The Missing Free Agents

This year’s free agent class was supposed to be historic, but with Clayton Kershaw pitching only really well, Josh Donaldson and Andrew Miller hurt, David Price and Jason Heyward not performing well enough to opt out of their deals, and Matt Harvey taking a nosedive, this class only turned out to be pretty good. Manny Machado and Bryce Harper are two superstars hitting free agency in their mid-20s. Having one of the two would make for a great headliner; signing both would provide multiple teams with the opportunity to transform their franchise. After those two, we’ve seen starting pitchers do pretty well so far, and a bunch of relievers sign solid deals, but the talk of a slow offseason has returned.

Some of last winter’s slowness was mitigated by star players receiving contracts close to expectations. Yu Darvish, Eric Hosmer, J.D. Martinez, and Lorenzo Cain all signed deals that seemed fair as spring approached. Jake Arrieta didn’t come that far off when we consider his opt-out. Machado and Harper are still likely to sign very big contracts, while some in the middle might end up getting squeezed. But with this free agent class the supposed justification for teams saving their money on the heels of MLB payrolls going down despite soaring revenues, another slow winter is cause for concern for the players.

In examining the slow market, Ken Rosenthal recently called the system broken and floated some differing perspectives on the causes, effects, and solutions. One paragraph, in particular, caught my eye.

Some on the players’ side believe the market is better than last year’s, echoing club officials who say agents need to change their playbooks, stop holding out for unrealistic prices and secure long-term extensions for their clients — even at club-friendly rates — before free agency.

As to the first part, there is some reason to believe free agency is going a little better this year as compared to last year. Dollars and signings are way up over this point last season. Patrick Corbin, Andrew McCutchen, and Nathan Eovaldi have all done well. It’s hard to know which players, if any, have good offers on the table but are holding out for more, though the very last part of Rosenthal’s quote above was striking. It’s clear from the quote that teams are trying to convince agents and players to sign long-term extensions at team-friendly prices before free agency.

Teams like team-friendly things. It’s right there in the description. What’s less clear is why anyone on the players’ side should be advocating for more of these deals. I advocated for the opposite last spring and argued that if the players wanted to do something to combat the glacial market, they should stop signing team-friendly, long-term extensions. While likely impractical without additional financial assistance elsewhere — individual players will still be keen to receive life-changing money — the strategy would net players considerably more in free agency. A previous study I performed showed that teams saved half a billion dollars on the contract extensions signed in the four years from 2008 through 2011. We can look at this year’s missing free agent class and see similar savings.

Below are the players who would have been free agents this winter if they had not signed contract extensions early on in their careers.

Hosmer got $144 million last winter coming off his best season; Anthony Rizzo had a similar 2018 season to Hosmer’s 2017 at the same age, though that was a down year for Rizzo. Corey Kluber is one of the very best pitchers in baseball coming off another great season. Andrelton Simmons learned how to hit a little bit and that, combined with his great defense, helped him transform into one of the league’s premier players. Those three players might add close to half a billion dollars in free agent spending this year without meaningfully changing the rest of the market. If the Cubs looked more like the third-best team in the NL Central without Rizzo, would they still have been this quiet? Would Cleveland still have shifted salaries around instead of trying to make themselves better? Might the Angels have been more even active in trying to build around Mike Trout if their second-best player was a free agent? The effect on the free agent market isn’t just that better players might be available; it’s that the teams losing those players have major holes that wouldn’t be filled by players on bargain contracts.

If we were to look at the missing free agents and examine only the years bought out and the expected production during those years, here’s the surplus those teams are projected to receive over the course of the next few seasons, based on $9 million per win. The remaining surplus has not been discounted to present-day value.

Yan Gomes basically breaks even and Julio Teheran is a slight negative, but every other player comes out way ahead. This doesn’t even capture any discounts teams may have received during the arbitration process. Teams save massive amounts of money on these contracts and prevent very large free agent deals. This doesn’t mean these deals are necessarily bad; some players may value the extra security that a long-term deal provides, even if it comes at a steep discount. What would constitute a faulty strategy by players and their agents would be signing these types of deals as a means of getting more money to players, as it often has the opposite effect. Teams have less need for free agents when they have cheap options in-house, and that’s what team-friendly extensions tend to provide. Players’ options are currently limited by to the poor CBA negotiated on their behalf, but signing more team-friendly contracts is not a solution to their troubles. If anything, doing so would actually make their position even worse.