Baseball being an uncapped sport leads to an interesting economic study created entirely by its own doing. The sport needs Darvish and Hosmer thrilling fans, but it also needs them doing it in a scenario that makes sense for future markets as well.

 

We may have had one of the most boring off-seasons in recent memory, but there's a time crunch coming, and the craziness could just be about to start.

 

Originally posted at Off The Baggy.

 

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[laloesch]

GOOd! Let them strike. And while there at it demand a hard salary cap be on the table and really see the fire works go off.

 

[Squirrel]

Good article, Ted. I agree with everything you said.

[Vanimal46]

"Situation number one is that the crop of free agents is, for lack of better descriptors, rather week."

 

I disagree with this statement, as I feel this is one of the better FA classes we've seen in a few years. There's still a projected ~48 2018 fWAR available for some team to sign them. For reference, the Houston Astros compiled 53.8 fWAR last year as the best team in baseball. I realize it's not a fair comparison between a group of 75 FAs and a 25 man roster. I just wanted to point out that there are several players available that will move the needle in a positive way for any team.

 

If GMs and owners continue deciding a player making $500k providing any sort of value is better than signing a FA in their early 30's, it's not going to be good for baseball. Owners will pocket multiple millions more, and the players' share of the revenue pie will decrease.

[Vanimal46]

 

GOOd! Let them strike. And while there at it demand a hard salary cap be on the table and really see the fire works go off.

 

So what, let the owners continue pocketing a significantly higher percentage of revenues than the players? 

[Ted Schwerzler]

 

So what, let the owners continue pocketing a significantly higher percentage of revenues than the players? 

 

As I replied in the blog space, the players should continue to get a significant portion of the pie. I'll side with millionaires over billionaires all day long. The problem is they're attacking it in the wrong way, and not playing into market trends.

[Ted Schwerzler]

 

"Situation number one is that the crop of free agents is, for lack of better descriptors, rather week."

 

I disagree with this statement, as I feel this is one of the better FA classes we've seen in a few years. There's still a projected ~48 2018 fWAR available for some team to sign them. For reference, the Houston Astros compiled 53.8 fWAR last year as the best team in baseball. I realize it's not a fair comparison between a group of 75 FAs and a 25 man roster. I just wanted to point out that there are several players available that will move the needle in a positive way for any team.

 

If GMs and owners continue deciding a player making $500k providing any sort of value is better than signing a FA in their early 30's, it's not going to be good for baseball. Owners will pocket multiple millions more, and the players' share of the revenue pie will decrease.

It's top-heavy. There's a few guys at the top worthy of suggesting upper tier, but there's a ton of warts with this class too. The reality is that, in general, free agents hitting the market in their 30's and asking for 10 year deals doesn't make sense. Pivot with the information that you have to turn towards a higher AAV to capitalize while you should have a level of productivity that leaves organizations comfortable with the valuation.

[Vanimal46]

"Brian Dozier, Josh Donaldson, Manny Machado, Charlie Blackmon, Byrce Harper, A.J. Pollock, and Andrew McCutchen..."

Of these names, Harper and Machado will have no issues receiving multiple long-term deals. They're hitting FA at the perfect age (26-27) and history shows when players hit the market at this age, teams don't hesitate to offer 7+ year contracts.

You don't think Dozier, Donaldson, Blackmon, and McCutchen will experience the same issues the current crop of FAs are facing? All of them will be entering their age 32-33 season. Why would teams want to pay for their age 36+ seasons over JD Martinez? 

 

Same thing applies with the pitchers available. All entering their age 31+ seasons... Why would teams want to pay for their age 35+ seasons over Yu Darvish?

 

Free agency is broken, and a strike may need to happen to get the changes they need.

[TKGuy]

The market has changed, you can make more money annually on your agreement but the clubs are not going to give you the numbers of years as they have in the past, especially on starting pitchers ( See Barry Zito).

 

Look at some of the reliever deals. Davis gets the richest annual deal for a reliever at $17.3 million per, but it's only three years. Addison Reed got 8.5 per and Anthony Swarzak got $7 million per to be setup guy. But each deal is only two years. I think GregHolland is going to have to take a deal like that.

