Even now, with spring training beyond its midpoint, the offseason seems unfinished. Though J.D. Martinez finally landed with the Red Sox, elite talent remains on the board.
Baseball’s wealth of unemployed free agents stands in drastic contrast to what existed just two winters ago. Then, one free agent after another achieved incredible wealth and security through massive long-term deals.
Seven players — headlined by David Price’s record-setting seven-year, $217 million deal — landed nine-figure deals. Seven more received guarantees of at least $50 million.
Since the end of 2017, there have been three deals of at least $100 million and three more of at least $50 million. Price’s free agent experience seems like a distant memory.
“It’s weird,” Price said. “The market is going to change every year. Everything kind of lined up against the players this year, for this market.”
Two interrelated questions now loom: What were the elements that lined up against the players, and will those elements persist going forward?
Conversations with major league executives identified a confluence of factors that created a free agent market unlike any in recent memory: growing recognition of free agency’s limitations and risks; the rise of analytics and the role of data-driven models to project player value; the departure of big spenders from the marketplace; a flood of players available via trade from rebuilding clubs; a collective bargaining agreement that amplified disincentives to spend; and new methods of evaluating players for teams that would rather pay for untapped potential than past performance of players who may be nearing decline.
Those developments not only affected this year’s free agent class, but may have considerable implications for how the game operates going forward.
A flawed system
Major League Baseball’s free agent system rarely rewards its best players with the biggest contracts. The most productive players are in their early and mid 20s. Players aren’t eligible for free agency until they’ve played six full seasons — typically after those best years are in the past.
Last year, none of the 16 position players identified by Baseball-Reference.com as having produced the greatest value as measured by Wins Above Replacement had ever reached free agency.
That’s not atypical, but teams long ignored the numbers that offered such conclusions. No longer. The word “inefficient” echoes among front offices when describing free agency, a conclusion driven by analytics departments that once represented aberrations but are now at or near the center of organizational decision-making, particularly when defining free agent prices.
“There’s so many ways to value players now,” said Orioles general manager Dan Duquette. “There’s so much data. The valuations are more precise than they were even five years ago. This isn’t just baseball. It’s all the sports — and all businesses, too, particularly consumer businesses.”
It’s not just baseball operations departments that are aware of such changes. Statistically savvy fans hold organizations to account regarding how they spend. Team owners typically demand that baseball operations departments use models to show how a player’s anticipated performance will compare with potential salaries. Those models are unkind to free agents.
“You have 30 teams that are working in similar ways, appraising players by the same metrics, with the same discipline,” said former player Alex Rodriguez. “That’s something that wasn’t as consistent maybe a decade ago.”
Thirty major league teams didn’t consider Rodriguez to be worth $252 million in 2000 or $275 million in 2007; 30 teams didn’t view Albert Pujols as being worth $240 million in 2011 or Price worthy of a $217 million deal.
In each case, one team set the bar tens of millions beyond what other clubs would spend. Markets are often defined by one team acting in a fashion unlike 29 others.
But if two or three engines for salary growth tap out of free agency, the impact can be drastic. The current CBA, reached one year after Price signed with the Sox, helped to achieve such a change.
The new CBA, which took effect in December 2016, was intended by owners to promote “restraint,” in the words of commissioner Rob Manfred at the recent MIT Sloan Sports Analytics Conference. It did so by increasing the penalties for spending above the luxury tax threshold, which is set at $197 million in 2018, with higher penalties for payrolls in excess of $217 million and $237 million.
“The penalties are really tough,” said one MLB executive. “A lot of teams aren’t willing to go there.”
The penalties are particularly high for teams that spend beyond the threshold for three consecutive years. While the incentive to stay below the threshold got much larger under the new agreement, the room to stay under it barely changed.
Baseball’s luxury tax line has barely moved this decade. In 2011, it was $178 million. In 2018, it is just 11 percent higher at $197 million, far short of the salary cap growth over the same period in the NBA (71 percent), NFL (48 percent), and NHL (25 percent).
Big-market teams recognized the importance of resetting their luxury tax rates — saving tens of millions of dollars over multiple years — by sneaking under the threshold at least once, something made possible by the development of outstanding young cores.
The Red Sox did so in 2017. The Dodgers and Yankees (among others) will follow suit in 2018 — just before what could be a remarkable class of free agents (including Bryce Harper, Manny Machado, and Clayton Kershaw) next winter. The result has been drastic.
In the winter of 2016-17, the Yankees and Dodgers guaranteed more than $300 million to free agents. This winter, the game’s two richest teams have guaranteed a combined $14 million in free agency.
“We had a little bit of a perfect storm,” said Manfred. “The basic agreement created an incentive for clubs that had been over the tax threshold to get under for one year because their tax rate going forward is going to be lower. So both the Dodgers and the Yankees, two traditional drivers in our free agent market, had this incentive to get down.”
Of course, the Yankees still had money to spend this winter — but they chose to spend it on Giancarlo Stanton, acquired from the Marlins via trade, rather than free agents. Stanton represented the tip of the trading iceberg.
Payroll-shedding deals by Miami, Pittsburgh, and Tampa Bay wiped out several potential destinations for free agents.
