For the second straight year MLB’s hot stove season has ground to a halt. You can call it a lukewarm stove, you can call it an ice cold stove, you can call it a periodically almost hot stove, but whatever you call it, the following things are all true:
- Pitchers and catchers began reporting on February 11.
- 76 players remain unsigned including Bryce Harper, Manny Machado, Dallas Keuchel, Marwin Gonzalez, and Craig Kimbrel.
- 143 players signed one-year deals including Josh Donaldson, Yasmani Grandal, and Brian Dozier.
- 74 of those one-year deals include one-year minor league contracts for players with significant service time.
The economics of MLB free agency have some serious problems and it’s about to get compounded for the free agent class of 2020, who now have to compete not only with each other, but also with the players who only signed one-year deals this year.
There are any number of theories about why the free agent market has gone cold including: analytics driving teams to shy away from larger contracts, greedy agents demanding too much money for their players, a Collective Bargaining Agreement (CBA) that incentivizes teams staying below the luxury tax, and teams deliberately tanking to try to replicate the success of rebuilds like the Cubs and the Astros. The answer is probably some combination of the above, and maybe a few other things I’ll be exploring in the coming weeks. For this post I wanted to establish that there is a structural problem in the free agent market because it has resulted in players expecting a set of contracts that is not aligned with what owners are willing to pay. I also want to establish that it’s persistent across player talent levels, this isn’t just owners being gun shy about 10-year deals.
There is enough money
Before I jump too far into laying out this problem I want to be really clear that MLB teams have the money to pay your favorite players. Regardless of how you look at revenue and salaries, the money to pay players exists.
Since January Maury Brown has published a trio of pieces in Forbes that show three things. First, MLB revenue is at an all-time high. The league topped $10.3 billion in profits in 2018. This increase happened despite flagging attendance. Second, a smaller percentage of that revenue is being spent on player salaries as you can see below:
Now, when these numbers emerged, there were two main questions about them. The first is that clearly there are fluctuations in the data on a yearly basis. This could be just a natural fluctuation. The second was that these numbers weren’t entirely accurate because MLB and the MLBPA have slight differences in how they account for revenue and salaries (of course they do). So on February 11, Brown updated his research to account for those variations. Which leads me to his third point: No matter how you look at revenue and players’ salaries the percentage is declining. Before I post the two charts that tell this story better than I could, here is how the two sides differ in calculating revenues and player compensation according to Brown:
The owners see total player compensation differently than the MLBPA and its players. MLB pays not only for the players in the big leagues but for those in the minor leagues, as well as the bonus money paid to amateurs in the draft. For the owners, player compensation looks like this:
Major League Player Compensation + Benefit Plan Costs + Postseason Share Payments + Minor League Signing Bonuses (not including associated tax) + Minor League Salaries And Benefits
The MLBPA is focused just on this:
Major League Player Compensation + Benefit Plan Costs + Postseason Share Payments
But honestly, it doesn’t matter how you tally these numbers, the results look pretty similar. First, MLB’s numbers:
And here are the MLBPA calculations (basically the above, without the minor leagues):
In both instances the trend line for player compensation is flatter than the trend line for revenue. In other words, the money is there and growing, but less of it is going to players.
One final point from Brown’s research before I move on to player signings and contracts. As we saw in earlier MLB data, it’s possible for the percentage of money going to salaries to dip one year and rebound in another, sort of like 2012 to 2013. Luckily for us, Brown has a handy chart that looks at this with a 2019 projection, and well...it’s not great for players.
If that projection holds, 2019 will be the first year in a decade with depressed salaries as a percentage of revenue for back to back years. So if the revenue exists, and the players aren’t getting it, what exactly is going on?
It’s not just about bad contracts
A common response to concerns about player compensation is that this is merely a market correcting for bad contracts of the past (and Lordy, there were some bad contracts.) Don’t get me wrong, I’m not about to defend the Jacoby Ellsbury deal or the Albert Pujols contract. I think there is solid evidence in the numbers that eight-plus-year contracts for players who are over 30 are unlikely to be great deals. The rational response from teams might be to replicate the substantially better results from deals like Jon Lester’s and Max Scherzer’s. However, the market isn’t correcting to a middle ground. The market is disappearing.
You can see it very clearly in this chart Scott Lindholm posted on Twitter:
It is sort of implausible that there is just truly no talent currently in MLB that is worth a $150 million deal. While that always was the elite echelons of contracts, it seems highly suspect to me that it just no longer exists. There used to be a handful of those deals each year and yet, suddenly in the vaunted free agent market of 2019 there are just none? But beyond the top tier contracts, the noise even above $50 million is substantially muted in 2019. It starts to illustrate why players have started taking to social media to air their concerns.
100 or so free agents left unsigned. System is broken. They blame “rebuilding” but that’s BS. You’re telling me you couldn’t sign Bryce or Manny for 10 years and go from there? Seems like a good place to start a rebuild to me. 26-36 is a great performance window too.— Justin Verlander (@JustinVerlander) February 11, 2019
Almost every free agent lost in 2018
Another response I frequently hear is that 2018 was isolated or really wasn’t that bad. After all, most of the best players did wind up playing, they just had to wait a lot longer to get signed. I think Brown’s data above goes a long way to refuting that, but there’s even more when you start looking at individual deals.
