BY BERNIE PLESKOFF
As you read this, I am in Cuba hosting a group of baseball fans and people who are curious about baseball in Cuba. I have written this in mid-January when only 32 of 166 baseball free agents have signed contracts for next season. Perhaps additional players have signed while I’m away. However, this has still been an offseason that has taken its toll on baseball. I’ll explain more about that later.
So why is it taking so long for players to sign? And if many have signed while I’m gone, why did it take until January to get a contract? I have several reasons I wish to share:
We have a new breed of general manager and front office personnel managing the baseball operations of major-league clubs. Most are highly educated and most have some degree of experience, expertise and background with numbers and/or math. Most know the value of algorithms and how they can relate to baseball. Most of today’s front offices know everything there is to know about players, from their ages to their sweet spots to the holes in their swings. They know what pitch they like to throw at a certain count. They know where the hitter is looking for a pitch. They know where a pitcher throws the ball and they know where the hitter hits the ball. They’re that sophisticated. They’re smart. They’re not to be intimidated. And mostly, they don’t talk. Today’s front office personnel keep their feelings and their plans to themselves.
Control is an important word in front office lexicon. Team control of contract value and length is the name of the game. The longer the team has control over the contract value and contract length, the better.
I think many writers and announcers believe front office personnel are much more involved with in-game management. Many front office personnel are involved with daily lineup construction, as well as pitcher and replacement deployment based upon data they churn daily. That’s today’s game. It is truly a team affair from the front office, to the manager and coaches to the players.
Given all the information at the fingertips of front offices, why in the world would a team extend a contract to a player beyond the data implied and illustrated by metrics? Why give a player a five-year contract when the forecast indicates drastic decline? Why pay a player X dollars if a player is worth only Y? I discussed that issue previously at BERNIE’S BASEBALL WORLD. It is worth exploring further here.
Fact: Every Major League Baseball team will receive at least $50MM from the sale by Major League Baseball of controlling interest in BAMTech to ESPN. BAMTech is the statistical, video, data streaming company that was created by Major League Baseball. It is estimated that Disney has paid a total of $2.58 billion dollars for roughly 75 percent of the company. A previous payment had been made. The final payment of Disney’s purchase, totaling roughly $1.58 billion dollars will be shared among big league clubs. That’s not chump change. Each team will get their millions during the first quarter of the year. Friends, that’s lots and lots of money in addition to all the other revenue streams teams now enjoy.
BAMtech was a spin-off of MLB Advanced Media. Major League Baseball owners were already flourishing from their Advanced Media entity before the sale of BAMtech to Disney.
Of course, there are lots of revenue streams for each major-league club. How the club chooses to spend its money is a private matter. However, television and radio contracts, licensing agreements, ticket sales, merchandising, naming rights, parking, concessions and on and on and on mean money flows to the club all year long.
Several major-league teams assist their “less fortunate” competitors by paying a luxury tax for exceeding the game’s $195MM payroll threshold. The threshold is designed to keep big spending teams in check. Some feel the tax is indeed, a salary cap dressed with different clothes. Perhaps that’s true. Whatever one wishes to call it, the luxury tax seems to cool unlimited spending a bit.
This past season the Dodgers ($244MM) the Yankees ($209.3MM) the Tigers ($190.4MM) the Red Sox ($187.9MM) the Cubs ($186.5MM) and the Giants ($186.4MM) all have to pay the luxury tax. Teams each had to add $13MM for benefits to their 40-man roster, and that’s what drove the Tigers, Red Sox, Cubs and Giants over the tax threshold. This “revenue sharing” adds money to the coffers of other teams.
The late George Steinbrenner bristled at paying the luxury tax because he was adding money to teams he was trying to beat. He was aiding his opposition with his money, not theirs-paying the opposition money to help beat his team. But that’s the system. Teams now are doing whatever they can to avoid going over the luxury tax threshold.
With a stated goal of keeping under the threshold of the luxury tax, Yankees team owner Hal Steinbrenner has stated the team will end their current 15-year string of luxury tax payments. As of this writing, their payroll sits with an ultimate goal of being within the $177MM neighborhood. That’s still a nice enough neighborhood in which to live and one that can help them win the World Series.
The luxury tax very well may be one of the reasons the “big market” teams haven’t ponied up as of this writing for J.D. Martinez, Yu Darvish, Jake Arrieta, Eric Hosmer, Mike Moustakas and even Lorenzo Cain. Wouldn’t those guys help any team in baseball? I think they would. But the luxury tax looms for those teams that may wish to pay the asking prices of those available free agents.
