The Contractual Reasons Why Free Agent Contracts Are Down This Off-Season

Posted March 15, 2018 by Burly
Categories: Baltimore Orioles, Los Angeles Dodgers, New York Yankees

I had read earlier this off-season that the owners had pantsed the players’ union in the latest collective bargaining agreement (CBA) on terms affecting free agency, but I didn’t actually look at the CBA to see for myself until two days ago.  There are certainly reasons to think that the new contract terms have an awful lot to do with this off-season’s disappointing free agent signing period, at least as far as the free agents and their agents are concerned.

The current CBA punishes free agents in a less direct way than the old free agent compensation system, but by separating the compensation paid from the actual free agent signed, it may be boosting owners’ resolve in refusing to sign sign free agents, at least if it means going over the salary cap to do so.

The new rules much more steeply punish teams for going over the team luxury tax thresholds (i.e., a soft salary cap).  Under the system that started with the 2017 season, penalties are much steeper if a team goes over the luxury tax, particularly if they are over the base luxury tax amount ($197 million in 2018) three years in a row.  Plus, the penalties increase by the amount over the luxury tax threshold, up to a 95% on the payroll amount over $237 million (the third luxury tax threshold) in 2018 if  the team has been over the $197M base luxury tax threshold for the third year in row.

Meanwhile, each time a team gets itself under the luxury tax threshold in a year, it resets the taxes at the lowest rates the next time the team goes over any of the three luxury tax thresholds.  Plus, starting with the current season, any team going over the third luxury tax threshold ($237M in 2018) (it’s called the Second Surcharge threshold in the CBA for confusion’s sake) has its top pick in the next Rule 4 amateur draft automatically dropped ten places.  Everyone reading this should know that a team’s first pick in any draft is far more likely to result in a major league regular player than any subsequent draft pick that year.

In sum, the new penalties are steep this offf-season if a team goes over the $237M amount or goes over the $197M amount for the third season in a row.  At the same time, the wealthiest teams can reset the monetary penalties every third season by dipping under the currently $197M amount.

These are powerful incentives for the wealthiest teams (the teams which drive free agent contract amounts as a whole) to keep their annual payrolls within range of the currently $197M base threshold amount so that they can dip below it at least every third season.  It’s also an incentive for the wealthiest teams to shorten free agent contract lengths to three seasons or less, so that they will have the flexibility to try to dip below the first luxury tax threshold (base threshold amount) every third season.

I think the owners also accurately predicted that separating penalties from the actual free agents signed would make teams less likely to spend than under the old system.  Under the old system, a team signing a free agent who received a qualifying offer lost its first round draft pick, so long as the pick was not in the top 10 or 15 overall.  Thus, a team could directly compare the value in the immediately following seasons of the free agent they hoped to sign with the value of the first draft pick they would lose by the signing.

Now the incentive is to keep overall team salaries below the soft but increasingly stern salary caps.  Now teams no longer lose that first round pick by signing any particular free agent, but are instead punished if they go over the third luxury tax threshold.  Because the penalty is now more divorced from any particular player the team hopes to sign, I suspect the psychological effect has made teams more unlikely to sign free agents that will put them over the salary caps.

I had wondered why teams had been willing to negotiate away first round draft pick compensation for signing elite free agents, which looked like a huge win for the players’ union.  Now I understand it — the owners with their tougher salary cap penalties have apparently gotten back even more than they gave up.

However, I also suspect that the typically high-spending Yankees and Dodgers are trying to get under the $197M base threshold this off-season because they want to spend big next off-season.  The Dodgers want flexibility to re-sign Clayton Kershaw, this generation’s Sandy Koufax, if he has a 2018 season in line with his career averages and opts out of his current contract; and the Yankees want flexibility to throw money at Manny Machado next off-season.


Philadelphia Phillies To Sign Jake Arrieta for Three Years at $75 Million

Posted March 12, 2018 by Burly
Categories: Chicago Cubs, Kansas City Royals, Milwaukee Brewers, Minnesota Twins, Philadelphia Phillies

The Phillies and Jake Arrieta have reportedly reached a deal that guarantees Arrieta $75 million over three seasons.  This is perhaps the contract for Arrieta that could have been predicted much earlier this off-season, as teams showed a strong preference for shelling out big bucks but for fewer seasons during the first half of this free agency period.  Arrietta receives well less than expected, but he certainly didn’t take a beating like Mike Moustakas.

