The Qualifying Offer Remains a Problem for Players
(Photo: Arturo Pardavila III)
There is growing sentiment this offseason that the MLBPA and players didn’t do so well in the last CBA negotiation. Some have argued the owners have won the last several rounds of negotiations.
Instead of focusing on deep structural issues related to the devaluation of most free agents — the elite free agents, the Bryce Harpers and Yu Darvishes are always going to be paid — the players took home much smaller victories in the last CBA talks, such as improving dining options in the clubhouse.
The union’s primary focus during the last round of CBA negotiations seemed to be eliminating the qualifying offer or at least reducing the punitive nature of it. The Scarlet QO had compromised the markets for a number of players in past winters. And in the current CBA, the players did get a weakened qualifying offer.
It seemed like a small victory at the time, but it is looking less and less like a kind of victory and more like another factor in the historically slow offseason.
The offseason is now technically over. Of the nine players attached to a QO, six remain unsigned even with pitchers and catchers having reported to camps across Arizona and Florida.
Among the nine QO players — Jake Arrieta, Lorenzo Cain, Alex Cobb, Wade Davis, Greg Holland, Eric Hosmer, Lance Lynn, Mike Moustakas, and Carlos Santana — only Cain, Davis, and Santana — have signed deals. The one-year deal is tied to the average salary of game’s 125 highest-paid players, which was $17.4 million this offseason.
The problem remains, as FanGraphs alum and MLB dot com stalwart Mike Petriello notes, that while the draft-pick damages attached to the QO have been reduced, the tag is still apparently too great a cost when tied to a good but not great free agent.
Only 3 of 9 qualifying offer guys have signed.
I think b/c it's no longer "lose 1st pick," & b/c new rules are convoluted, it's easy to forget how much QO still limits FA.
If you're luxury tax payer, a QO guy costs you 2nd/5th picks, $1M of pool. Is a non-elite FA worth that?
— Mike Petriello (@mike_petriello) February 15, 2018
The penalties associated with the QO are still apparently playing a role in reducing players’ marketability.
The key factor that limits the market is really this: signing clubs that were alos luxury-tax payers in the previous season (almost always a large-market team) are forced to surrender their second- and fifth-highest picks in the upcoming draft and forfeit $1 million in international bonus pool money, which is roughly 20% of many clubs’ international budgets. Signing an additional QO-tagged player would cost such a team its third- and sixth-highest picks. Teams that are not over the luxury tax and do not receive revenue-sharing surrender their second-highest pick and $500,000 in international pool dollars. All other teams forfeit their third-highest pick.
While all first-round picks are now protected, the total costs associated with the QO are still apparently too great for most clubs when a non-elite player is tagged with the QO. If given a mulligan, perhaps Cobb, Holland, and Moustakas would all agree to the one-year qualifying-offer contracts.
Moreover, as Craig Edwards found it looks like overall player salary could decrease this season. At the moment, there is one fewer player earning at least $10 million in 2018 (126) compared to a year ago (127). If the growth of the one-year salary of the QO slows, more clubs are likely to attach it to players in hopes of gaining draft-pick compensation. The number of free agents tagged could increase.
One notable free agent who wasn’t attached with a qualifying offer was Zack Cozart, and he signed relatively promptly this offseason. Cozart agreed to a three-year, $38-million deal with the Angels way back on Dec. 15, the time of year, when we were younger, when free agents used to sign. Dave predicted a three-year, $39-million deal and the crowd a four-year, $60-million contract for Cozart. That deal seemed fair to moderately club-friendly. When the remaining six players with QOs eventually sign — assuming they sign — this author suspects they will fall far below the public’s expectations and players’ asks back at the beginning of the offseason.
While the elite free agents will always be paid, one of this author’s posts at FanGraphs concerned the forces working against the middle-class of player and free agent. I revisited it in November. Beyond clubs operating more efficiently and similarly, beyond certain clubs holding back cash for the next year’s class of free agents, beyond the stronger luxury-tax penalties that have created something of a hard cap, one thing that hasn’t been discussed as much is that the QO remains an impediment for the non-elite players tagged with it.
The qualifying offer might not be on the top of the list of things for which the MLBPA ought to fight, but it remains a problem for many players attached to it.
A Cleveland native, FanGraphs writer Travis Sawchik is the author of the New York Times bestselling book, Big Data Baseball. He also contributes to The Athletic Cleveland, and has written for the Pittsburgh Tribune-Review, among other outlets. Follow him on Twitter @Travis_Sawchik.