 

JDMartinez is essentially a DH, but could still get $20-25 million annually. Lorenzo Cain got $16 million annually from Milwaukee for 5 years. The anamoly is that two teams are actually offering 7 years to Hosmer, which I have no idea why he hasn't jumped on it.

 

Yu Darvish is rumored to be seeking 7 years, I'd be shocked if he got more than 5 years. I envision a deal at 4 years approaching $30 million per or 5 years at $25-27.5 million annually. Even the Cubs are rumored to only offer 4 years. The Twins are willing to go 5, but I'd balk at going more years. The Brewers may go 6. Sounds like Yu wants the Dodgers, but the luxury tax is probably causing problems there.

 

I think the slow offseason is a combination of agents not seeing that the 7 year and longer deals won't be here any longer and the luxury tax ramifications ratcheting back spending on the big market teams who are positioning themselves for next year's FA class

[Vanimal46]

 

It's top-heavy. There's a few guys at the top worthy of suggesting upper tier, but there's a ton of warts with this class too. The reality is that, in general, free agents hitting the market in their 30's and asking for 10 year deals doesn't make sense. Pivot with the information that you have to turn towards a higher AAV to capitalize while you should have a level of productivity that leaves organizations comfortable with the valuation.

 

I think GMs and amateur GMs around the internet agree. Unfortunately that hurts a ton of players entering free agency the way it's currently set up. With teams having 6 seasons of control on any player, most don't experience FA for the first time until they're 31-32. Pretty crummy situation for them.

 

I do have a few solutions to fix free agency! 

1 - Fire Tony Clark from MLBPA and hire someone who can gain more power against the owners. 

 

2 - Reduce the amount of cost-controlled seasons from 6 to 4. Instead of 3 pre-arb years and 3 arbitration years, it's 2 and 2. Players will be able to hit FA at their prime age and get the long term deal they want. Owners see a better return on their investment while sharing the revenue money. 

 

3 - Implement performance bonuses during the season. Their salaries would stay the same, and cost controlled seasons remain the same. But, if they hit performance goals and achievements during the season, they get a bonus! That way a player is compensated for doing well, at the exact same time they're doing well. 

 

 

[mikelink45]

I would call this year a market correction like we are seeing on Wall Street right now.  That does not mean that the egos of the owners will not overwhelm common sense in the end, but I agree with the comment that this is an overall weak group.  

 

Darvish is the ace, but as Schoenfield writes on ESPN - "Buyer beware: Darvish will be paid like an ace, but he’s more of a six-inning starter these days. His wOBA (weighted on-base average) allowed was .289 through pitch 50 but .334 from pitches 51 to 100, and he lasted fewer than six innings in 11 of his 32 starts."  

 

I do not want the owners to pocket all the profit, but I also do not want teams to throw money around and hurt their future.  I think that Pujols and other long term contracts are starting to add up to make a point with owners.

 

Next year has great value, but will have another economic factor - supply and demand!  Will there be enough big spenders for all the values that are out there.  It is an interesting time, but the fact that the players want big contracts and their agents want huge contracts is not enough to make these contracts worthwhile for the teams.  

 

We have had corrections before and I look forward to seeing it happen again.  If I were able to spend the extra owner money I would prefer to add another player or two to the active roster. With the shift to mega-bullpens we could use another roster spot. 

[Ted Schwerzler]

 

"Brian Dozier, Josh Donaldson, Manny Machado, Charlie Blackmon, Byrce Harper, A.J. Pollock, and Andrew McCutchen..."

Of these names, Harper and Machado will have no issues receiving multiple long-term deals. They're hitting FA at the perfect age (26-27) and history shows when players hit the market at this age, teams don't hesitate to offer 7+ year contracts.

You don't think Dozier, Donaldson, Blackmon, and McCutchen will experience the same issues the current crop of FAs are facing? All of them will be entering their age 32-33 season. Why would teams want to pay for their age 36+ seasons over JD Martinez? 

