Three-Bagger: Darvish Meeting, Sano Fallout, Ice Cold Stove

In my opinion... Collusion isn't the right word. It's more like a collective reset.    

Multiple things in no particular order. 

The Dodgers and Yankees seem to be on the sidelines as they try to reset the luxury tax. Taking the two big boys out will slow a market. 

Harper and Machado are already a factor. I think the Dodgers, Yankees and quite a few others are looking at next year and doing some pre-prep for that. 

The young GM's are seeing the danger of Jason Heyward length contracts. They are not colluding but they are all seeing the same obvious data. 

Are the estimates you referenced in the highlighted part of your post the average production per WAR after signing or are this calculated based on the price free agent signed and there war for 2-3 seasons leading up to free agency?

 

I think you are confusing production per WAR with what players are signing for in comparison with this historical WAR. 

"Actual cost and actual WAR created by free agents collectively"

https://www.fangraphs.com/blogs/the-recent-history-of-free-agent-pricing/

Not the years prior to the FA signing. (Which would, by the way, be a very amateurish way of forecasting. As the writer of the above-referenced article goes on to say, "I have found in the past that projections tend to overshoot actual WAR on average". I choose to give front offices credit for better projections than outsiders, and thus that they know what they are getting into, more or less, when they sign those contracts.)

FWIW, there have been a few players and at least one agent (not surprisingly, Scott Boras) who have shall we say “speculated aloud” that something less than random is happening. The counter argument is extremely valid: next year’s class could be much more attractive and the increased use of analytics means that the same type of mindsets are making these decisions. 5-7 contracts for 30 year olds who aren’t uber stars may be a thing of the past.

The symptoms and signs have been here for years. We're noticing it now because of the serious lack of activity this winter... The best of the best free agents have no issue getting long term contracts. Harper/Machado/Kershaw will have multiple 7-8 year contracts to decide over because of their age heading into FA. The rest will demand similar long term contracts and struggle to find a team willing to do so.

You bring up analytical front offices and that plays into it for sure. They see years of data handing out poor FA contracts rewarding past performance, and now they don't want to do it anymore.

So how are players supposed to get their piece of the revenue pie? If the market is capped for international FA, and their contracts are controllable for 6-7 years, how can they earn money for their performance right now?

It's pretty easy to calculate actual cost.  What I am wondering is how they are forecasting and determining market value.  Has there been a considerable gap in forecasted vs actual performance.  Of course, this includes how long the player will add significant value.  It seems like there was a tendency be overly optimistic.  Does WAR even have any significant role in contract valuations.  Honestly, I have never dig into it by it seems highly suspect.  How accurate has Streamer been?  I have never seen a metric this suspect used in any form of valuation in any other industry.  

 

Are we seeing an adjustment this year?  There are more business school educated personnel in front offices now.  There appears to be an adjustment in-process this season.  Are the front offices finally recognizing the odds of defying aging and the cost of losing cost controlled players.  It will be very interesting to see how this shakes out in coming weeks.

You raise several tangents and I'll only try to address the three I bolded. I don't think we really know what forecasting the teams use, except to speculate that the kinds of sabrmetric forecasts developed 20 years ago (back when baseball front offices were mostly pooh poohing the business school quants)  probably were a starting point, but they've gone in different directions by now and have left the amateurs in the dust - the heavy hitters in the world of business analytics have gotten pretty good at teasing out patterns from so-called Big Data. Occasionally team personnel take part in things like the SABR Analytics Conference (there's one coming up in March, not too late to buy a plane ticket to Phoenix!) but I've never attended one and I don't know what they choose to say there but I bet it's not very much they consider a competitive advantage.

Second, I doubt they use one of the WAR variants literally, even if WAR is conceived in the desired spirit of "value added to the team". For one thing, I'm sure we all agree, in deciding on a contract offer it always comes down ultimately to dollars and cents. A team's winning record contributes fuzzily to revenue in ways they surely can model, and individual players in turn contribute fuzzily to winning in ways the teams also model. But in addition, big-ticket players can contribute to revenue a little more directly, such as concessions sales (might Darvish bring in $1M in sales of jerseys shipped to Japan during several years for example?) or simply name-recognition putting fannies in the seats. Just being seen as "going for it" may be quantifiable for revenue as well - which I think several posters here are suggesting as a reason to pull the trigger on a big contract now. The idea of dollars divided by WAR is just a proxy for the real computations the teams make, and I don't think anyone was pretending otherwise.

Third, I am guessing that the free agent logjam is indeed an outcome of an adjustment, but not quite straightforwardly. It may be that the forecasts several years ago were inaccurate, but the inaccuracy was apparently skewed toward the overly optimistic side, and not merely random with bad outcomes generally balanced by surprises on the good side. It looks like teams were paying more for wins, in practice, than they believed going in - if that's a circular argument, so be it, because I can't know what goes on inside GMs minds. OTOH, they were easily affording these dollars. Empirically they WERE paying recent free agents $10M per win, or thereabouts; their perhaps not believing it beforehand doesn't make it untrue. So they CAN pay that price per win, if they choose to, and it's a matter of sharpening up their forecasts (which, in the years that have followed, they probably have) to get more wins for their dollar. That in turn perhaps leads them to spread the money around a little more evenly, which in turn disappoints the top-end free agents who keep waiting for the "real" offers to finally start rolling in this off-season.

There's a lot to think about, when trying to reverse-engineer what's going on in baseball's front offices.

Perhaps on the flip side, ticket prices will be held constant or even edge down and the fan will be able to take his family to a game for a bit less of a hit to his budget?

I don't wanna launch a lengthy digression, but the insertion of this old chestnut always gets me. Ticket prices are high because other fans are waving fistfuls of dollars to acquire tickets ahead of you. If teams dropped their prices, scalpers would swoop in and pocket the difference. Salaries are more of an effect, than a cause, of high ticket prices.