MLB State of the Game Article Part 1: Contracts


Some teams are breaking the bank but while other teams refuse to spend at all. How will contracts impact the future of baseball?

The future of baseball is inherently tied to that of the contracts that pay players to pay the sport. Just a few years ago, it seemed ludicrous to suggest that a single player would get over $400 million dollars. But, in the wake of Mike Trout’s record-breaking deal, here we are. This past offseason almost made it easy to take these astronomical numbers. But the key word is almost; though Manny Machado, Bryce Harper and Trout all received jaw-dropping contracts this winter, the fact that this excess was not limited to one player makes all the difference. If it happens with one player? That’s an anomaly. Two? That could still potentially be labeled as a blip on the radar. But, in the span of a few weeks, three stars just got paid an astonishing amount of money. It’s fair to argue that these contracts will become the norm, both in negotiations with free agents and with star players still under contract.

On February 19, when Machado signed with the San Diego Padres for $300 million, many fans and analysts immediately wondered what Harper would get. (Most correctly assumed his deal would be even more remarkable.) Just over a week later, the Philadelphia Phillies gave Harper $330 million to be the face of their franchise. Finally, on March 19, news broke that the Los Angeles Angels handed Trout a $430 million contract. Within the span of a month, three incredible contracts permanently changed baseball. From here on out, most star players will seek to get their own mega-deals and hungry agents will keep pushing the envelope. Where will it end? $500 million? $600?

It’d be impossible to predict how this trend will continue to evolve; a number of external factors like inflation will continue to heavily influence contracts. So, instead, let’s put the money aside and focus on other reason these contracts are so unusual. Trout’s contract includes a no-trade clause and, unlike other sizable deals in recent memory, it doesn’t include any opt-outs. The Angel’s star outfielder is locked in; he’ll be with the franchise for the next 12 years. Harper’s contract is quite similar in that regard; he and the Phillies are firmly tied together for the next 13 years. (For comparison, Machado’s deal has a limited trade clause and an opt-out after the fifth season.) It’s rare to see players and teams commit to each other like this; if contracts are marriages, then opt-outs and trade clauses (or the lack thereof) are like divorces. The Phillies and Angels are now married to these star players and the only way to escape them, when the players likely decline at the end of the deals, is to eat a lot of money.

But what does this all mean? These contracts are signed and they’re practically set in stone. But they will heavily influence the baseball world for years to come. To clarify, few players, if any, will get a deal that’s equivalent to Trout’s. He’s a once-in-a-lifetime player; many people consider him the greatest of all time. If any star deserves his contract and the lengthy commitment it requires, it’s Trout. But other stars and their agents will likely use this deal, and Harper’s, as bargaining chips to ensure that they, too, get sizable paydays. Boston Red Sox star outfielder Mookie Betts is the player who’s most likely to continue this trend.

Consider Betts’ resume: he’s been to multiple All-Star games and won several Gold Glove and Silver Slugger awards. He’s the reigning AL batting champion and he’s a former Defensive Player of The Year. Betts is only 26 years old, but he’s widely considered one of the greatest players of this generation. But the star’s 2019 season is off to a rocky start; he’s only batting .200 as of this writing (UPDATE: As of 4/29, Betts is batting .269).

So where does that leave one of baseball’s best players, especially in regards to his upcoming free agency? The outfielder already rejected a $200 million dollar extension, which seems like chump change compared to Trout’s deal, after the 2017 season. With the Red Sox collectively struggling this season, some analysts, and even star pitcher David Price, have wondered if the team will trade away Betts and other notable players rather than letting them walk away in free agency.

At this point, it seems like the smart money is on Betts’ departure from Boston. Teams love to overpay for star players, especially of Betts’ caliber. These players don’t usually reach the open market, especially in today’s game, where teams are handing out lengthy extensions to their top players well before they reach free agency. (The White Sox handed Eloy Jimenez $43 million (with team options in the deal) before the young outfielder made his major league debut.) Around the league, stars like Alex Bregman, Jacob deGrom, Khris Davis and others are getting paid by their respective teams, which proactively depletes out the free agent parket. Some writers have dramatically stated that MLB free agency is dying. We won’t take it that far (yet) but the game continues to favor trades and extensions over the open market.

This wave of extensions practically happened overnight. According to Travis Sawchik of FiveThirtyEight,MLB teams spent a record amount of money in contract extensions during March 2019. It’s even more notable that most of the players that reaped the benefits weren’t even eligible for salary arbitration. The Braves signed reigning NL Rookie of The Year Ronald Acuna Jr. to a $100 million dollar deal long before they’d have to worry about duking it out with him in arbitration. On paper, it’s eye-opening to see teams handing out so much money to players when they don’t need to (yet.) But, in reality, teams are taking this approach so they spend less down the road.

In team management, control is everything. Owners and general managers seek to hold all the guards, to the extent they can. With recent arbitration cases, like those of Trevor Bauer and Gerrit Cole, trending in favor of the players, teams are becoming more aggressive than ever. Salary negotiations and player contracts, much like the game actually being played on the field, are increasingly driven by hyper-focused analytics because front offices are trying to do whatever they can to find maximum values. It’s like Moneyball 2.0, except the main consequences are those found in the players’ contracts, or lack thereof.

Maybe that trend explains why free agency, for all intents and purposes, is broken. It’s not dead but what used to be one of the defining elements of baseball is now an albatross that’s harming the game. It’s inexplicable that a former Cy Young winner (Dallas Keuchel) and two-time Reliever of The Year (Craig Kimbrel) are still unsigned this late into April. Sure, both have red flags and there are valid concerns they’ll regress, which partially explains why teams are hesitant to sign them. But it’s appalling that, in a league with 30 teams in it, nobody has managed to reach a deal with either star pitcher. The players, and their respective agents are also factors, to be sure. Kimbrel, Keuchel and their agents justifiably want to get paid. But the fact that the market has prevented them from finding a fair deal is the most significant indicator that, more than ever before, free agency needs to be fixed.

Otherwise, baseball will continue following the path it’s currently on. Teams will lock up players to long term deals and pay them less than they’d get in arbitration or on the open market. (Just ask the Braves’ Ozzie Albies.) In that case, players will continue to grow frustrated because they’ll be increasingly undervalued. As a result, the idea of a players’ strike suddenly doesn’t seem so crazy after all.



Image Citation: https://knowledge.wharton.upenn.edu/article/moneyball-approach-hiring-ceos/

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