Given the revenue flow for every major-league club, is there such a thing as a “small market” team? While the market in Milwaukee and Cleveland may not equal that of New York and Chicago, aren’t they raking in money from multiple revenue streams in the same manner as everyone else? Yes and no. While every team seems to be making money-it’s a matter of degree. How much money? Are they in the black? Or are they in the dark black? While you and I don’t get to see their books, it is a good assumption that owners will not have to worry about where their next dollar or meal will come from.
It boils down to each owner or ownership group setting a salary limit within which he or they can find comfort. They may have the money, but it is their choice how to spend their money. I totally get that.
The Arizona Diamondbacks are a great example of today’s baseball economics and front office structure.
Last year, one player, Zack Greinke was paid $34MM, or reportedly roughly 28.36% of the total payroll. I have seen differing payroll figures and the percentage may have been even higher. Given arbitration and normal increases in already negotiated contracts (for example, Greinke will earn $34.5MM in 2018) the team’s salary could increase accordingly without the services of outfielder J D Martinez who is on the market as a free agent. Everything within the structure of the payroll is relative to the individual contracts of the players.
Fans (and the team itself) would probably love to see Martinez return. However, are the Dbacks willing to add an additional $20 to $25MM to the payroll each year for the next several seasons? I think not. And-this same front office will be facing the pending free agency of All-Star first baseman Paul Goldschmidt. Goldschmidt is currently playing on one of the most team-friendly contracts in baseball at $11MM for 2018. That was part of a 5-year $32.05MM contract Goldschmidt signed in 2014. At the conclusion of 2019, assuming the team has picked up his option for that season, Goldschmidt will become an unrestricted free agent. Greinke will remain on the payroll unless he is traded or retires. In fact, Greinke will remain on some team’s payroll until his $206.5MM contract expires in 2021—four seasons from now. Can the team afford Greinke and sign Goldschmidt to an extension? Maybe they can. Will they? Not likely.
Greinke’s contract and the pending free agency of Paul Goldschmidt are presenting a perfect example, a perfect storm of the dilemmas faced by today’s general managers. Do they try to move Greinke now and convince another team to take on his salary so they can extend Goldschmidt when the time comes? If they keep Greinke through the life of his contract, will they be able to extend Goldschmidt? Will they have the money to pay outfielder AJ Pollock, who becomes a free agent in 2019? What about the six-year $68MM contract signed by outfielder Yasmany Tomas that extends through 2020? How does that figure in the total salary equation? How do they afford to keep solid players on their payroll for the foreseeable future? Regardless of what one thinks of Tomas as a player, his payroll requirements are right there for the team to see and pay.
The management team of Tony La Russa and Dave Stewart did the Diamondbacks no favors by signing Greinke to such a lengthy, expensive contract. It became clear that no other team was even close to the deal Greinke signed at the time with Arizona. Add in the Tomas deal and new front office guru Mike Hazen and his capable staff enter this season like a boxer with one hand tied behind his back. He really can’t win the salary struggle. Lack of depth due to payroll issues and trades that stripped the farm system may haunt the club.
Yes, the Diamondbacks may be competitive. Yes, they may even make the playoffs. But with so much of their payroll dedicated to one or two players, the general manager is left with few options to strengthen his team due to salary constraints. If a key position player or pitcher suffers an injury or has a poor performance during the season, the depth does not exist in the farm system to replace the player or pitcher. With tied hands, Hazen and company will have to be smarter and quick on the draw to fix the leaks. They will have to shop at whatever baseball outlet stores they can find instead of the elite big time shopping malls where the prime players hang out.
In one week from February 5 thru February 12, the Diamondbacks agreed to $42.9MM in salary arbitration related salaries. They have signed all but one of their salary arbitration eligible players. The exception was injured pitcher Shelby Miller who is seeking $4.9MM while the club is offering $4.7MM. The arbitration agreements brought the team’s projected 2018 payroll to a planned $120MM. Of course, unforeseen circumstances could change that outlook. Is that payroll enough to contend in the National League West against the Dodgers, Giants, Rockies and Padres? We’ll find out.
Why? Why aren’t free agent players signing? Think of the risk/reward of signing a player 30 years or older to a contract for five or more years. In general, a player reaches prime performance at age 27 to 28. Does it make sense then to sign a player to a contract that ends when he is 35?
