Today at 5 p.m. E.T. is the deadline for teams to make a qualifying offer (QO) to their free agents. For years, this decision was straightforward: teams handed offers to anyone remotely worth it. Why not? Every player rejected them. It was a free draft pick.
Meanwhile, evidence mounted that players should adjust their strategy of “always reject.” Nelson Cruz, Stephen Drew, and Kendrys Morales (among others) showed that rejecting the offer wasn’t always a good idea. These players cost themselves big time.
Can you imagine the frustration they felt at reaching free agency only to see a big payday slip through their grasp? This year’s free agents are watching and learning. And teams are watching and learning with them.
When these guys rejected the QO, their price tags increased by about $8.1 million. Research by Matthew Murphy at The Hardball Times shows that, prior to 2014, a draft pick in the compensation range (typically picks No. 26-30) was worth this much, or a little more than a win. Cruz, Drew, and Morales gambled that teams would pay this additional price for them.
They lost their bets. Teams priced the draft pick into their assessments of each player and found the math upside-down. Because the teams had all the leverage, the players had to concede some salary.
Last year, three players got wise and adjusted their approach. In the 2015-2016 offseason, Brett Anderson, Colby Rasmus, and Matt Wieters accepted QOs from the Dodgers, Astros, and Orioles, respectively. Meanwhile, Ian Desmond became the latest example of a player weighed down by the draft pick he incurred by rejecting the QO.
The signal became clear: marginal players shouldn’t reject the QO. If they do, they’ll get burned. This year, the signal will manifest itself as a higher probability that a marginal player will accept a QO. I expect teams will read this intent and, accordingly, be more selective this time when making their QOs. Fewer marginal players will likely get one.
To model the break-even point teams need to justify a QO, I estimated what each player might be worth on a one-year deal and compared that to the $17.2 million guarantee they’d get if tendered a QO. I used the following inputs to compute break-even points for many free agents:
- A reasonable one-year contract offer. To get this I divided the total value of multi-year contracts, as estimated by the FanGraphs crowdsourcing project, in half.
- The value of a QO: $17.2 million.
- The value of a compensating draft pick: $8.91 million.
The formula is:
Break-Even % = 100 – (100 * ((QO Value – One Year Contract Value) / Draft Pick Value)
where Break-Even % is between 0 and 100.
Consider Luis Valbuena. No one thinks Valbuena is worth $17.2 million per year, but he’s a useful player who should land a multi-year contract as a free agent. In years past, an aggressive team would’ve made him a QO in order to get a draft pick. In the soon-to-be published results of this year’s contract crowdsourcing exercise, readers estimated Valbuena’s contract this winter (without a QO) at $25.6 million, so I estimated his one-year value at half that: $12.8 million. In reality, he’ll probably sign for less than that on a per-year basis, but he’ll probably get two or three years, so that’s my guess at what his open-market value would look like if he only wanted a one-year deal.
Using the formula noted above, Valbuena’s break-even point is calculated as follows:
100 – (100 * ((17.2 – 12.8) / 8.91)) = 100 – 49 = 51%.
If the Astros though there was less than a 51% chance that Valbuena would take the QO, they could justify making him the offer. The potential value of a draft pick makes up for the risk of overpaying him by a few million if he takes the one year deal. However, I’m confident Valbuena is more than 51% likely to accept a QO this year. Last year or the year before, maybe not. But he knows that if he rejects the offer, the draft pick will hurt him badly. He’ll have to convince other teams he’s worth something like $20 million for one year or $35 million over two, since they’ll be factoring in the tax they’ll have to pay to sign him as a free agent.
Therefore, the Astros shouldn’t make him an offer, even with the lure of a draft pick if he turned it down and signed elsewhere. If they do, they’ll likely find themselves paying $17.2 million, after he and his agent correctly ascertain that the QO would crush his market value, and a multi-year deal probably isn’t available on the open market with a draft pick attached. Also, the Astros would have the additional headache of finding playing time for Valbuena while also having to work Alex Bregman and Yulieski Gurriel in at the same positions Valbuena plays.
Rasmus is another player who won’t get a QO, even though he got one last year. His break-even point is 47%. If he’s any more likely to accept a QO, the Astros shouldn’t make it. With an estimated one-year contract of $12.5 million, Rasmus is more like 99% probable to take the QO.
The last interesting guy to examine is Brandon Moss. His break-even point is 41%. Like Valbuena and Rasmus, Moss would take the QO in a heartbeat. This may be why the Cardinals reportedly won’t make him one.
The following table shows other eligible free agents, sorted by Marginality, which is 50 – (|50 – Break-Even %|). The closer to 50% a player’s break-even point is, the more marginal the player is. (Once again, data taken from contract crowdsourcing effort.)
|Player||Marginality||Est. Total Contract*||Est. One-Year Contract*||Break-Even Point (%)|
Valbuena, Rasmus, and Moss are the players most on the bubble. The next tier includes Edinson Volquez, Michael Saunders, Mike Napoli, and Matt Holliday. Their respective break-even points are 72%, 76%, 24%, and 21%. If you’re Dayton Moore, do you think Volquez is more than 72% likely to accept a QO? If so, don’t make him one. As for Napoli and Holliday, I guarantee you they’re more than 24% and 21% likely to accept a QO. Those thresholds are very low.
The guys who definitely won’t take a one-year, $17.2 million offer appear in the middle of the table. Their break-even point is at 100%, reflecting the fact that making guys like Justin Turner a QO is never a mistake. These guys will likely get offers. Because the decision to make an offer is so easy, their Marginality is 0.
Last come the guys who would take one-year, $17.2 million every single time. Making these guys a QO is always a mistake. A 0% break-even point for C.J. Wilson means if he’s even 0.000001% likely to accept a QO, Billy Eppler shouldn’t make him one. This decision is just as easy as deciding whether to make an offer to Turner, so Wilson’s Marginality is also 0.
If the physical game of baseball is one of constant adjustments, so is the business game. Last year, three players saw evidence of how rejecting a QO could hurt their income. They adjusted their business strategy and took the QO. This year, teams can expect more marginal players to do the same. Therefore, the teams themselves will adjust. The result will be fewer (if any) QOs to marginal players.