Aside from the term and the guarantee, Arietta’s contract is interesting and full of the kind of crafty, creative terms we’ve come to expect from Steve Boras.  The deal is heavily front loaded, with Arietta receiving $30M in 2018, $25M in 2019 and $20M in 2020.  More evidence of many teams’ new preference for paying players the most when they reasonably predict the player’s performance value will be highest and paying less for the anticipated decline seasons.  This makes budgeting in future seasons easier, but loses the time value of money of the traditional back-loaded multi-year deals.

After two seasons, Arrieta has an opt-out, except that the Phils can void the opt-out by guaranteeing two additional years (2021-2022) at $20 million per.  The $20M per can be elevated up to $25M per based on games started or up to $30M per based on Cy Young Award finishes in 2018-2019, meaning, I suppose, that Arrieta could earn as much as $60M or $70M more than the $75M guarantee if he wins the Cy Young Award in either 2018 or 2019.

Arrieta and Boras didn’t get what they were expecting, but it’s still hard to have much sympathy for either.  Arrieta is still guaranteed a pile of money, which could nearly double if Arrieta is as good going forward as Boras claims he will be.

For a team that lost 96 games last off-season, the Phillies sure spent a lot of money on free agents this off-season.  None of the deals is longer than three years, so the Phillies must think they can be competitive by 2019, or the deals don’t appear to make much sense.

However, the Phillies play in a big and potentially lucrative market, and I definitely think it’s easier to develop young players on a good team than a terrible one.  It’s nice to see at least one MLB team this off-season — and you also have to give credit to both the Twins and the Brewers for doing the same — really trying to make itself better for 2018 this off-season.

Minnesota Twins Now Cherry Pick Lance Lynn

Posted March 11, 2018 by Burly
Categories: Minnesota Twins, Cleveland Indians, Kansas City Royals, St. Louis Cardinals

The Twins have reportedly reached a one-year deal with Lance Lynn that guarantees Lynn $12 million and comes with an additional $2 million in performance incentives.  It’s the latest of the Twins’ cost-effective off-season moves that should give the Twins a real chance to challenge the Indians for the 2018 AL Central flag.

While Lynn’s one-year deal isn’t nearly as much of a shocker as Mike Moustakas’ one-year $6.5 million contract with the Royals, Lynn will ultimately receive more than $5 million less guaranteed than the qualifying offer from the Cardinals Lynn rejected earlier in the off-season.  More evidence that more free agents receiving qualifying offers next off-season will accept them than did this off-season.  It’s one-and-done for qualifying offers now, meaning that any free agent who has ever previously received a qualifying offer can’t receive another one in the future.

There’s clearly a fight brewing over the next collective bargaining agreement (CBA), particularly because I am doubtful that owners will agree to eliminate the qualifying offer/compensation system in the next CBA.  The owners have agreed to limit to one qualifying offer per player per career, but it looks like they have found a way (maybe as a result of collusion, but can it be proven?) to effectively force a significant percentage of the free agents receiving qualifying offers to accept them.  I don’t see owners giving that up without a fight.

One thing worth noting, however, is that fewer free agents may receive qualifying offers next season precisely because more free agents are likely to accept them.  The qualifying offer is high enough that acceptance limits a team’s ability to find the funds to add other free agents the off-season a qualifying offer is accepted, at least unless any other free agent deals are heavily back-loaded.  If players are more likely to accept qualifying offers, teams will be less likely to offer them unless they really believe the player is worth the qualifying offer amount for the additional year of control.

Pat Misch Sighting

Posted March 10, 2018 by Burly
Categories: Baseball Abroad, CPBL, New York Mets, San Francisco Giants

I’ve long been a fan of Pat Misch.  He’s a former San Francisco Giants farmhand who in my opinion took modest physical abilities as a pitcher as far as he possibly could.

I figured his professional pitching career was over last year, when at the age of 35 he got his brains beat out in three starts in the Independent-A Atlantic League last summer.  I figured he would become a minor league pitching coach, since he very clearly knew how to pitch in spite of less than major league stuff, and his professional record suggested a guy who wouldn’t be able to walk away from the game.

It turns out I was wrong.  Misch has been spotted in Arizona trying to catch on as the fourth pitcher for China Trust Brothers of Taiwan’s CPBL, who like several other Asian teams are conducting their Spring Training in AZ.  Some background is appropriate here.

