The Free Agent Salary Dominoes

As baseball adjusts to the realities of the novel coronavirus, many decisions concerning the upcoming season loom. Yesterday, my colleague Craig Edwards discussed the service time issues likely to bedevil the sport’s return to normalcy, whenever that (hopefully) occurs. It’s nearly impossible to underrate how big of a kerfuffle this could cause. Service time is one of the most significant drivers of how a large percentage of baseball’s revenue pot ends up being divvied out. This ain’t a pot of delicious chili, but one that amounted to nearly $11 billion in 2019. Players and teams have a lot invested in this fight. For teams, those cost-controlled years mean massive profits. For players, accruing service time is essential to moving up the incline from pennies to cash windfall they might enjoy in free agency.

If, in the worst-case scenario, the 2020 season isn’t played at all, baseball will be in uncharted waters. This year’s revenue won’t be coming back, and the negotiations between owners and the union are, for all practical reasons, a hashing-out of who takes the biggest economic hit for that year of missing dollars. If they prove to be unsuccessful at gaining a whole year of service time after a lost season, players nearing free agency will see large reductions in their next contracts, simply by virtue of being a year older when they hit the market.

How much would hitting free agency a year later affect baseball’s best upcoming free agents? To get a sense, I took some of the biggest names anticipated to hit free agency for the first time over the next two offseasons and projected five-year contracts based on their “normal” free agent entry season, along with the projections if they hit free agency a year later:

In total, these 15 free agents to-be project to make $2.1 billion over their first five years after hitting free agency. Delaying service time by a year projects to cost this group $316 million. And that’s just 15 players; everyone in the league, from Fernando Abad to Mike Zunino would have to wait another year until they could take open bids. That’s a rather poor return after losing a whole season of their career.

It’s especially cruel that Kris Bryant is the player on this list who ZiPS projects to lose the most money. After all, not only would he lose $31.7 million over the following five years, he also was the victim of the Cubs’ service-time shenanigans. That means one can make the case that, unless you actually thought that Kris Bryant needed a few weeks in 2015 to become a better player than Mike Olt, the 2020 worst-case scenario would delay Bryant’s free agency by two full years.

The unfortunate thing is that the flip side — giving everyone a year of service time after a lost 2020 season — doesn’t feel totally satisfactory, either. Making Mookie Betts have to wait an additional year to become a free agent feels unfair, but so does the Dodgers having traded Alex Verdugo and Jeter Downs for nobody. One of those outcomes is obviously worse – the Dodgers can weather their disappointment much more easily. But there’s something universally unsatisfying about the Boston Red Sox becoming a massive beneficiary of their decision to trade Betts!

For further context, we’ll look to the past. One of the examples I like to use is Alex Rodriguez’s contract.

Going into his 2001 deal with the Rangers, ZiPS, if it had existed at the time, would have projected a $254.9 million contract. This is based on 82 projected wins (assuming Rodriguez stayed at shortstop) and the going rate of a win in free agency growing from $2.5 million in 2001 to $3.9 million in 2010. A-Rod was 25 going into the 2001 season, but re-projecting him as hitting the market at different ages drastically changes how much ZiPS would have projected him to get:

If the projections included a change of home park to Yankee Stadium and a move to third base, A-Rod’s win projection for 2001-2010 drops to 74.1 wins (70.0 was the actual result). The first A-Rod contract was fine; it was the Yankees giving him a new 10-year deal after he opted-out that was the disaster.

Every additional year that passed would likely have cost A-Rod $20 million-$30 million in projected salary, assuming the team had approached this question using a method similar to ZiPS. Twenty years (!) after A-Rod’s deal with the Rangers, a lot more teams use models similar to ZiPS than would have at the time.

Hopefully, the worst-case scenario doesn’t come to pass and we get a meaningful-if-shortened 2020 season. But if 2020 is gone, the MLBPA and the owners are likely going to have to spend the time finding a creative resolution. If the inability to solve the service time issue gets folded into already tense CBA negotiations, 2020 might not be the only season that ends up shortened or unplayed.