Pay scales using merit and tenure seem to be opposites of one another. Under the tenure system, pay rises as more service time accrues; under the merit system, pay is correlated with performance. While two the models might seem at odds, the Major League Baseball Players Association, along with Major League Baseball, have created a bit of a hybrid between the two systems.

Those players without much service time, like Gerrit Cole and Jacob deGrom, have their salaries set for them without regard for their performance, while veteran players like David Price and Jason Heyward are free to receive pay based on their track record and expectation of future performance. While we can debate how fair this system is, particularly for young players, what is more certain is the disparity in pay between players — it is massive.

There will be 750 players on MLB Opening Day rosters, and while we do not yet know the identity of all those players, given the contracts that have been given out, we can get a fairly good idea of the breakdown of salaries and service time of the group as a whole. Looking at all the players with guaranteed contracts and providing minimum salaries to fill out the roster in the same manner I did when projecting 2016 payrolls for all MLB teams, we can get a decent idea of how money is spread out among players.

Taking a broad look at salaries with respect to service time, here is a scatter plot of 2016 salaries and service time.

Read the rest of this entry »

The qualifying-offer system has created considerable discussion this offseason. After Dexter Fowler took smaller deal than expected and Ian Desmond ended up receiving only about half the qualifying-offer amount, there has been talk about changing the system in the next Collective Bargaining Agreement. Dave Cameron discussed a sensible solution that could help the system. The issue has been around in the past, but the CBA discussions combined with the sheer number of qualifying offers extended have increased the exposure this year. While it’s pretty well acknowledged that the QO system is designed to dampen free-agent prices, it’s important to recognize what the system is not: a reward for drafting and developing young talent.

A record 20 players were extended qualifying offers this offseason — this after, 34 offers total were made over the first three years of the system. If nothing else, the sheer quantity of offers led to three acceptances — by Colby Rasmus, Matt Wieters, and Brett Anderson — the first year in which any player had accepted an offer.

In a dreamy view of Major League Baseball, the qualifying offer helps those teams which have experienced success both drafting and developing players, but which also lack the requisite funds to prevent homegrown players from departing by way of free agency. A benevolent qualifying-offer system gifts those teams with draft picks so that they can further develop talent to help their club.

Read the rest of this entry »

While a few more moves will certainly occur here and there before the start of the season, team payrolls for the 2016 campaign are taking shape. After adding in the Baltimore Orioles’ signing of Pedro Alvarez, we have a pretty good idea of how the Opening Day payrolls will appear. Much of the offseason has been spent discussing the qualifying offer and “tanking,” but those issues are related to the larger issue of team spending. Revenue and payroll have been growing, but based on the team payrolls, it looks like the growth we saw over the past few years slowed down this offseason.

To determine Opening Day payrolls, I took the raw data from Cot’s contracts and added in minimum salaries to reach the 25-man total needed to field a team. Dead money paid to other teams was included. Over the next month, as players hit the disabled list or veterans with minor-league contracts earn their way onto rosters and get guaranteed deals above the minimum, the team payrolls will likely rise by a small amount, perhaps a few million dollars per team, but will not change the overall outlook by team.

Below is the current Opening Day payroll information for every team. To nobody’s surprise, the Dodgers lead the way.

Update: The Minnesota Twins have not been contracted and are included in the chart.

Also not a surprise: the Tampa Bay Rays bring up the rear. The average payroll right now is $128 million, and the median is right up there at $126 million. However, right after that median, there’s a major dropoff. The Chicago White Sox come in at $125 million, but after them, there is more than a $20 million drop to the Colorado Rockies. The top-four teams have a higher combined payroll than the bottom-ten teams combined, but that tier above $120 million speaks somewhat to the Royals’ success and the second wild card. Teams who might project for 75-80 wins can make a move or two and put themselves in contention for the playoffs, where anything can happen.

