Uncertainty and Opportunity: 3 Predictions for the 2020-21 Offseason

[Nick Nelson]

The World Series is over, and free agency is about to open up for business. With that, one of the most unusual and unpredictable offseasons in the history of Major League Baseball will get underway.

 

No one knows exactly what's coming. But we can make a few educated guesses.It's been widely anticipated that MLB teams would uniformly cut spending this offseason – perhaps significantly – in the face of severe economic setbacks. The league reports losing more than $3 billion during the abbreviated 2020 season, and while 2021 may bring us closer to a sense of normalcy ... no one's confident it'll be THAT close.

 

As things stand now, the expectation is for partial-capacity stadiums, lingering pandemic-related complications, and more reduced revenues. That outlook could well change over the coming four months, but with the offseason officially underway, teams must operate based on what they know.

 

In the days immediately following the conclusion of the World Series, suspicions of a chilly offseason market were reaffirmed, with a stunning array of team-friendly options declined. Brad Hand, Charlie Morton, and Darren O'Day are among the most head-scratching. Under normal circumstances, each of these guys would be a no-brainer to keep. But as we're seeing, these are no normal circumstances.

 

The wildest thing to me is that, in the case of Hand, he went through outright waivers. That means any other team could've simply taken on a one-year, $10 million contract for an elite closer, no strings attached. Nobody bit. This isn't just Cleveland's cheapness – although, it is that too. Baseball owners are taking an understandably cautious approach with an ambiguous financial landscape ahead.

 

I don't necessarily blame them. In a refreshingly candid and open series of quotes shared with La Velle E. Neal III of the Star Tribune, Jim Pohlad laid out the ownership viewpoint well:

 

“Yes, I believe there will be fans in the ballpark, but I can’t tell you when or at what level, I just don’t know. I don’t think the fact that we lost money in 2020 — which we did, and we are right in the middle of that pack — I don’t think that’s the driver for what we are going to do in 2021 ... There is uncertainty, and we are going to have to figure out an ‘uncertainty discount,’ and we will.”

How might this "uncertainty discount" play out in practical terms, and how might the Twins specifically be affected? Here are three key threads I see playing out.

 

1: Many players will end up accepting deals for well below market value, with an eye on guaranteed money.

 

If it hasn't already, it'll quickly become apparent to the current free agent class (and more importantly their agents) that spending is at a premium this winter, especially when it comes to hard-and-fast commitments. I foresee a lot of guys ultimately forced to accept non-guaranteed or incentive-based deals, for whom that'd normally who never be the case.

 

In this tough environment, there could be opportunity for front offices. Think about it: If you're the Twins and you offer, say, Jake Odorrizi a multi-year deal that would seem perfectly reasonable under normal market circumstances (three years, $36 million?), does he just jump on it?

 

Normally he might take a passive approach and see what else the market has to offer. But this year, when he knows that there are many other starting pitchers vying for the same limited funds? And when he knows that only a select few true contenders will be actively spending to win?

 

If the Twins move on and sign a Marcus Stroman, they're out of the running for him. And that's one club checked off the list. Scales have been tipped. Supply will outweigh demand in this strange offseason.

 

2: The first couple of months will be very slow, followed by a late flurry in February and March.

 

Because of the lopsided supply/demand ratio, buyers will hold all the control. Front offices will feel little urgency to address needs in what I expect to be a slow-developing offseason. Especially for this reason: financial parameters figure to grow clearer as the winter progresses.

 

We have no idea right now whether 25% league-wide stadium capacity in 2021 is a feasible possibility, let alone 50% or more. In February, we'll have a better idea – albeit maybe not a definitive answer. This means patience is not only a luxury, but to some extent a mandate for front offices held to account.

 

If this eventuality is obvious to us, then it's surely evident to parties on both sides ... which brings me back to the point above. I think there will be serious opportunity to strike fair yet team-friendly deals in the early stretch of the offseason, when adaptive free agents make the most of their situations and avoid the painful saturation to come in January and February.

 

3: Tensions between the league and union will be further inflamed, and that's bad news for everyone.