 

Same thing applies with the pitchers available. All entering their age 31+ seasons... Why would teams want to pay for their age 35+ seasons over Yu Darvish?

 

Free agency is broken, and a strike may need to happen to get the changes they need.

Dozier, Donaldson, Blackmon, McCutchen, etc are all superior talents to the likes of Mike Moustakas, Eric Hosmer, and Todd Frazier. That being said, yes, long term deals are by and large a thing of the past because of how teams have compiled data on them turning out. That's the point though. You can't tell me Hosmer or Martinez is justified in their complaining of the process when they're out there seeking 8 year deals and $200 million. Shift to what the market is telling you. If you're asking for 3-5 year deals at $25m+ AAV and not getting it, then I'd be much more in agreement that the process is broken.

 

Teams can absolutely afford to hand out big money, and they should. Ask them to do so in a situation that the market has dictated makes sense then. When you're getting guys like Torii Hunter in 2015 at 39 years old finding a 1yr/$10m deal, there's no reason why you can't take big money and less years in your lower 30's, then go year-to-year as you age. Having teams hang onto guys like Pujols in his current state because of the financial commitment doesn't do any good for market efficiencies either.

 

At the end of the day, the opportunity will remain as long as the production does.

[Mr. Brooks]

It's top-heavy. There's a few guys at the top worthy of suggesting upper tier, but there's a ton of warts with this class too. The reality is that, in general, free agents hitting the market in their 30's and asking for 10 year deals doesn't make sense. Pivot with the information that you have to turn towards a higher AAV to capitalize while you should have a level of productivity that leaves organizations comfortable with the valuation.

Who is asking for a 10 year deal?

[Old Twins Cap]

I wouldn't even worry about Baseball Club owners.  They make money regardless, in multiple ways.  Hell, they just got a huge windfall in the new tax bill.

 

But the Yankees and the Dodgers are reportedly trying to get out from under the luxury tax, which gets worse and worse for them every year if they can't get under.

 

So, everything in this article, plus pulling the Dodgers and Yankees out of the market, who normally have no upper limit on salary, -- plus the players holding out for overall salary growth above 20% because they know how much money is being made -- and you've got a multi-factorial explanation for what is going on.

 

We love our players, but, another baseball strike would be a huge hit for baseball.  The image of a group of super-wealthy individuals on the picket line hoping for higher wages.  Just begging for a Trump tweet tantrum.

[laloesch]

The market has changed, you can make more money annually on your agreement but the clubs are not going to give you the numbers of years as they have in the past, especially on starting pitchers ( See Barry Zito).

Look at some of the reliever deals. Davis gets the richest annual deal for a reliever at $17.3 million per, but it's only three years. Addison Reed got 8.5 per and Anthony Swarzak got $7 million per to be setup guy. But each deal is only two years. I think GregHolland is going to have to take a deal like that.

JDMartinez is essentially a DH, but could still get $20-25 million annually. Lorenzo Cain got $16 million annually from Milwaukee for 5 years. The anamoly is that two teams are actually offering 7 years to Hosmer, which I have no idea why he hasn't jumped on it.

Yu Darvish is rumored to be seeking 7 years, I'd be shocked if he got more than 5 years. I envision a deal at 4 years approaching $30 million per or 5 years at $25-27.5 million annually. Even the Cubs are rumored to only offer 4 years. The Twins are willing to go 5, but I'd balk at going more years. The Brewers may go 6. Sounds like Yu wants the Dodgers, but the luxury tax is probably causing problems there.

I think the slow offseason is a combination of agents not seeing that the 7 year and longer deals won't be here any longer and the luxury tax ramifications ratcheting back spending on the big market teams who are positioning themselves for next year's FA class

If Yu is now expecting or hoping for 7 years FORGET IT. Five years is the offer take it or leave it and don't look back. There is no way they should even consider giving him that. Edited February 3, 2018 by laloesch

[mazeville]

Really good take. 

