Relative Shortage of Qualifying Offers Another Sign of a Chilly Winter To Come
In the latest sign that this offseason could be a difficult one for free agents due to the industry-wide loss of revenue caused by the COVID-19 pandemic, just six players received qualifying offers from their 2020 teams prior to Sunday’s 5 PM Eastern deadline. That’s the lowest total since the system was put in place in 2012, not that anyone should fret the loss of something that makes player movement more difficult. The six — Trevor Bauer, Kevin Gausman, DJ LeMahieu, J.T. Realmuto, George Springer, and Marcus Stroman — have until November 11 to accept or decline the one-year, $18.9 million offers. While historically, the odds strongly suggest that most of those players will decline them and move on, Gausman and Stroman stand out as two players who could accept them and return to their respective teams.
I’ll get to the players and the decisions themselves, but before that, there’s a lot to unpack. To review, the qualifying offer system was introduced for the 2012-16 Collective Bargaining Agreement and then revised for the 2017-21 CBA. It’s the latest mechanism in a battle that’s as old as free agency itself, for not only does it compensate the team who lost a major free agent by awarding them a draft pick, it penalizes the team that signs him by costing them a draft pick, and acts as a drag on player salaries because at a certain point, the cost of the lost draft pick(s) is substantial relative to the expected value of the player. That the updated rules make a player who has previously received a QO ineligible to receive another one is a clear acknowledgement of that fact.
The value of the one-year qualifying offer is based upon the mean of the top 125 player salaries (full-season salaries, not prorated ones). A player issued a QO can accept and return to the team for whom he played in 2020 at that price, or he can decline it and sign with any team (including the one from whom they rejected the offer), with his old team receiving a draft pick whose placement is based upon the size of the subsequent contract. If a qualified player signs a deal for at least $50 million, his old team gets a draft pick between the first round and Competitive Balance Round A. There were no such picks in the 2020 draft, but in ’19, those picks were numbers 33 and 34, while in ’18, they covered picks 31-35, meaning that they yielded around $9-10 million in future value. If a qualified player signs a deal for less than $50 million, the compensatory draft pick follows Competitive Balance Round B, which takes place after the second round, and which in 2019 covered just pick number 78, and in ’18 fell in the 75-78 range, worth somewhere around $3-3.5 million.
Meanwhile, the quality of the pick lost by the signing team depends upon whether it exceeded the Competitive Balance Tax in the previous season, and whether it receives revenue sharing money. A team that pays the tax will lose its second- and fifth-highest picks, which might amount to around $8 million in future value, while a team that receives revenue sharing will lose its fourth-highest pick, which might be worth closer to $3 million. These are ballpark estimates; you can read the fine print here. Read the rest of this entry »