 

Things turned ugly during the league's negotiations to start up a reconfigured COVID season in the early part of the summer. This only underscores a well-known truth: The two sides are very much at odds with the collective bargaining agreement set to expire after next season. Overdue to be addressed are many inequities.

 

Suffice to say that the cost-slashing we're about to see will not help matters. Free agent big-leaguers who already felt undervalued, and hindered in their earning power, will face devastating market prospects.

 

In his interview with La Velle, Pohlad said the following, which I think fairly reflects the position of his peers at large: "In a sense there has been, in my view — and I’m not speaking for the players or the union — there has to be some degree of risk sharing here ... Basically the owners bore the entire brunt of the short season. The players got their prorated salary for the games they played in. In terms of lost revenue, they bore no risk to it. But they were cooperative in getting the games started, and that’s a big deal. Going forward, it just comes about as a result of a depressed market that is, in effect, players bearing their share of the risk also.”

 

This is a reasonable statement on its face, from a strictly operational standpoint. But let's be honest: It's a sentiment that will hit sourly for players who undertook great burden and risk to make this season work. And that disconnect will only serve to foment the tensions brewing as a huge juncture for MLB approaches.

 

Unlike the first two predictions, there's not some potential Twins-related silver lining here. Even if they wanted to, the well-meaning Pohlads and Falvine Machine could do nothing to prevent a contentious impasse at the highest level, which would existentially threaten the game we love. I feel like we danced close to this line in May and June.

 

In fact, there's no real takeaway on this one. I'm just nervous. Nervous about this, and a lot of other more important things at the moment. Throw it all into the pot.

 

Hey, 2020!

 

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[puckstopper1]

This will be an offseason unlike any we have ever see before.

 

Should be VERY interesting!

[Vanimal46]

I don’t see how any team can make a move without knowing when the 2021 season will start, how many games they’ll play, if fans will be in the stands, etc. Unless they’re just shedding salary.

 

The flurry of activity in Feb/March is optimistic IMO assuming they start spring training on time. Until we get more clarity on Covid and revenue that could get captured in 2021 there’s going to be a lot of waiting around.

[TopGunn#22]

Hmmmm, so why not be bold and offer Trevor Bauer 3-years, $25 million per year.  Take some "uncertainty" and make it "certain."  That contract could be $5 to $10 million below his market value but it offers Bauer "certainty."  It also offers the Twins certainty as they then prioritize their payroll for 2021-2023.  They lock up an Ace at the top of their rotation and suddenly, instead of having to "Homer" their way to wins, they can pitch.  Then the Twins can decide to move on from Sano and Rosario with Kiriloff at 1B and Rooker/Larnach in LF.  There needs to be a youth movement for the Twins.  They need to get some of these prized prospects up to the show.  That will allow them the payroll flexibility to add a stud Ace like Bauer.  Rather than wait for the market to freeze you out, be bold, and set the market and make a BIG statement.   

[mikelink45]

I look at Manfred - his attitude is no pro baseball as a sport - it is pro owners all the way.  He was dictatorial in negotiating the 60 game season and I think he will be equally tough in the bargaining.  

 

The cutting of minor leagues happened before the pandemic, the loss of so many outposts of baseball cannot help the sport regain its popularity.  The length of game talks have taken ridiculously long to come to any solutions other than pointing to first for an intentional BB.  Elimination of some relief pitcher use with the three batter rule was the other option.  But there is so many more tweaks - why the HR trot - go to first and then the dugout, eliminate half the warm up pitches with each new inning and pitcher.  But that is not what this is about.

 

The conversation about the new Mets Owner is that he has had some talks with other owners who are afraid he will hurt their economics by spending.  They could not have talked to George Steinbrenner like that.  Will it work?  

 

I believe collusion has raised its head as a Covid-19 response.

 

[rdehring]

Timely article, Nick.

 

It is my understanding that the $3.1B number was lost revenue, not bottom line. Is that your understanding as well? But the actual losses were real with many teams losing north of $100M, if we can believe their comments. 