 

The other factor has been the success of teams like the Astros, who tore everything down for multiple years to collect assets and build for the future. The team rapidly improved once its better draft picks reached the majors, and won the World Series. 

 

Teams are getting smart about that. So fewer teams are trying to win, which is limiting the overall market. And teams like the Yankees and Dodgers are trying to control their spending to stay under the salary cap or because they spent too much in past years.

[tarheeltwinsfan]

 

 

 

2 - Reduce the amount of cost-controlled seasons from 6 to 4. Instead of 3 pre-arb years and 3 arbitration years, it's 2 and 2. Players will be able to hit FA at their prime age and get the long term deal they want. Owners see a better return on their investment while sharing the revenue money. 

 

No way the owners will agree to this. It would cost them tens of millions annually.

[Mr. Brooks]

No way the owners will agree to this. It would cost them tens of millions annually.

And teams that draft and develop players should be the ones to reap the benefits. I don't want to see small and mid market teams being nothing more than farm systems.

 

I'm all for players making more money. Make all 6 years ARB years then. I don't want to see the Twins draft and develop Royce Lewis, only to watch him go to the Yankees at age 25.

[Nine of twelve]

I think the timetable on free agency is probably about right and I think the players are entitled to at least as large a share of revenue as they currently receive, but I think the revenue sharing system needs to be adjusted. It's a recipe for apathy in half the country for the highest-revenue teams to continue to have a large advantage in the free agent market. Owners need to be aware that for the sport to maximize its total revenue every team should have a reasonably similar chance to sign top free agents.

[terrydactyls]

How can anyone feel bad for a player that turns down a contract worth in excess of $10M a year, let alone $25M a year. Poor starving little babies. Take the damn shorter length contract at a higher AAV and play for your next contract. If you've pocketed $50 million during that time, you will be able to survive. How much is too much? Apparently, no one has an answer to that. As a white collar professional who has now now retired, I earned less than $4M in my entire xcareer. And yet I can survive in retirement. I guess I should have sought out endorsements to supplement my income???

[Vanimal46]

 

How can anyone feel bad for a player that turns down a contract worth in excess of $10M a year, let alone $25M a year. Poor starving little babies. Take the damn shorter length contract at a higher AAV and play for your next contract. If you've pocketed $50 million during that time, you will be able to survive. How much is too much? Apparently, no one has an answer to that. As a white collar professional who has now now retired, I earned less than $4M in my entire xcareer. And yet I can survive in retirement. I guess I should have sought out endorsements to supplement my income???

 

I feel worse when a billionaire owner pockets dozens of millions in revenue... They provide absolutely zero benefit to the fans and product on the field. 

Edited February 3, 2018 by Vanimal46

[Deduno Abides]

1. Darvish is not an ace. He’s good, but not an ace.

2. The solution to even the imbalanced split between billionaire owners and millionaire players should not be for teams to sign more ridiculous contracts. The solution should be for less money to go from non-millionaire fans to the sport. In other words, cut costs - less public financing, cheaper tickets, cheaper “authentic” jerseys, cheaper beer, etc. I am a political centrist who feels that the ridiculous thing isn’t the lack of nine figure contracts for mediocre players, but that the ridiculous thing is how much money comes out of fans’ pockets to pay for those contracts and the owners’ profits.

Edited February 3, 2018 by Deduno Abides

[Nine of twelve]

How can anyone feel bad for a player that turns down a contract worth in excess of $10M a year, let alone $25M a year. Poor starving little babies. Take the damn shorter length contract at a higher AAV and play for your next contract. If you've pocketed $50 million during that time, you will be able to survive. How much is too much? Apparently, no one has an answer to that. As a white collar professional who has now now retired, I earned less than $4M in my entire xcareer. And yet I can survive in retirement. I guess I should have sought out endorsements to supplement my income???

It's easy to gripe about how much the players make but there's no reason the owners should get a huge payoff either. Nobody complains how much money Tom Hanks or Paul McCartney has made and the players are entertainers just like them. The reality is that we fans contribute huge sums to the sport and the players are the reason we do that. Hence, the players should get most of the dough.

