The Continued Costs of Miller Park

A Modest Free Agency Proposal

The biggest story of the offseason has been free agency’s glacial pace.  Jack Moore wrote about how this looks like collusion over at the Baseball Prospectus main site, but an innocent explanation exists as well: teams are being smart consumers and trying to avoid overpaying players who are about to enter their decline phase.  If it is in fact just smart business, however, then this trend of the free agent market being slow is going to continue in future years; teams are not likely to get dumber.  And this presents a problem for baseball’s labor relations: players are earning a smaller percentage of the game’s revenue than they have in years past, and a diminished free agent market will only exacerbate that as large contracts for veterans disappear.

Although collusion would obviously have a significant impact, there are also rational reasons for the veteran free agent market to deteriorate.  Teams have realized that players signed into their mid- to late-30s are bad investments, so they are relying more on younger players to fill roster spots.  Additionally, since the average age of rookies now is 24.6 and thus players don’t hit free agency until they are through their peak years, teams can keep control of these players through their most productive years.  Then, when players become free agents, the next batch of rookies takes those spots.

This is a problem for the players, though, because free agency has always provided the promise of a payday.  Players earn the league minimum salary for their first three years regardless of production, and then they enter arbitration. In arbitration they get more money, but not their market rate.  For example, Kris Bryant has just become arbitration-eligible, and he will be making the most money ever for a first-year arbitration-eligible player: $10.85 million.  By contrast, the Blue Jays signed veteran Jaime Garcia, he of the career 95 cFIP, for $10 million.  One of the ten best position players in baseball will earn roughly the same as a league-average starting pitcher.

Baseball’s system has generally worked because players like Bryant knew they would receive a massive free agent contract after they exhausted their six years of team control.  But if teams stop rewarding players for past performance, then the best players in baseball will never get paid what they deserve.  This is a threat to the balance between players and ownership, and this article will present a possible alternative method.

Any analysis like this requires a certain set of assumptions.  I am assuming here that the MLBPA is interested in maximizing the money their members make (which may not be entirely fair, given the way veterans control union power).  I am also assuming that owners would be willing to pay market value for players who are more likely to perform over the life of the contract (which may not be fair if what we are witnessing is collusion).

With that being said, a system like the NBA’s restricted free agency seems to make sense for baseball as well.  After an NBA player’s fourth season, he becomes a restricted free agent.  Other teams can sign that player to an offer sheet, but the player’s current team has the right to match that contract.  The advantages of such a system are that teams still retain control over their young players, but players are eligible for a large payday much sooner in their careers.  Kris Bryant, for example, could be a restricted free agent at 27 instead of an unrestricted free agent at 30, and so a longer-term contract would make sense because some of his prime years are still in front of him.

This system would not be perfect.  Players still have to be under team control for long enough that a team feels comfortable investing in player development.  Free agency after one year, for example, would likely harm player development because teams would not be guaranteed any reward.  Additionally, this system would still be subject to the type of age manipulation that we currently see.  Teams can hold players down to get more of their prime years in the current system, and the same would be true for any new system as well.  MLB’s minor league system complicates matters, as MLB teams have direct control over when the service time clock begins.

It also would not translate directly from how the NBA does it.  The NBA’s maximum salary is not mirrored in baseball, as teams have cost certainty for their young players even once they have hit free agency.  This does not exist in baseball; Bryce Harper could sign for $30 million per year next offseason if he wants a ten-year contract, or he could sign for $40 million per year if he takes a shorter deal.  The Washington Wizards, on the other hand, knew that they would be paying Otto Porter about $25 million this season because that was the most he could be offered.

Another problem with the NBA’s restricted free agency is that it allows teams to keep players for nine years before they hit free agency.  NBA players generally make their debut at 19 or 20, so they still have productive years ahead of them when they finally hit the open market.  But because baseball players debut so much older, this system would not allow players to switch teams in their primes.  Tweaks would have to be made.

One of the most important tweaks would have to be to the timing of restricted free agency offers.  In the NBA, teams make offers to players, and then the player’s original team has three days to decide whether or not to match.  In that time, the offering team’s money and roster spot are tied up.  This creates logistical problems, where teams know that any offer to a star player will be matched, so they don’t bother making it and instead maintain flexibility.