Read the rest of this entry »

Earlier this week, Salvador Perez and the Kansas City Royals agreed on a second contract extension. In terms of financial need or justification for the Royals, there weren’t any compelling reasons for the Royals to sign Perez to another extension when his previous contract kept Perez under control through the 2019 season. Even with no extensions, Perez would not have been a free agent until after this season. In his analysis of the deal, Jeff Sullivan focused on the human element of the deal and being fair to Perez. Ken Rosenthal wondered if this would start a trend and named a few other players who might benefit from teams deciding to be a bit more fair. Perez is certainly not the first player to sign a very team-friendly deal, but he is also not the first player to be awarded a second deal despite having a number of years still left on his first contract.

In Rosenthal’s piece, he acknowledges that Perez was a “special case,” noting that the Royals catcher had recorded just 158 plate appearances at the time he signed the contract. That lack of experience led to a very low guarantee and the three team options that would have prevented Perez from reaching free agency for another four seasons. While acknowledging both the lack of need and the recognition of fairness, Rosenthal suggested six other players who might fit the same bill as Perez, although perhaps on a smaller scale given their larger guarantees: Paul Goldschmidt, Anthony Rizzo, Jose Altuve, Chris Sale, Madison Bumgarner and Chris Archer.

On the whole, these types of extensions save massive amounts of money for teams, but we can take a look at the contracts Rosenthal discusses and compare them to Perez’s to see if they are actually close. The first few columns of the table below should be self-explanatory, but the last column, FA Surplus Value, might not be. To calculate the surplus value, I took current projections, applied standard aging curves, set the cost of a win at $8 million for this year along with 5% increases in years thereafter and compared the value of the projected production to the cost for free agent years only. For the players below, their arbitration salaries have also been at a discount, so if you want to include those values, feel free to add on another 20% or so (whichever number you feel like) to capture that discount as well.

Rosenthal did a very good job identifying the super-team-friendly contracts. Perez falls right in the middle of those contracts in terms of surplus value, but what makes his case different is the very low salary-level in relation to the other players — this, even if his options had been picked up. The top-four players on that list are massive bargains, but at least they will be paid around $10 million or more per year — double that of Perez. Altuve is in nearly the same boat as Perez in terms of salary, but he gave up just two years of free agency, which limits the surplus value.

Looking back through MLB Trade Rumors’ extension tracker, I identified players who were locked up to a second extension while still possessing multiple years on their first one. The idea: to find some sort of precedent for the Perez contract, or perhaps something closer to the situations of Sale, Bumgarner, Goldschmidt and Rizzo. Certain names come to mind immediately when considering players who’ve received a second extension while still playing on the first. Miguel Cabrera, for example. And Ryan Howard. These are classic cases of a team mistakenly extending players before they’d have to, but neither case is really similar to Perez’.

Read the rest of this entry »

When Major League Baseball and the Major League Baseball Players Association agreed to terms on a new domestic violence, sexual assault, and child abuse policy last August, it was clear that the first few cases to arise under the new agreement would take on heightened importance. As I noted at the time, under the agreement MLB and the union agreed that any past suspension — or lack thereof — for an act of domestic violence would not serve as a precedent in any future cases arising under the new policy. Instead, the initial suspensions handed out by Commissioner Manfred under the agreement would establish a new baseline against which the fairness of any future punishment would be judged.

As a result, Tuesday’s news that MLB had officially suspended Aroldis Chapman for the first 30 games of the 2016 season established a significant milestone, marking the first case in which a player has been suspended without pay under baseball’s new domestic violence agreement. This is all the more noteworthy considering that Chapman was never actually charged for the incident that led to his suspension. Although baseball’s new policy clearly permits MLB to punish players in cases that do not result in criminal prosecution, it wasn’t clear to what extent the league would be willing to suspend someone for an incident that did not result in the player being charged with a crime.

Further, because Chapman declared shortly after his suspension was announced on Tuesday that he would not be appealing the punishment, MLB has avoided the possibility that the 30-game suspension could be overturned by an arbitrator, creating an immediate precedent for future cases.