 

As for fans in the stands next year, short of something happening on the vaccine front very soon I cannot see Minnesota allowing more than minimal fans should the season open on time in April. So I don't see how the Twins can plan for anything other than a substantial cut in salaries.

 

I also foresee another negotiation you haven't mentioned, that being between teams regarding sharing ticket revenue if say the Rangers can have nearly full stadiums and the Twins are limited to 1,500 fans. Don't know how that discussion will be handled, unless it already is as part of prior agreements. Are you aware if that is covered in their existing revenue sharing agreements? 

[saviking]

With so much uncertainty about 2021 season from both the virus and the union I would use next year to bring up all the minor leaguers I could to find out who can play and who can't with the aim of filling any gaps for the 2022 season with money saved from the 2021 season. If you get lucky you might be able to pick up a bargain deal just before the 2021 season. NO way I would sign anyone until just before training camp. 

 

Watching all our promising players next year regardless of our record would be very entertaining and we watch baseball for it's entertainment value. It would be like watching Herbek, Gaettie and the crew when they came up to the majors many years ago .. 

[nicksaviking]

This offseason looks like it's set up to really infuriate not just the players but the fans as well. If no one wants to give Brad Hand 10M, that sure seems like most teams aren't going to be doing anything in free agency, but these top free agents WILL find a home, so it will almost certainly be with the clubs still willing to spend, even if they don't open up their wallets as wide as normal. 

 

I'm not looking forward to the conversations that will take place if every usable free agent ends up in NY, Boston, LA, Chicago and somewhere in Texas.

[Major League Ready]

 

Timely article, Nick.

 

It is my understanding that the $3.1B number was lost revenue, not bottom line. Is that your understanding as well? But the actual losses were real with many teams losing north of $100M, if we can believe their comments. 

 

 

 

They could not have lost over $3B (100M+ per team) if revenue was only down by $3.1B. There are variable costs that we not realized because of the 60 game season as well as some other cost cutting measures that would assure a difference between revenue decrease and net loss. I have not seen anything that detailed losses but the estimates for lost revenue are closer to $5B. The estimated losses(EBITA) I have seen lately are between 2.7B & 3.1B

[Trov]

This offseason will be a crazy one.  I think many players will still try to act like a normal offseason, because their agents will fight for that.  The owners will hold strong and not sign any long term deals, except for a very few guys.  I know many players will not want to and will keep holding out.  I agree later signings will be  happening.  I doubt many trades will happen until FA shakes out too, because you cannot expect certain things to happen in FA.  Everything we know from past is out the window.  

 

This is also because CBA up after next year.  Unlike other leagues were players and owners share in revenue, baseball is a true free market where the owners try to fleece the players and the players try to max their earning potential.  Neither side cares about the other.  In basketball there is talks that players may lose 40% of their earning, because their CBA is based on overall revenue, so when you hear player signed x deal in NBA it really is based on expected value, but COVID blew that up.

 

Baseball has no provisions.  So when players that are earing 20 million or more, it will cut against the players that could be earning say 10 mil, like hand.  If you need to cut payroll, you will do it on that end, because you cannot cut to save money, like in NFL, you still owe it, so why owe it and then replace too.  

 

Like with Hand, he was bought out for 1 mil, so the saving was 9 mil on him, but his spot still needs to be paid, for say .5 to 1 mil, so saving is only about 8 mil.  Really crazy times coming next season.  

 

I doubt many teams will want long term beyond next year too with not knowing what CBA will bring, and how long work stoppage will be.  At this rate, I expect a full season gone, unless both sides see how damaging that could be to the game. 

[Otaknam]

Just to clarify management cannot cut player salaries, only payroll. Players under contract will be paid, possibly on a pro rata basis like they did this year if COVID persists to shorten the season. If the Twins could get Bauer on the 3 year 9-10 million they should do that. But I doubt Bauer would sign that since he sees himself as an ace despite the off field baggage. He’s a very good number two but not in Verlander’s class as a one.