Misch’s last great professional hurrah came in Taiwan in 2015.  He was picked up late in the season by the Lamigo Monkeys and pitcher very well.  The Monkeys made the Taiwan Series that year, and in Game 7 Misch pitched a no-hitter.  Needless to say, it has been the only Taiwan Series no-hitter in the CPBL’s 28 season history to date.

Misch was able to parlay that no-hitter into a contract with the Orix Buffaloes of Japan’s NPB in 2016.  However, he was no longer a major league caliber pitcher in Japan, and spent most of the year pitching for the Buffaloes’ minor league team.

CPBL teams are able to carry three foreign players on their major league roster.  In recent seasons, those foreign players have almost all been starting pitchers, as that is where the greatest value lies for CPBL teams, because the best young Taiwanese pitchers are all typically signed by NPB or MLB teams at the age of 18 or 19.

The Brothers already have three foreign starters lined up, but as the CPBL’s wealthiest team, the Brothers already have three foreign starters lined up.  Not including Misch, the Brothers also have three more pitchers in camp competing to be the fourth foreign pitcher who will pitch for the Brothers’ minor league team just in case one of the three foreign major leaguers gets hurt or is completely ineffective.

I’m doubtful that Misch has much of a shot of being even a minor league Taiwanese pitcher in 2018, but you have to give him credit for still trying.  If you love playing baseball, keep playing until you can’t find a professional team that will give you a contract.

I still suspect that once Misch comes to terms with the fact that his professional pitching career is over, he will go into coaching.  Even if it’s too late to find an MLB organization pitching coach job in 2018, he could still possibly catch on with an Indy-A club and then join the MLB system next year.

Kansas City Royals to Re-Sign Mike Moustakas for only $6.5 Million

Posted March 9, 2018 by Burly
Categories: Kansas City Royals

Sometimes I call them right.  Only yesterday, I wrote that Moustakas should sign a one-year deal and hope for another big year in 2018, so he could try his luck as a free agent again next off-season.

Even so, the actual reported deal between Moustakas and Royals is little short of shocking.  The Royals had given him a $17.4 million qualifying offer at the beginning of the off-season, which Moustakas obviously rejected.  Now, the Royals bring him back for only about 40% of the qualifying offer amount.

It’s a huge fail for Moustakas and his agent Scott Boras.  The deal comes with $2.2 million in 2018 performance bonuses and a mutual option for 2019 at $15 million.  If Moustakas had accepted the original $17.4 million qualifying offer, the Royals could not have extended another qualifying offer next off-season under the current collective bargaining (CBA) rules, and Moustakas would have been a truly free free agent with no associated draft pick losses attached to his signing.

You can bet a lot more free agents are going to accept the qualifying offer next off-season than did this time around.

The fact that Moustakas was essentially forced to take a one-year $6.5 million pillow contract after had predicted he’d get five years and $85 million is perhaps the strongest evidence yet that something isn’t right with this off-season free agent market and that it’s more than just a change in market conditions driven by analytics or new CBA terms.  It smells strongly of collusion.’s predictions are based on a thorough and thoughtful comparison with past free agent deals received by similar free agents in years past.  That Moustakas would have to settle for a guarantee less than 10% of that prediction, even taking into account that this is a strategic pillow contract with the only major league team he has played for, only makes sense to me if teams have collectively decided to take a hard line this off-season.

Of course, we don’t know if Moustakas received any multi-year offers that he turned down earlier in the off-season.  However, rumors of interest in Moustakas were few and far between this off-season  It’s also possible that Boras and Moustakas simply made a bad gamble that by waiting as long as they did they’d eventually get a better offer.

It still seems shocking to me that no team was apparently willing to offer Moustakas, say, three years at $36 million given his age, his abilities and his 2017 season.

Is the Atlantic League an Option for Free Agents Tied to Draft Pick Compensation?

Posted March 8, 2018 by Burly
Categories: Boston Red Sox, Kansas City Royals, Minnesota Twins, Seattle Mariners

I read a post on today stating that Scott Boras and Mike Moustakas might be comfortable waiting until after the June Draft to sign a contract so that Moustakas will no longer be tied to loss of draft picks and international bonus money by any team that signs him.  I don’t really believe that’s true, because missing 60+ games is going to cause Moustakas’ value to drop more than it will be increased by de-coupling him from draft pick compensation.