Read the rest of this entry »

Determining profits and losses for baseball franchises is a speculative task. When teams say they’re losing money, we can take them at their word or ignore them. They don’t open their books, so how much money teams make or lose is subject to factors outside of publicly available knowledge — and, therefore, equally subject to a lot of potential “massaging” on the part of the teams themselves.

That state of affairs might change slightly in the near future, however. Liberty Media, owners of the Atlanta Braves — as well as a majority stake in Sirius XM and a substantial stake in Live Nation Entertainment — are planning to offer stock in their separate divisions. As a result, they’ll have to provide more information to the public on the Braves’ operations. The Braves are claiming losses over the past few years, although in a cash sense, those losses are a bit deceiving, and the team is set to make money this season after slashing payroll.

There was a time, not all that long ago, that almost all Atlanta Braves games were broadcast nationally on TBS. The cable network, owned ostensibly by the same person who owned the Braves, Ted Turner, used the Braves to get publicity for his cable network, and the Braves were able to reach a broader base of fans. In the middle of the Braves’ great run of success, Time Warner bought Turner’s broadcasting company and the Braves, and the new owners continued to put Braves games on TBS. Changes to this once symbiotic partnership, however, brought an end to TBS’s almost daily Braves telecasts and saw the team enter one of the worst television contracts of the last few decades.

Read the rest of this entry »

You can probably be forgiven if you heard about a possible Blake Snell contract extension and your first reaction was to wonder, “Who?” Snell has never pitched in a major-league baseball game. He is not one of the top-ten prospects in baseball. Rather, he’s made just 21 starts above Class-A, has produced a walk rate above 10% in every year of the minors, and (perhaps as a result of playing in the Tampa Bay Rays organization) is generally unknown to the masses. However, Snell is one of the top-20 prospects in baseball, his walk rate has moved down as he’s moved up the minor-league ladder, he struck out more than 30% of batters last season, and he allowed just 21 runs in 134 innings last season (1.41 ERA). He’s also likely to see the majors this season, and the Rays have had talks with Snell about a contract extension.

Contract extensions for players with no service time are incredibly rare. The last one was Jon Singleton in June 2014, and prior to Singleton, Evan Longoria’s contract extension in April 2008 — which was not announced until after a week in the majors — was the closest comparison. The Rays are not strangers to similar deals. Matt Moore is in the final guaranteed year of his contract that he signed after pitching just 9.1 innings back in the 2011 regular season. They also approached Melvin Upton as a teenager, but were unsuccessful in reaching an agreement. Since 2010, there have only been four contract extensions for players with under one year of service time and the Rays are responsible for two of them in Moore and Chris Archer. (Singleton and Salvador Perez are the others.)

Read the rest of this entry »

There are rumors that Adrian Beltre, a potential free agent next winter, might sign a contract extension with the Rangers this spring, potentially taking him to the end of his career. Jose Bautista in is a slightly similar situation with the Blue Jays. Dave Cameron discussed the potential of signing him to a contract extension one year out. Edwin Encarnacion and Carlos Gomez are also among those veteran players who have previously signed contract extensions but who are eligible for free agency after the 2016 season. Those players could conceivably sign extensions before hitting the free-agent market. If they do, how will the contract look? Will the signing team extract any extra value from signing it? Or is it distinctly an advantage for the player?

On Friday, we looked at players who were bought out before taking their very first crack at free agency — players who signed their first extension just before reaching their free-agent years. Generally speaking, teams paid free-agent prices for those players and received typical free-agent results.

I wondered if the same form would hold true for more veteran players who have already received an extension somewhere along the line or had even already participated in free agency. On the one had, such players are older and thus more prone to decline earlier on in the contract. On the other, the signing teams would already have familiarity with these players and these players might be better given the previous investment, perhaps mitigating the influence of any age-related decline.

Much like I did on Friday, I consulted MLB Trade Rumors and looked for players who signed an extension within a year of free agency. This time, I considered only players who had amassed at least six years of service time, indicating that he’d already signed a previous free-agent contract — either that, or at least signed an extension that bought out a certain number of free-agent seasons. For the most part, these players had been made a priority by their current team or a previous one and their current team decided to make a significant investment in their future and convince them to skip the allure of free agency.

