Is The Market Changing?

Yet another year where Major League Baseball seduces its fan base with promises of an action packed winter meetings, only to produce nothing of interest for fans of 25 teams so far. After seeing how many bargains have been found late in the winter, many General Mangers are now content to let the market develop. The popularity of this strategy has led to an interminably long wait for deals to be struck.

I wonder, though, whether the late bargain market will actually develop this year. We’ve had about 10 free agent signings so far, and the price so far has come in around $3 million per win, significantly reduced from prior years. Essentially, the only players who have signed have been ones willing to take a discount. We’ve seen something of a reverse bidding war, where teams are telling players that they’ll sign the first guy from among a group of similar free agents to take a specific deal. Rather than teams competing over players, now players are fighting for roster spots, and it’s driven prices down.

However, I’m skeptical that this trend will last. It may be tempting to look at the signings so far and claim that teams are cutting back on spending, but I’d bet that we’re just seeing a selection bias. The guys who have signed so far are not a representative sample of the free agent population – they are mostly aging players on the decline, more interested in finding a landing spot than cashing in. These are the types of players who were waiting for contracts in February, and they have reacted by taking deals early and solidifying their place on a team.

To me, it looks like the free agent market has flipped. The guys willing to take a discount are signing early, while the guys who want to be paid are going to drag this process out through the winter. MLB’s revenues weren’t down that much in 2009 to where the numbers support a big pullback on spending this winter. There are teams with money to spend who just haven’t opened the wallets yet. When they do, I’d bet we’ll start to see some deals back over $4 million per win.

The late market might not be so full of bargains this year. The expectation of the market developing as it did last year may have changed the dynamics of how this thing plays out.