Despite television deals with ESPN, FOX, and TBS that will net Major League Baseball an average of $1.5 billion per year over the next years, franchises derive most of their revenue locally. Ticket sales, advertising, naming rights, local radio broadcasting rights, and local television rights constitute the majority of each team’s revenue. In recent years, new local television deals have generated incredible revenues with one-third of all teams now having signed deals worth at least one billion dollars. The deals have raised a question: When will this television rights bubble burst and send these skyrocketing guarantees back to earth? The Arizona Diamondbacks new television deal, believed to be in excess of one billion dollars, partly answers the question: Not yet.

Skepticism regarding the continual rise of local television contracts is justified. There have been indications recently that all is not well for the regional sports networks. The Los Angeles Dodgers generated news when they signed a contract worth more than $8 billion two years ago. Unfortunately for the Dodgers, that contract is still generating news as Time Warner Cable has been unable to successfully negotiate with the rest of the television providers in the Los Angeles area, leaving 70% of LA homes without the ability to watch Dodgers games on television. The San Diego Padres have had trouble getting their product in local homes before reaching a deal prior to the start of last season, and Houston’s deal has been a disaster as they try to charge high subscriber prices to watch a team they had no plans to make successful for several seasons.

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In yesterday’s post, I focused on the decrease in winter signings over the past few years. As pitchers and catchers trickle into camp a new signing season begins and that season has seen a considerable increase in activity over the past few years. From 2008-2011 teams averaged around 9 contract extensions in the period starting now and ending near the beginning of June. In the last three years, the average for spring signings has been nearly 13 with a high of 16 in 2012.

From 2008-2011, 35 players signed during the spring, compared to 47 during the winter. Those numbers have reversed in recent seasons. The three-year spring period from 2012-2014 has already seen 38 players sign contract extensions compared with 22 winter signings from 2012-2015. Just like with the winter signings, the service time of the spring signers has not changed over the years. The players that sign in the period between late February and early June skew younger, but the service time has remained consistent, 2.4 from 2008-2011 and 2.5 from 2012-2014.

It is possible that the increased number of signings in the spring is having an effect on future winters. A large number of spring signings in 2012 and 2014 preceded very meager numbers the following winters. The spring signers are younger than their winter counterparts. Increasing the number of young players signing in the spring could bring down the number of players available to sign in the following winters. Of the 38 players who have signed extensions the past three springs, 33 had under five years of service time and 24 were below three years of service time. Many of those players might have been candidates for extensions in later periods had they not signed early in their careers, but it does not appear to have affected the number of quality free agents.
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On February 17, 2011, Jose Bautista signed a five-year, $65 million extension with the Toronto Blue Jays. Bautista’s contract was one of a dozen similar extensions signed by players that Winter. From the 2008 to 2011, at least 11 players signed extensions similar to Bautista’s every winter (Extensions between end of the postseason and February 17th, using MLB Trade Rumors Extension Tracker). At the time, Bautista had fewer than six years of service time, agreed to a contract exceeding two years, and the contract bought out at least one free agent season. Offseason extensions are a fairly common practice, but in recent years, they have become increasingly rare. Since 2011, no offseason has seen double-digit extensions. Only Giancarlo Stanton, Kyle Seager, Wade Miley, and Devin Mesoraco signed similar contracts this Winter, matching a recent low of four from two offseasons ago.

While the number of extensions has gone down considerably in winter, the costs associated with these contracts have not experienced the same downturn. From 2008 to 2011, 47 Winter extensions cost teams $1.66 billion while the last four winters have seen teams sign extensions totalling $1.51 billion in guaranteed money to just 22 players. $150 million dollars is hardly a small amount, but the number of deals dropped by more than half, causing the cost to sign an individual extension with a player to go up considerably.

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