Seven Reasons Why the Free Agent Market Is So Incredibly Slow
Welcome to “Stare-down Week.” That’s how one general manager characterized this week as baseball gets midway through the third month of one of the deadest free agent markets this side of the collusion years.
“It’s to the point now where both sides are staring each other down this week,” the GM said, referring to teams and agents. “Over the holidays, for the first time I can recall, people just weren’t calling. Things are usually quiet then, but it just shut down because up until then it was more quiet than usual. Now I feel like by the end of this week or early next week, it’s time for somebody to blink.”
Said one veteran agent, “It’s not like there haven’t been discussions. Clubs have talked about money and years—everything but actual, aggressive offers. In some cases players are waiting for the market [at their position] to be set, but that still hasn’t happened for many of them.”
What’s going on? Start with the so-so quality of this free agent class—nobody big enough to generate an early auction atmosphere. And drawing long-term trends from this market is dangerous because of the expected spending frenzy that’s coming 10 months from now.
You still might see as many as four $100 million contracts this winter: to Yu Darvish, Jake Arrieta, J.D. Martinez and Eric Hosmer. But with almost one month before camps open, this officially is a slow market for free agents. The middle class of free agents—waiting for the market to be defined, but still holding out for multi-year riches— seems especially imperiled as the clock ticks to the opening of camps.
One of the players in that class who blinked this week was Jay Bruce, who took a three-year, $39 million offer from the Mets. Bruce, 30, (.254, 36 HR, 101 RBI) was this year’s version of 30-year-old Jason Bay (.267-36-119) eight years ago or 31-year-old Nick Swisher (.272-24-93) five years ago. In this market, where 30-home run hitters are easily found, Bruce fell far short of the four-year guarantees for Bay ($66 million) and Swisher ($56 million).
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In the meantime, here are the reasons why this free agent market has been so slow:
1.The 2016 Collective Bargaining Agreement
In the last round of CBA negotiations the players won on quality of life issues such as extra seats on spring training buses, clubhouse chefs, scheduling and extra days off, but lost on economic issues, such as the Competitive Balance Tax. The CBT, which imposes a “luxury tax” on payrolls that exceed a defined threshold, has become a soft cap that is hardening.
While revenues were skyrocketing, the 2016 CBA barely raised the threshold (this year, for instance, it’s $197 million, or only 4% greater than what it was four years ago) and increased penalties (surtaxes and a draft position penalty for the most extreme offenders).
The CBT alone has kept the Dodgers and Yankees out of major free agent bidding. Agents can’t even use them as leverage. Both teams have a business plan driven by staying under the threshold this year in order to re-set their tax rate in 2019 from 50% of the overage to 20%—a potential annual savings of about $12 million just on a potential Bryce Harper signing.
Over the past decade, the rise in the CBT threshold (32%) has not nearly kept pace with the rises in the average salary (52%) or revenues (67%). “The [cap] effect is real—very real,” said one agent. “It’s something that needs a very hard look next time around.”
2.The 2018 Free Agent Class
Harper, Manny Machado, Josh Donaldson, Charlie Blackmon, Andrew Miller, Craig Kimbrel, A.J. Pollack, Daniel Murphy, Cody Allen and Andrew McCutchen are all eligible for free agency after this season. Clayton Kershaw and David Price could join them if they exercise opt-out clauses. Keeping payroll flexibility for Free Agent Armageddon is the smart play.
“This year you might have one or two teams over the [luxury tax] threshold—if that,” said one executive. “Next year you might see a dozen teams over the threshold.”
3. The Baseball.
The apparently livelier baseball, introduced in the final two months of 2015, has so dramatically increased the number of home runs as to devalue them on the open market. From 2014 to 2017 home runs increased 46%. Why pay a premium for them when there are plenty of prospects or bargain veterans with a launch-angle swing guru who are 25-homer guys waiting to happen?
Power is a cheap commodity because of the supply. In 2014, only 27 players hit 25 homers—less than one per team. Last year there were 74 players who hit 25 homers, including 15 who didn’t even have enough plate appearances to qualify for the batting title.
This free agent market began with 10 players who hit 25 homers. Seven of them are corner infielders: Logan Morrison, Mike Moustakas, Lucas Duda, Mark Reynolds, Yonder Alonso, Todd Frazier and Eric Hosmer. Alonso is the only one signed, and he took a two-year, $16 million deal—less than the Giants gave Aubrey Huff eight years ago. (First basemen Mitch Moreland, at two years, $13 million with Boston, and Matt Adams, one year, $4 million with Washington, are corner hitters who also signed bargains in the crowded market.)
“Maybe he saw the handwriting on the wall with all of these corner infielders on the market and jumped,” one GM said of Alonso. “But maybe it winds up looking pretty good by spring training with this glut out there.”
4. The Scott Boras Factor
The agent controls much of the top of the market, including Martinez, Hosmer, Arrieta and Moustakas, and Boras typically does well with slow-playing free agency. Chris Davis, Prince Fielder and Max Scherzer, for instance, all signed between Jan. 21–26. He’ll be just fine.