Consider the case of Albert Pujols. I love Albert Pujols. He turned 38 January 16, 2018. He signed a $240MM contract that expires in 2021-four seasons from now. He can barely run. His batting average last season was .241 in his 636 plate appearances. His lifetime batting average is .305-even with a tough 2017. He hit 23 home runs last year. In 2016 he hit 31. In 2015 he hit 40. The decline in his production is real. At one point Pujols was a great player. He’s still good and he should make the Hall of Fame. But his contract has been an issue for a franchise that has stated it had limited resources to compete. That is changing with the signing of Justin Upton, Shohei Ohtani and others by the Angels. None will get the type of years Pujols agreed to years ago. Remember, too, the Angels are the team that gave outfielder Josh Hamilton four years for $99MM.
It is likely those types of deals could be over for teams like the Angels.
Why? Basically, length of contracts and their Average Annual Value dictates the pace and progression of the offseason signings. Control. Length of time remaining on a veteran contract is paramount. Years until arbitration and ultimately, free agency rule the discussion. Why not? It’s good business.
There are additional nightmare contracts that are helping to lead front offices away from mega deals. Here are a few:
Ian Kennedy signed with the Royals in 2016 for five years and $70MM. I don’t think it is incorrect to state that Kennedy may not be able to earn his contract in say…2020 or 2021 if not even next year. Kennedy turned 33 in December.
Shin-Soo Choo got a sweet seven-year $130MM contract from the Rangers prior to the 2014 season. Choo is now 35. His contract expires in 2020. Can he produce value for the Rangers? Last year he hit .261 in 636 plate appearances. But Choo’s biological clock continues to tick.
Pablo Sandoval left San Francisco for Boston at the start of the 2015 season. He signed a $90MM contract that will expire at the end of this season while he is playing for the Giants once again. But the Red Sox are paying the bulk of his deal. How has Sandoval done since signing with Boston? 2015=. 245/10/47, 2016=. 143/0/0 in seven plate appearances, 2017=. 220/9/32 combined for Boston and San Francisco in 279 plate appearances. Would you say Sandoval was worth the average of $18MM per? I didn’t think so.
Jason Heyward signed an eight-year, $184MM contract with the Cubs when he was 27 years old. He is signed thru the 2023 season. Last year Mr. Heyward hit .259/11/59 in 481 plate appearances. That came after a year when he hit .230/7/49 after leaving the St. Louis Cardinals for the south side of Chicago. Maybe the Cubs are a bit gun shy about giving soon to be 32- year old Jake Arrieta the sun, the moon and the stars in a new contract during his free agent negotiations.
The New York Yankees gave a seven-year contract to outfielder Jacoby Ellsbury in 2014. No worries though, after the 2020 season they will be rid of that contract. There is a team option for 2021, but Mr. Ellsbury may be long gone by then.
There are countless other bad contracts that have strapped franchises of resources and limited their moves. I remember how the long-term deals for Nick Swisher and Michael Bourn handcuffed the Indians due to the poor rewards on each of their contracts. Each offered little to no return on the investment.
Yes, there have been long-term contracts that have been successful. But it seems the “new guard” of front office personnel are not interested in tying precious resources to long-term deals. I believe the long-term deal signed by Giancarlo Stanton and assumed by the Yankees will be a bargain for the Yankees. Why? I believe he will return a profit in terms of helping deliver a World Series to the Bronx Bombers-and in so doing, he will more than pay for his salary. Just his initial impact in his best years may be worth the price. But I believe Stanton to be the exception. Other moves by the Yankees to trim extraneous contracts will help nullify the amount of Stanton’s deal. But will he hit home runs in bunches in years to come? Chances are his value will not match the amount of money he will make. He will put people in the seats. He will add revenue to the franchise. But in reality, who knows what will happen in the future?
Why haven’t we seen free agent signings and trades? Well, those same front office personnel also like building their organizations with deep prospect rosters and farm systems. If, in fact, the organization is deep in prospects, the organization can withstand injuries or poor performance at the major-league level.
Teams with deep organizations like the Yankees and Dodgers, for example, have built their development programs with care and calculation. In fact, the most solid teams (Astros and Indians come to mind as well) aren’t going to play very often in the quicksand of long-term contracts that choke resources. They will calculate their moves based upon metrics-visible numbers that help history and the future unfold.
It is not inconceivable that some of the current free agent players will wait until they get that additional year they seek or the money they want. It is not unbelievable that a team like the Washington Nationals can swoop in and sign a player like JD Martinez because they have a great relationship with his agent and the agent and player get tired of waiting for their lottery numbers to be called. Then-boom! Enter the Nationals.