The Marlins, Rays, Pirates, White Sox, Tigers, Braves, and Reds are all rebuilding, looking beyond 2018 for their next contention windows, thus taking them out of the mix for big-dollar free agents.
“I think there were a lot of elements that contributed to the slowdown [including] the combination of teams that were rebuilding and restructuring, following the blueprint that was performed by the Astros a handful of years ago,” Mariners GM Jerry Dipoto said at the Sloan Conference.
The 2012-16 CBA, meanwhile, introduced draft and international amateur spending limits that meant that the creation of a prospect base is now most efficiently accomplished by trading lots of major league talent (a strategy employed by the Yankees in 2016 and the White Sox in 2016-17) or by picking at the top of the draft.
New draft bonus pools gave huge financial advantages to teams that finish with the worst records. The game is doing more to reward losing than it did before 2012. Under those circumstances, teams’ futures may be hurt by adding free agents who offer marginal roster improvement — and thus a less attractive draft spot.
Agents are understandably upset, but it’s worth stepping back to ask: What causes teams to go through tanking/rebuilding cycles? Often, it’s long-term deals in which a player’s value doesn’t match his salary.
“It seems to be a correlation between the two: change strategies and look to get younger [when] you have a few guys in the back end of those contracts,” said Astros GM Jeff Luhnow. “That’s a correlation.”
With a growing awareness of player aging curves — the upward or flat slope in a player’s 20s followed by a downward hill or cliff in his 30s — has come with a change in the distribution of opportunities.
“Us as players have talked about it for a couple of years,” said Price. “A lot of the older guys are getting weeded out.”
With the likelihood that a free-agent signing will tie a team to a player through his decline, teams are looking to give more opportunities to younger players with upside.
“We’re thinking differently around how we build a long-term, sustainable team, not just go for it one year and then have to pull back,” said Twins chief baseball officer Derek Falvey. “We’re starting to identify aging curves.
“We went through an era of baseball, the PED era, where maybe those years were extended. I think it’s still to be seen in terms of how players will age, but I think it’s playing some role in why teams are evaluating the way they are right now.”
Meanwhile, more precise defensive analytics have attached numbers to the anticipated fielding declines of players who sign as free agents. Most teams understood that players’ defensive value declines steadily starting in their early 20s. Now, numbers show just how much that is the case.
A growing talent pool
Huge free agent paydays depend on scarcity — the idea that a player has a skill that isn’t replicable. Yet with the introduction of new technologies and training methods, that notion is taking a hit.
Power hitting and power pitching rank high on the list of the most important commodities in baseball, but in the last few years, once-scarce abilities have become abundant. In 2014, 11 players hit 30 homers. Last year, that number nearly quadrupled to 41, helping to explain why Mike Moustakas (38 homers last year) and Logan Morrison (36 homers) both landed one-year, $6.5 million guarantees.
In 2008, 14 pitchers who threw a minimum of 40 innings averaged 95 m.p.h. or greater with their fastball. Last year, that number was 88 — a 529 percent increase.
On top of that, teams are applying data to coaching and instruction in ways that were unimaginable just over a decade ago. Some teams believe they’ve reached a point where they can identify traits such as the spin rate or break of a fastball or breaking ball and unlock enormous impact from players whose production has been modest.
In that universe, teams can show more excitement about signing the next Jake Arrieta — a player who achieved a mid-career breakout — rather than spending $100 million on Arrieta at a time when some signs pointed to a decline in his stuff in 2017.
“What teams think they can do with players is as important as what the player has already done,” said Red Sox vice president of pitching analysis Brian Bannister. “It’s armies of very knowledgeable baseball people, analysts, and disruptive technology all combining to have a more complete approach to developing players. I think you’re seeing that around the game.”
The way forward
The pendulum could swing back next winter, when the Yankees and Dodgers will have reset their luxury-tax rates and superstars such as Harper and Machado will hit the open market in their mid 20s.
“Certainly the dynamic this year is different than it has been for the last few years,” said Luhnow. “Whether or not that is a dynamic that will continue into next year and beyond remains to be seen. I wouldn’t call it disruption yet until we know what it looks like when it’s all said and done.”
As player anger about the market moves from a simmer toward a boil, is there anything that can avoid a collision between players and owners?
The market is offering some indications of middle ground. Martinez’s deal with the Red Sox — front-loaded to guarantee $50 million in the first two years, less expensive in the final years, and with opt-outs that would permit him to take advantage of better market circumstances — could represent a path forward for free agents.
Yet if players want to maximize their earnings, it might require more fundamental changes in how the sport does business as defined in the next CBA.
Perhaps MLB will follow the example of the NBA and NHL, which have tried to decrease the draft incentives for losing. Perhaps baseball will look at models where team salary floors made it almost impossible to ignore free agency entirely. Or maybe the sport would consider an even more drastic alteration — one that might permit players to explore free agency earlier in their careers and hit the open market at a time when more peak years remain in front of them.
“It may be that the efficient thing to do is . . . make changes in your economic model where what a player earns is more closely related to his expected productivity,” said Manfred.
The notion is drastic, but this offseason reveals a sport whose teams now view free agency — the engine of player salary growth — with a jaundiced eye. Under those circumstances, the issue might not be how teams and players are approaching the market, but rather with the definition of the market.