[Darius]

If I’m a guy like Bauer’s agent, I’m pushing for tiered contracts. I’ll sign for a minimum of $X, whether there are games or not. The contract ratchets up based on the number of games and fans allowed in the stadium. Whether you get them to show up and buy tickets isn’t my problem.

 

No way I’m getting charitable with ownership. You make a windfall next year because ballparks open and people are super enthusiastic about attending games because they’ve been locked up for a year (which isn’t out of the question), I want my cut of that. I’m losing no sleep over a lean year for people who have banked billions in actual earnings and unrealized gains over over the years. I already did my time on the MLBs antiquated arbitration/team control system where you get star players at a bargain for a significant chunk of their career.

 

The smart play may actually be waiting until in season to sign like some did last year. The pandemic has to burn out sometime, one would think, if there is no advance in vaccine, etc. by then. There will be normal baseball again at some point.

[Major League Ready]

 

 

 

This is also because CBA up after next year.  Unlike other leagues were players and owners share in revenue, baseball is a true free market where the owners try to fleece the players and the players try to max their earning potential.  Neither side cares about the other.  

 

 

I agree baseball is a free market and therefore your statement is a contradiction. Owners can't fleece players if a free market exists. You may also want to look back at the actions of both sides last year and re-evaluate which side acted with integrity. Owners paid Milb players in spite of them not playing. They also kept the vast majority of their staff despite a 50% (roughly) revenue loss. How many companies were even remotely as generous.

 

Players on the other hand agreed to renegotiate if fans were not present. Then, they ignored this fact and basically said we want every dime regardless of what happens with revenue.

 

[twinfan]

I'd still put people in the stands with 4-5 per row, every other row and every other end of the row. That would get about 25-35% in the seats. I'd also have seat-side food and drink delivery and a monitor at the bathrooms. As far as free agents, there is always talk of salaries for many going down- especially those non tendered but it doesn't always happen. The top salaried players and those who happened to have a breakout year will get (over)paid. However, evaluating the free agents for next year is very tricky due to the shortened season. I would think there will be a flurry before Christmas then a break until Spring Training starts.

[SkyBlueWaters]

Bringing fans back in attendance is a fascinating question. Ran a quick search, and found this:

 

https://www.sportstravelmagazine.com/sports-canceled-covid-nba-nhl-nfl-ncaa-nascar-soccer-league-season-tournament/

 

Decisions were made this spring and summer while leaders were still figuring out the virus. We all saw the (understandable) waffling and 2nd guessing.

 

By spring training we'll have 12 months of information, not weeks (think back to March 2020, the uncertainty at the abrupt end of spring training).

 

We'll have more info on outdoor attendance, and expert opinion on the virus, too. Still, it's like leaders trying to get kids back in schools. You can't blame parents who put safety first.

 

Don't know what the answers are. Maybe prorated contracts, based on whatever the new normalcy becomes, will be the compromise.

[Trov]

 

 

 

I agree baseball is a free market and therefore your statement is a contradiction. Owners can't fleece players if a free market exists. You may also want to look back at the actions of both sides last year and re-evaluate which side acted with integrity. Owners paid Milb players in spite of them not playing. They also kept the vast majority of their staff despite a 50% (roughly) revenue loss. How many companies were even remotely as generous.

 

Players on the other hand agreed to renegotiate if fans were not present. Then, they ignored this fact and basically said we want every dime regardless of what happens with revenue.

 

I by no means was trying to say owners are in the wrong, and I can see how you thought that.  My point was that without revenue sharing or split, both sides are trying to get the biggest chunk of that revenue.  Unlike in other sports where if the league makes more money it is good for all because they share in the extra money, but they also share in the losses.  In MLB the owners take the risk of losses, but the players want to share in gains, making recent arguments that they should share in gains of non-baseball money like tv channels, real-estate around stadiums, and other areas.  The point is, as a free market, both sides are trying to get as much money as they can, which will cause the other side to make less.

[Shaitan]

Twins have made a lot of late offseason deals under this FO. Lynn and Morrison bombed, but Marwin and (I think others I can't name right now) worked out. I expect more of that philosophy this year for useful role players (bench, bullpen, etc).