February 6, 2019


For the past week, team equipment trucks have been motoring to Arizona and Florida. Spring training begins in about a week.

But about half of the Top 50 free agents remain unsigned. And the prospects of mega-deal long term contracts are fading fast.

The new free agent dogma is actually the renewal of the old ownership system. Way back, teams used to be owned by individuals or families. The baseball club was their sole business. They operated it like a mom and pop store. If they could get by cutting corners (player salaries) to make a profit, they made a profit first.

Small market clubs still operate under that guide line. Low attendance, small fan base, and lower local television deals means these clubs are under financial pressure against signing a player to a large contract. But under the CBA and baseball rules, all the small market teams have enhanced revenue sharing from the league, and extra draft picks to acquire "cheap" young talent to remain "competitive."

General managers now covet draft picks because they can retain a player for six years (three in arbitration) at a relative small cost. The farm system is now the most important aspect of the operations. If you can draft and develop talent consistently, your team can be frugal, competitive and profitable.

In order to do so, teams now "tank" more often to obtain higher "can't miss" prospects. It is okay to tank if you have very little fans to complain (see, Marlins.)

You have now about one-third (1/3) of MLB clubs at the bottom in salary budgets, many whom have little desire but to tank to acquire top ten draft picks.

You have the top four spenders, big market clubs, who are at the luxury cap limit of $206 million. These previously annual big spenders do not want to go over the salary cap because of the financial and draft penalties. To take on a salary like Harper's $30 million/year $300 million total, it could cost a team over the cap as much as another $300 million in penalties over that ten year period. To avoid that, the team would have to off-set or cut $30 million a year for the duration of the contract (which some GMs would classify as three veteran players or four quality relief pitchers in value.)

The rest of the clubs position themselves to spend $100 to $150 million per year. If their division is weak, like the AL Central, they could be in contention most of the season (thus validating their "plan" to their fans). Fair weather fans might return so everybody is happy. But with an average starting pitcher making $10 million, a team could have almost one-third of their payroll in a rotation. That leaves an average salary of $4 million for every other player on the roster. That is why prospects being paid the league minimum ($555,000) are so important as they free up money to sign or retain veteran players (second tier).

Player agents may be late to recognize this new paradigm being the old system before steroid fueled free agency. Teams now have the MBAs, computer geeks and stat analysts crunching big data to find that players over 30 in the non-steroid era are not as valuable or productive going forward. So many teams have been burned by long term, dead money contracts to be gun-shy about signing another player demanding even more money.

It seems that Harper's foray (or folly) into free agent basically ended when he rejected the Nationals pre-free agency extension of $300 million/30 years. Machado has not formally rejected the White Sox $175 million offer, but it seems no one else has topped it. The Phils said they would spend "stupid money," and if that was the case Harper and/or Machado would have had last month a press conference in Philadelphia. Agents must be frustrated by the "take it or leave it" offers from teams (who are giving their best contract first without being pushed and pulled by other teams or the agent.) Free agency is no longer a live auction between teams. It is more like a Priceline value search.