One executive, however, pointed out two changes in this marketplace: it remains saturated with available players in January, and the rise of intellect and power in baseball operations departments has narrowed Boras’ well-paved path of dealing directly with ownership on mega-deals. Boras, the executive said, viewed general managers from certain clubs as “middle managers” and preferred to woo owners such as Tom Hicks, Ted Lerner and the late Mike Ilitch with direct sales pitches on intangibles and business-related enhanced values of his players. Now more power, especially in regards to defining player value, is concentrated with analytically savvy general managers and presidents of baseball operations who are less prone to emotional or vanity buys.
5. The Rise of Bullpens
Only one type of player has benefited from this free agent market: relievers. That should not be a surprise for a game that keeps gives more and more work to more and more relievers. But don’t be fooled: teams have stopped giving four-year deals to middle and set-up relievers (as they did for Darren O’Day and Brett Cecil), and the cost of relievers is cheap.
“It’s an easy expenditure,” said one GM about why teams jumped out early for relievers. “The dollars don’t have much impact at all on the luxury tax.”
The flip side is that the emphasis on bullpens has de-emphasized starting pitchers. The Rockies, for instance, paid three well-worn relievers $35 million a year rather than chase Darvish or Arrieta.
Nothing is stranger in this market than the lack of buzz on Darvish and Arrieta. Both pitchers compare favorably to Jon Lester when Lester hit the market three years ago:
Previous Four Seasons Heading into Free Agency
Player | Age | W-L | IP | ERA | FIP | ERA+ |
Lester | 31 | 55–42 | 830 | 3.61 | 3.56 | 114 |
Arrieta | 32 | 64–29 | 751.1 | 2.67 | 3.04 | 150 |
Darvish | 31 | 40–33 | 641.1 | 3.27 | 3.31 | 131 |
Arrieta and Darvish, however, have been received in free agency wildly different than was Lester. Half a dozen teams jumped on Lester immediately, with the Giants, Red Sox and Cubs especially wining and dining him. Lester’s agents actually slow-played free agency to wait until the winter meetings to finalize his deal with the Cubs: $155 million over six years.
That year and the next (2014–15) saw a run on free agent starting pitchers—13 of them signed contracts of at least four years, including James Shields, Brandon McCarthy, Mike Leake, Jordan Zimmermann and Wei-Yin Chen. Since then? No free agent starting pitcher has signed a contract of four or more years.
Now we have a baseball world in which teams pitch their starters with more rest and take them out earlier than ever before. And proof that it works (as long as you have a deep inventory of pitchers): the Dodgers won the NL pennant by having their starters face the fewest hitters a third time around—marking the second straight year they were successful by getting their starters out quicker than any team in baseball.
6. The Empty Middle Lane
It’s become mostly a bifurcated game: teams are either all-in as far as World Series aspirations or all-out. That’s not “tanking.” That’s smart business sense. Nothing drives spending now more than where a team is on the winning curve, and teams that don’t have a chance to win the World Series scale back to rebuild rather than cling to false hope. The success of the Royals (though it was a long rebuild), Cubs and Astros give credibility to such plans so fan bases that once clamored for short-term fixes can accept a rebuild.
This industry-wide vision, according to one executive, has wrought a going-for-it upper tier of “10 to 12 clubs” (several of whom have clamped down on spending because of the CBT) and “eight to 10 teams” who are not in buying mode because of rebuilds.
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“The thing about the few teams in the middle ground, who might have money to spend, is that they are teams that generally are conservative in nature,” the executive said, referring to teams such as Milwaukee, Minnesota and Pittsburgh.
7. Flexibility
The elite players will get paid, even in a slow market, but a better understanding of value by front offices is keeping clubs from committing years to fungible-type players. Here are some of the free agents who scored contracts of four or more years in 2012 or 2013: Melvin Upton Jr., Josh Hamilton, Michael Bourn, Edwin Jackson, Nick Swisher, Matt Garza, Ubaldo Jimenez, Ricky Nolasco, Curtis Granderson and Omar Infante.
You can always find mistakes on long-term deals. But the buzzword in the game now is “flexibility”—in terms of roster usage (players who play multiple positions or have options remaining) and payroll (both at the trading deadline and future seasons). It’s one thing to give a star like Robinson Cano a 10-year deal. It’s quite another to commit four years to Infante, who gave Kansas City in those four years 298 games, eight homers and a .238/.269/.328 slash line, making him the worst Royal ever at getting on base with so many games with the club.
This market is likely to be the worst in at least a decade as far as players fetching deals of four years or more:
Year | 4+-year Contracts | $100M+/YEar |
2007 | 8 | 1 |
2008 | 5 | 2 |
2009 | 6 | 1 |
2010 | 6 | 3 |
2011 | 7 | 3 |
2012 | 9 | 2 |
2013 | 12 | 4 |
2014 | 15 | 2 |
2015 | 15 | 7 |
2016 | 9 | 1 |
2017 | 0 | 0 |