It is true that the vast majority of MLB free agent talent was eventually signed in 2018 (although we’ll never know how much the late free agent start hurt some players, specifically pitchers such as Alex Cobb and Greg Holland who had pretty disastrous starts after missing most of spring training). However, I wanted to look at what these players signed for relative to expectations. To do this I looked at MLB Trade Rumors’ top 50 free agent prediction piece from November 2, 2017 and the contracts players eventually signed. To make this a bit easier to see, I turned their written piece into a chart:
2018 Projected and Actual Contracts Top 50 Free Agents
|Player||Proj. Total||Proj. Years||Proj. AAV||Actual Total||Actual Years||Actual AAV|
|Player||Proj. Total||Proj. Years||Proj. AAV||Actual Total||Actual Years||Actual AAV|
Of the top 50 free agents, 37 wound up taking a deal that was below MLBTR’s projection for them heading into the 2018 offseason. Four players received offers that were almost exactly what they were projected to receive and only nine players exceeded expectations. I almost feel like there should be an asterisk on the thirteen contracts that met or exceeded expectations, though, because ten of them happened before the freeze set in last January when it kind of looked like regular baseball teams were going to offer regular baseball deals to players. Only Alex Cobb, Eric Hosmer and Jay Bruce actually signed deals for at/above market value after fears of collusion were first voiced by Jeff Passan. In other words, the best contracts of 2018 almost all happened early, before front offices had adapted to the new reality of below market short-term deals.
The problem continues in 2019
In 2018 fans were told to wait until 2019 for the banner crop of free agents including Harper and Machado. Well, we’re here now, and it looks like the same problems persist. When pitchers and catchers began to report in 2018 there were close to 100 unsigned free agents according to the Washington Post, including J.D. Martinez, Eric Hosmer, Jake Arrieta and Mike Moustakas. The Cubs deal with Yu Darvish barely made the cutoff, he signed mere days before pitchers and catchers began to report last year. As of this writing in 2019, 76 free agents have yet to sign as camps open, including Harper, Machado, Kimbrel and Gonzalez.
The sheer number of one-year deals is stunning - I count 143 one-year deals as of Brett Anderson signing on Monday. It’s also worth noting that 74 of those deals are one-year minor league deals. Including minor league deals for some players with substantial major league service time like Hunter Pence, Rajai Davis Jason Hammel and Curtis Granderson. You can see a list of players taking one-year minor league deals below (this data is pulled from MLB Trade Rumors Free Agent Tracker and reformatted to only show minor league deals):
2019 Minor League Deals by Team
|Peter Bourjos||CF / LF / RF||Angels||1||Minor|
|Javy Guerra||RP||Blue Jays||1||Minor|
|Eric Sogard||2B / SS||Blue Jays||1||Minor|
|Rafael Ortega||CF / LF / RF||Braves||1||Minor|
|Matt Szczur||CF / LF / RF||Diamondbacks||1||Minor|
|Paulo Orlando||LF / RF||Dodgers||1||Minor|
|Matt Joyce||LF / RF||Indians||1||Minor|
|Ichiro Suzuki||LF / RF||Mariners||1||Minor|
|Dixon Machado||2B / SS||Marlins||1||Minor|
|Curtis Granderson||LF / RF||Marlins||1||Minor|
|Pedro Alvarez||DH / 1B||Marlins||1||Minor|
|Hector Santiago||RP / SP||Mets||1||Minor|
|Gregor Blanco||CF / LF / RF||Mets||1||Minor|
|Rajai Davis||CF / LF||Mets||1||Minor|
|Jace Peterson||LF / RF / 2B / 3B||Orioles||1||Minor|
|Andrew Romine||LF / RF / 2B / SS / 3B||Phillies||1||Minor|
|Sean Rodriguez||LF / 2B / SS||Phillies||1||Minor|
|Shane Robinson||LF / RF||Phillies||1||Minor|
|Gregorio Petit||2B / SS||Phillies||1||Minor|
|J.B. Shuck||CF / LF / RF||Pirates||1||Minor|
|Francisco Liriano||RP / SP||Pirates||1||Minor|
|Melky Cabrera||LF / RF||Pirates||1||Minor|
|Nick Franklin||LF / 2B / SS||Pirates||1||Minor|
|Matt Davidson||1B / RP / 3B||Rangers||1||Minor|
|Hunter Pence||LF / RF||Rangers||1||Minor|
|Jake Smolinski||CF / LF / RF||Rays||1||Minor|
|Carson Smith||RP||Red Sox||1||Minor|
|Jenrry Mejia||Red Sox||1||Minor|
|Gorkys Hernandez||CF / LF / RF||Red Sox||1||Minor|
|Erasmo Ramirez||SP||Red Sox||1||Minor|
|Lucas Duda||DH / 1B||Twins||1||Minor|
|Adam Rosales||2B / SS / 3B||Twins||1||Minor|
|Ryan Goins||2B||White Sox||1||Minor|
|Brandon Guyer||LF / RF||White Sox||1||Minor|
|Randall Delgado||RP||White Sox||1||Minor|
|Drew Hutchison||RP / SP||Yankees||1||Minor|
The free agent market has ground to a halt and it’s affecting almost all players equally. Players at the top aren’t coming close to the years or AAV that they were predicted to receive. Players in the middle are settling for one-year deals where they could previously expect two or three. Players at the bottom are being non-tendered and signing contracts well below their arbitration value or minor league deals.
An outstanding read from Michael Baumann at the Ringer last month laid out the dilemma baseball is facing. The relative labor tranquility since 2002 is breaking down rapidly. You don’t need to look further than players’ reactions on Twitter to see that frustrations are boiling over. All signs point to owners continuing on their current path of maximizing profits by failing to pay players as they reach free agency and more aggressively non-tendering players. The MLBPA has already signaled that they are gearing up for a fight. Every day these practices continue, every day players remain unsigned, every player that takes a deal below their perceived value, resentment grows. That resentment will add time to what could be a lengthy work stoppage in 2021.