I also well remember Kendrys Morales and Stephen Drew were both pretty dreadful in 2014 when they waited until June of that season to sign contracts after not receiving the free agent contracts they wanted.  In fact, it arguably sent Drew’s career into a fatal tailspin.  I can’t believe that teams and agents haven’t reached the obvious conclusion that it’s extremely difficult to start the season two months after all the other major leaguers have begun playing every day.

For that reason, if any of the remaining free agents tied to draft pick compensation fail to sign contracts before well into the 2018 MLB season, I wonder if it would make sense for them to sign to play with Atlantic League teams until a major league deal comes along.  At least they’d be playing baseball and getting up to speed for MLB, even if the level of play is substantially lower.

Obviously, Atlantic League teams would love the idea and would certainly allow MLB players to leave as soon as an MLB deal along, even if it means the MLBer only plays for few weeks or less.  Nothing would boost the Atlantic League’s profile and attendance better than being to play MLB stars, even if only briefly.

Problems here, of course, are that the Atlantic League season doesn’t begin until late April, which is already more than three weeks into the MLB season.  Also, MLB free agents probably aren’t going to be willing to risk injury playing baseball for at most $3,000 a month, particularly if they are over 30 and thus more prone to possible injury.  Still, playing in the Atlantic League would at least allow them to stay sharp and show off their talents until an MLB team comes calling.

At the end of the day, the best possible option is for these free agents to sign a major league contract for only one season like Nelson Cruz did in late February 2014 for $8M after turning down a $14M qualifying offer earlier in the off-season.  He had a great season in 2014, and signed a four-year $57M deal which turned out to be a bargain for the signing Mariners.

In Moustakas’ case, another 30+ home run season might well get him the pay day next off-season he was hoping for this off-season.

Remaining Unsigned Free Agents Are Running Out of Time

Posted March 3, 2018 by Burly
Categories: Baseball History

With business closed on Friday, March 2nd as I write this, it’s safe to say that the remaining unsigned free agents this off-season are running out of time.  Veteran MLB players know how to get themselves in shape and don’t necessarily need six weeks of Spring Training.  Even so, MLB teams have now played between 6 and 9 Spring Training games each, and another week of missed games is reasonably likely to impact the performances of many of the remaining unsigned free agents in the 2018 regular season.

Add also the fact that at this point the vast majority of MLB teams have spent what they are willing to spend in 2018, at least unless a deal too good to pass up comes along.  The players who haven’t signed at this point are all players who at the start of this free agency period thought they were worth a lot more than the teams thought they were.  Neither side has blinked so far, but in short order the players’ values for 2018 are going to drop.

The missed Spring Training time becomes particularly important because any free agent who has already reached the age of 30 is signed as part of a win-now strategy.  Even before the current analytics trend took hold, teams well knew that over-30 free agents were going to provide almost all of their value in the first one to three seasons of their free agent deals.  The big payouts after the first two or three seasons were simply a cost of trying to win in the first few seasons.  Now, thanks to analytics, teams have better reasons not to hand out anything more than three year offers to over-30 free agents.

Analytics are basically about percentages, and percentages don’t necessarily predict reality.  Yes, relatively few major league teams are entering the 2018 looking like realistic possibilities to go deep into the post-season.  However, in baseball anything can happen in a short series.  10 teams make the post-season, and any of those ten teams could be the next 1973 Mets or 1987 Twins, or any of the many other not particularly impressive play-off teams since 1969 that got hot at the right time.

That said, there is almost no down-side to teams getting stingy with free agents this off-season, so long as the players’ union cannot prove collusion.  A few teams won’t perform as well in 2018 and 2019 as they would have if they gave the bucks to one or more of this year’s remaining free agents.  However, all teams will ultimately benefit if management succeeds in reducing the percentage of revenues that goes to free agents.

Assuming that the teams weren’t stupid enough this time around to create significant evidence of collusion, the biggest threat to management’s recent hard line is a player strike when the current collective bargaining agreement expires after the 2021 season.  That’s a long way out in the future in business terms, and management may be betting that players will have less stomach to strike with average annual salaries as high as they are now.

That’s a bet that management has consistently lost in the past, particularly during the labor disputes between 1985 and 1994 when salaries were hugely larger than they had been in 1966 when the players’ union formed. However, I suspect that management is full of people who will want to keep testing the players’ resolve as salaries grow higher.  Since it’s now been a generation since the 1994 strike, a new generation of management and players may have to find out for themselves the consequences of labor conflict in a highly profitable industry.