[Vanimal46]

 

2. The solution to even the imbalanced split between billionaire owners and millionaire players should not be for teams to sign more ridiculous contracts. The solution should be for less money to go from non-millionaire fans to the sport. In other words, cut costs - less public financing, cheaper tickets, cheaper “authentic” jerseys, cheaper beer, etc. I am a political centrist who feels that the ridiculous thing isn’t the lack of nine figure contracts for mediocre players, but that the ridiculous thing is how much money comes out of fans’ pockets to pay for those contracts and the owners’ profits.

 

That all sounds great in a perfect world... There is a demand for those tickets, authentic jerseys, and beer, and people will keep paying for them.

 

Revenue will continue to grow by the millions every year. Players currently are controlled for 6 seasons until they can explore FA for the first time, which is generally their age 31-32 season. GMs and Amateur GMs around the internet agree not to pay for their decline years.

 

At the end of the day, aren't we just padding the pockets of the 1%? 

 

I'd rather the players that provide us fans entertainment get that money... We just need to find a way for the players to get that money when they're providing the most value to a team. 

[Deduno Abides]

That all sounds great in a perfect world... There is a demand for those tickets, authentic jerseys, and beer, and people will keep paying for them.

 

Revenue will continue to grow by the millions every year. Players currently are controlled for 6 seasons until they can explore FA for the first time, which is generally their age 31-32 season. GMs and Amateur GMs around the internet agree not to pay for their decline years.

 

At the end of the day, aren't we just padding the pockets of the 1%?

 

I'd rather the players that provide us fans entertainment get that money... We just need to find a way for the players to get that money when they're providing the most value to a team.

 

This is the 0.01% and the 0.1%. I’m indifferent between them. If the 0.01% choose to share less with the 0.1%, I could care less. If either of them start getting hotsy-totsy, we’ll see how immutable is your assumption that non-rich need to subsidize the rich because of some unique societal contribution of sports. Edited February 3, 2018 by Deduno Abides

[Deduno Abides]

Let me put it another way. The teams are saying, “I wouldn’t pay that much.” So should fans.

Edited February 3, 2018 by Deduno Abides

[Deduno Abides]

It's easy to gripe about how much the players make but there's no reason the owners should get a huge payoff either. Nobody complains how much money Tom Hanks or Paul McCartney has made and the players are entertainers just like them. The reality is that we fans contribute huge sums to the sport and the players are the reason we do that. Hence, the players should get most of the dough.

Sports income is different from income from other forms of entertainment. For example, sports gets much more (involuntary) taxpayer support.

[Teflon]

The trouble with front offices now getting "sensible" about the returns on free agent contracts is it takes money out of the overpaid end of the system that won't go back into the underpaid end of the system. If this is going to continue, players need to reach free agency quicker so their peak seasons earn them more equitable pay.

[Brandon]

For the record. Isnt target field making payments to Hennipen County for the funds to build the ballpark? And isnt the Twins making big chunks of extra payments too?

 

And didnt the players all get a raise from new tax bill?

 

I think labor should tell their constituents to see how next offseason plays out. If Harper or Machado dont make bank, then labor has a big arguement. But so far im seeing offers in expected ranges get rejected by players. That makes them the villans of the offseason.

[Thrylos]

My (more) detailed thoughts on the subject are here. 

 

I think that the root cause of the problem is a system that as is pays players for past performance and new analytically-based Front Offices are not willing to continue. 

I am proposing several changes that will help the system, including livable wages for minor leaguers, hard salary caps and floors (with loss of draft picks as penalties), universal free agency at age 25 (unless there is an extension) so players can be paid for their prime seasons, universal NBA style draft with tradeable picks including IFA, Japanese, Cubans etc, elimination of IFA, Arbitration, Qualifying offers, and a few more.

 

Both sides have to give some.

 

I think that a large rational change is needed at the sport right now, so it stops taking advantage of 75% of its participants and pay better the players who are playing better.   I also think that with the new front offices that "get it", the time is ripe.