I have a couple ideas about how MLB could fix this.  First, the MLB could provide a buffer for teams who sign restricted free agents to sort out their 40-man roster situation, so teams wouldn’t have to be stuck in a holding pattern for three days.  They could sign a restricted free agent to an offer sheet and then have a week before they need to officially add him to their 40-man roster.  Second, they could shorten the matching time to just one day to provide less uncertainty for teams.

Third, and most radically, they could have a special restricted free agency window before unrestricted free agency.  During this time, offers would be made, but no other transactions would occur, so teams would not risk losing out on other opportunities while they wait for everyone to decide whether or not to match.  This would create some roster-building issues, as teams would be operating with imperfect information during this first window.  The NFL does this with its draft, however: football teams draft for need at times, but the draft occurs before free agency has opened.  The NFL does not appear to have suffered for this, so it seems as if it would be workable in MLB as well.

The types of contract being offered would be the most interesting aspect, and it is the test for whether such a system would actually solve the problem that we appear to be facing.  My proposal is that after three years in the majors, players would hit restricted free agency.  At that time, all teams would be free to offer those players whatever contract they want.  I think the lack of a maximum salary would remove the “automatic match” problem from all but the absolute top players.

Let’s use Kris Bryant as an example again.  After next season, anyone could offer him a new contract.  Teams may offer him a long-term deal, or they could try and entice him with a high-AAV short-term contract.  The Cubs would have the absolute right to match any offer that is made, though.  The main difference between the current system and my proposal is the player’s age: Bryant would be a free agent at 27 instead of 30, so he will be a more attractive option for many teams.  But because the Cubs still have the chance to match any contract, or offer him a long-term extension before he even hits free agency, they do not lose their access to their young talent.  They just have to pay him more.

This would bring a new level of intrigue to free agency.  Without a maximum salary, the Cubs would not have cost certainty.  Any team could try and find the price point at which the Cubs wouldn’t match; could it be $50 million per season?  Rivals like the Brewers could also force the Cubs’ hand by offering Bryant an over-market deal that is still reasonable enough that the Cubs would feel compelled to match (perhaps at $40 million per season?).  Where NBA restricted free agency can be rote because of max contracts, MLB restricted free agency likely would not be.

Another possibility would be that restricted free agency offers could only be for a maximum of four years.  This would still allow a team to try and offer a ridiculous one-year contract for someone like Bryant or Mike Trout, but it would provide some more certainty for both the team and the player.  Players would know that they will hit unrestricted free agency at no more than seven years after their debut, but they would have an opportunity to make more money before then.

I recognize that a possible problem with this is that it might allow big-market teams to exert their financial influence.  With more desirable free agents, the Cubs, Dodgers, Yankees, and Red Sox might be more involved and more able to spend their way to a title.  Small-market teams would have less of an ability to develop their own cores because they would only be guaranteed three years of big league service time instead of six.  Big-market teams would be able to absorb contracts that small-market teams just couldn’t.  For example, the Yankees could offer Orlando Arcia a contract that the Brewers couldn’t afford to match, simply because the Yankees can afford to absorb more money if the contract turns out to be a mistake.

With that being said, financial constraints are always a question.  Big-market teams have resource advantages over small-market teams, but that hasn’t prevented St. Louis or Cleveland from being competitive.  I suppose it’s possible that this is the change that destroys baseball’s relative parity, but I am skeptical that it would do so given that such hand-wringing never seems to pan out.  The lack of a salary cap did not result in the Yankees buying every World Series; they won their four in five years on the strength of a home-grown core.  Teams are smart, and I expect that small-market teams will be able to adapt to this change just as they have adapted to other ones.

This would be a radical alteration to baseball’s free agency structure, but if teams refuse to sign free agents who are over 30 to market-value deals, then something will need to change.  The players are what drive the product, and they are entitled to their share of the profits.  If they are not going to be rewarded in free agency under the current system, then a new system will have to be devised.

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