Read the rest of this entry »

Teams are constantly trying to sign young players to contract extensions, buying out both the remainder of the player’s cost-controlled seasons and then years of free agency after that. Doing so provides great benefits to the team, chiefly by allowing them to avoid the expenses of the free-agent market.

Not every player is offered or signs that type of extension, however. Some players choose to avoid extensions altogether, hoping for the big free-agent payoff as soon as possible. Other players might develop later and miss the window for an extension. Still others might lack the requisite talent to attract a deal. In every case, the player in question moves on, and that’s the end of it.

There’s a final scenario, however — one in which the club and player both possess an interest in reaching an extension but, for whatever reason, are unable to agree on the terms until the player’s final season of team control. In this case, a team isn’t buying out team-control years, only free-agent ones. And that changes the calculus a little bit. Because, while it’s possible the team might be receiving something of a discount from free agency, the odds of these deals working out for the team are not great.

Contracts for pending free agents (how I’ll refer to these players in their last year of team control) aren’t common. Players who’ve reached the brink of free agency have a major incentive to play out the year and see what the market provides. Having been unable to reach a deal for years, the odds that a player and his club will have a change of heart are low. This is particularly true for players who have never signed a contract extension and are heading into their sixth (or, because of service-time manipulation, seventh) year in the majors, and are now faced with their first chance at free agency.

Despite their rarity, there are a few examples of these contracts for pending free agents every season. Last year, for example, Rick Porcello signed a five-year deal with the Red Sox, while Clayton Kershaw and Brett Gardner have also signed similar contracts in the past couple years.

Looking at contracts from late-2007 through 2013, we can see how those deals have worked out for the teams that have signed them. Using MLB Trade Rumors’ extension tracker I looked for players with between five and six years of service time who were pending free agents and then signed contracts buying out at least two years of free agency. Those deals needed to be at least half-completed by this season to provide a decent idea on the deal’s outcome. In all, I found 26 such contracts. To determine value, I used $8 million per win for this season, and to approximate past and future years, adjusted by $250,000 per season. For contracts still active in 2016, I used the FanGraphs Depth Charts projection for the player, and if there were any years after 2016, I decreased the 2016 projection by half a win per year.

Read the rest of this entry »

There is an inherent risk/reward dynamic for both team and player when it comes to locking up young players to guaranteed contracts past their arbitration years. Without a guaranteed contract, teams can go year to year with players through the arbitration process and, in the event of player injury or decline in performance, the team can drop the player without consequence. However, once that same player reaches six years of service time, he is free to choose any team he prefers, often at an expensive price.

For the player, going year to year naturally exposes him to a possible loss in future compensation due to the risk of injury or a decline in performance. That said, by going year to year, the player essentially bets on himself during the arbitration process and reaches free agency at the earliest possible time — and with the benefit of a potentially large payday.

Where these two interests meet, teams and players reach agreements early in careers to buy out the player’s remaining arbitration years and some years of free agency. A team’s ability to absorb risk in handing out contracts is much greater than the player’s risk in turning the contract down, and the savings are generally much greater for the team.

From the winter of 2008 through the summer of 2011, teams and players agreed to 53 contracts both (a) at a point before the player in question had recorded four years of service time and (b) in which the contract featured no guaranteed money beyond 2016. Among those players, there are some bargains and some duds. By examining only the free-agent years for which clubs paid ahead of time, we can calculate rough approximation of how much money teams saved or lost by locking up players early in their careers.

While there are some players who might have been non-tendered during the arbitration process — therefore costing teams a bit more money than they would have going year to year — there are also players who would have earned considerably more during the arbitration process than their contracts provided. When teams sign players to these type of contracts, the major win for the team comes in free agent seasons, and the major concession by the players are those same years. As a result, the analysis below will focus on those years.

Read the rest of this entry »