Maybe Free Agents Just Aren’t Worth It

On February 1st, I was planning to write a post about how strange it is that four of the top five free agents (at least according to mlbtraderumors.com) are still unsigned.  Barry Svrluga of the Washington Post beat me to it.  However, the title of his article got me thinking whether not signing free agents means not trying to win.

Analytics are showing that free agents aren’t worth the money they are getting in terms of actual performance on the free agent contracts they sign and that MLB teams are finally catching up, although it has taken them a long time to do so.

I thought it might be interesting to look at what last year’s top 50 free agents (according to mlbtraderumors.com) did in  2018, the first year of their free agent deals, when everyone expects free agents to be worth the most.  Everyone basically understands that signing a free agent is a win-now strategy and that players are overpaid in the latter years of their free agent deals to provide big value in the first year or two of their contracts.

So what were free agents worth in the first year of the new contracts they signed during the 2017-2018 off-season, which was the off-season when free agent contracts dramatically tightened up in terms of guaranteed seasons?  As it turns out, not what they were paid.

I used the average salary over the years of multi-year contracts, rather than the actual first year salaries, which are in many cases lower, because it was less work to calculate.  It also gives a more accurate value, in a sense, of what the team will end up paying annually for the term of the contract.

By my calculation, teams committed $441.9 million in first year salaries, and got total production value, according to fangraphs.com, of only $356.6 million in return.  Of the 47 free agents I included, only 12 players performed in 2018 at a level greater than their average annual average salary over the lengths of their contracts, while 34 performed worse, 10 of whom cost their new teams money by playing at a level below replacement level.  The 47 players have a remaining 62 seasons on their combined contracts, when as a group they will almost certainly perform at a lower level than they did in 2018, since free agents as a group do not age well at all.

Free agent contracts look like a lottery gamble for teams.  A team might hit it big with the kind of performance J.D. Martinez, Lorenzo Cain, Jhoulys Chacin, Miles Mikolas and Mike Moustakas gave their teams in 2018, but teams were more likely to get the the underwhelming and overpaid performances Yu Darvish, Eric Hosmer, Wade Davis, Zack Cozart and Jay Bruce gave their 2018 teams.

There are a lot of reasons why teams would continue to sign free agents, even if they are overpaid even in their first seasons with their new clubs.  It’s good public relations to sign free agents, particularly if you have lost one or more of your own players to free agency.  The cost in talent, compared to trades, of signing a free agent is very low (although the current collective bargaining rules make it more expensive in terms of talent for the wealthiest, highest spending teams to spend big on free agents, which has always been the driver of the free agent market).  It might be worth overpaying a free agent in order to plug a glaring hole in your line-up.

However, what I take from this information is that it makes little sense to sign a free agent, particularly one in the bottom half of the top 50, unless you are fairly certain one or two performances is all that is separating your team from making or returning to the post-season.  Rebuilding teams shouldn’t be signing free agents until they are truly ready to compete.  Even if you don’t have a replacement level player in your organization at the position you are looking to improve at, a replacement level player can probably be obtained cheaply from another organization, particularly when compared to the financial cost of free agents, even with the sharp tightening in the market the last two off-seasons.

While I still suspect that teams are engaging in some kind of soft collusion — maybe MLB is holding meetings where MLB’s analysts are lecturing teams on the actual value of free agents each November — in-house analytics departments for each team are probably telling teams the one thing they need to do with respect to free agents is sign them for fewer seasons than they did in the past.

mlbtraderumors.com predicted that Bryce Harper and Manny Machado would get respectively 14 and 13 season contracts at $30M per.  The reason they may not yet be signed is that, while teams are willing to pay the $30M per, they aren’t willing to guarantee more than eight or 10 seasons, even for free agents so young and so good.  The only rumors I have heard for either is that the White Sox may have offered Machado somewhere between $175M and $1250M for seven or eight seasons only.

The current collective bargaining agreement terms are devastating the free agent market, because the ten richest teams can’t spend like they once did.  The talent bite that comes from overspending the salary cap for three seasons in a row, in terms of draft picks and international amateur spending, is steep enough that the richest teams are all trying to keep close enough to the cap amount that they can dip under at least once every three seasons in order to avoid the most severe penalties.  It is the richest teams that drive the upper limits of free agent contracts, so the current rules are bound to effect free agent contracts in a big way.

Explore posts in the same categories: Anaheim Angels, Baseball History, Boston Red Sox, Chicago Cubs, Chicago White Sox, Kansas City Royals, Los Angeles Dodgers, Milwaukee Brewers, New York Mets, New York Yankees, San Diego Padres, St. Louis Cardinals, Washington Nationals

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