And what impact has a slow winter had on the game of baseball? Are you reading about baseball in the local newspapers? Are you hearing about baseball on television? Certainly not like we have in previous years. Are teams selling tickets in record numbers? I doubt it. Maybe the Yankees are because they’ve had a fantastic offseason. I feel the same about the Rockies who have fortified their bullpen. Maybe those teams and the Angels (Ohtani, etc) are flush in ticket sales. But they could be few and far between.
There is a disturbing fact of life that must be faced by major-league baseball. Baseball has fallen to number three in popularity in the United States behind football and basketball. Soccer may be breathing down the neck of MLB as well. Beware, Mr. Commissioner. This is not good.
MORE FREE AGENTS TO COME FOLLOWING 2018
As if this offseason hasn’t produced enough acid reflux to last a lifetime, next year could prove to be even worse. Consider that free agent to be Josh Donaldson avoided arbitration with the Blue Jays by signing a 2018 one-year contract for…wait for it…$23MM. That’s the largest one-year deal ever for an arbitration-eligible player. What does he get when he becomes a free agent next year? Much will depend upon his production this coming season. I truly believe front offices will pay for now and not production from yesteryear. Those days appear to be gone.
Consider that Cubs third baseman Kris Bryant signed a $10.85MM one-year contract without free agency looming. In fact, it was his first year of arbitration eligibility. It was the biggest contract ever given a first-time arbitration-eligible player. What happens when his contract expires and he’s a free agent?
Buckle in folks. Next year the following players reach free agent status:
Outfielders: Bryce Harper, Nelson Cruz, A.J. Pollock, Charlie Blackmon, Adam Jones, and many more.
Infielders: D.J. LeMahieu, Daniel Murphy, Josh Donaldson, Manny Machado, Ian Kinsler among many, many more. Note: Kinsler accepted a trade to the Angels even though the team was on his “no trade list.” They appeared on the list due to “tax issues.” So players are very careful about where they play if they have a choice. Kinsler waived the deal to play with Justin Upton and others with the Angels.
Catchers: Yasmani Grandal, Wilson Ramos, Matt Wieters
Starting Pitchers: Dallas Keuchel, Patrick Corbin, Gio Gonzalez, Matt Harvey, Charlie Morton, Josh Tomlin and many, many more.
Relief Pitchers: Cody Allen, Kelvin Herrera, Joe Kelly, Andrew Miller, Zach Britton, Justin Wilson, Brad Ziegler, David Robertson, A.J. Ramos, Craig Kimbrel, Jim Johnson and many, many more.
As if the above list isn’t enough to make front offices gag, there are many potential free agents with strings attached to their last year of service under their current contract. For example:
The Dodgers Clayton Kershaw will have a chance to opt-out of the remaining two years of his contract.
The Astros Jose Altuve will likely remain with the Astros another year as the team has a very friendly $6.5MM option
The Astros Brian McCann has a $15MM mutual club/player option.
The Pirates Josh Harrison has a $10.5MM club option with a $1MM buyout
The Rangers Elvis Andrus can opt out of his remaining four years
The Cubs Jason Heyward can opt out of his remaining five years (why would he?)
The Diamondbacks Yasmany Tomas can opt-out of the remaining two years on his contract (why would he?)
The Giants have a $12MM club option to retain Madison Bumgarner
The Indians have a $9MM club option to retain Carlos Carrasco with a $663K buyout. They also have an additional year option for $9.5MM
And the list really goes on and on.
Why? Why aren’t teams lining up to sign J.D. Martinez or Yu Darvish or Mike Moustakas? As you can see, there is plenty of talent, some aging, some not as old coming available next year.
It is not a slam-dunk that the Giants will turn $12MM over to Madison Bumgarner for work he has done in the past. It is what he will he do in 2018 that will matter. Sure, in today’s world of $20MM pitchers, that salary seems attractive. But let’s wait and see. The Carrasco contract is a problem. The team has already lost Bryan Shaw, Joe Smith and Boone Logan from their pitching staff. Next year Andrew Miller and closer Cody Allen could leave. Yes, money is an issue.
I return to the fact with which I opened this piece. Each team will get at least $50MMM in the first quarter as a windfall. How they use that money and where they go with their own payrolls will be fascinating to watch.
And we know why front offices value young, controllable baseball players. They are less expensive, the team can plan on them being available, and they work hard to reach…free agency.
American sports preferences? Football, basketball and baseball in that order. I am concerned. Very concerned. And I hope this article helped clarify why.
Follow me on Twitter @BerniePleskoff