Agreed. The QO was a sloppy tool implemented to give small market teams an avenue to become good again when their homegrown stars they couldn’t afford to pay left.
However, it would be interesting to see if the QO has actually benefitted large market teams more. That’s my suspicion, through their financial resources to overcome lost picks, etc.
When the rule was first created and shortly after, the best players tended to be on the large market teams, so it was probably expected that they would benefit the most from FA compensation at first.
A system like this needs a longer term analysis that focuses on the “steady state” that will emerge after a few years or so. The changes made do a good job of addressing the shortcomings of the first QO system and will, in the long run, likely benefit the smaller market teams the most.
Free agent compensation also provides a “reserve price” for deadline trades, and this may be its most important function for small market teams. Sometimes, especially with position players, a seller will only have one buyer at the trade deadline, and a valuable compensation draft pick ensures that the seller is not left begging for a contender to take one of their best players off their hands.
The QO doesn’t even make sense on that basis. In fact, I’m struggling to find any sort of economic justification for it at all.
Let’s say you’re a small or bottom end mid-market team with a budget of, max, $120 million. Are you desperate to retain a QO guy who is going to cost you $17.8 million for a single year and then he’s gone? Of course you’re not. The only thing (and it’s been successful so far) that encourages you to make a QO is the prospect of getting draft picks in return. It’s astonishing (this year) to recall that, only two years ago, almost all QOs were declined by the players. I can’t see this happening next year, so any notion of “helping competitive balance” is about to go out the window.
Now, a QO might work for a mid-rotation pitcher. It might work for a young-ish CF or SS. It won’t work for most other players, given a sensible forward projection of value as compared to the value lost in picks, international spending, and draft pool — and the figure allotted to a QO is the same, independent of position or age or indeed anything at all. If nothing else, it depresses the value of a perfectly fine 2-WAR player (say) with a QO, as against a similar player with no QO.
The whole thing is absolutely insane.
“It’s astonishing (this year) to recall that, only two years ago, almost all QOs were declined by the players”
It’s not particularly astonishing: QOs are designed to not be accepted. Players who would accept them (i.e. those who think a QO is the best they can get) are the same who aren’t offered them in the first place.
Carlos Santana signed with the Phillies…
Bears, Popes, woods, Catholicism. So what?
I wonder if MLBPA and the owners should consider the prior ranking of “A” and “B” free agents in the next CBA? Advanced metrics and variable compensation could create levers that would allow parties to negotiate around value and competitive balance.
“Elite” free agents are still getting paid, or at least offered to be paid. Holland reportedly received the Davis offer but rejected it. Hosmer reportedly has multiple offers over $100+ million, but is holding out for more. Cain got more total value than he was projected to get. Wade Davis got a higher AAV than projected. Santana got a higher AAV than projected.
Martinez doesn’t have a QO, and his market isn’t as strong as projected (though he probably isn’t worth more than $100 million). So, maybe the explanation is that the players aren’t as elite as they think they are, whether they have a QO attached to them or not.
Martinez seems to be quite underrated by many commenters and perhaps the world. He is projected (by the Depths Charts page) to put up an ops similar to Correa and Machado – top 15 in the majors. I am not suggesting that he is worth what those two players are, but there is value to having a great hitter that WAR may understate.
No, having that kind of hitter is exactly as valuable as war says it is. What is more valuable is having that kind of hitter at a premium defensive position, which Machado and Correa are and Martinez is extremely not.
Problem is that I doubt teams think their WAR models are understating JDM’s value. He’s a great hitter that won’t be good enough defensively over the life of the contract he wants for half the teams. Smaller market usually leads to smaller contract.
The difference between having a handful of serious bidders on a player and two handfuls of bidders is quite small. The largest of 15 random numbers between zero and 1, when compared to the largest of a second set of 15 such numbers, will be smaller half the time, but rarely by a lot. In some settings, having even two competing bidders will generate close to full price.
It is conceivable that some teams build their rosters like they are in a points league trying to maximize projected WAR, but doing so would likely lead to some costly mistakes, and teams have more resources to devote to multi-million dollar decisions that I would expect that they would do better.
For JDM, there only seems to be one serious bidder out of 15 though.
Yep. He’s just a marginal WAR upgrade for most teams, unless you think the projections are off. Most teams can find cheaper ways of adding 1-2 WAR to their roster (i.e. add Nunez as UIF, add Vargas or Garcia as 5th starter).
This year’s free agents included a lot of guys who are unappealing to the modern GM. It also included a lot of guys who would have been better off accepting the QO because they aren’t elite players. Any reliever not named Aroldis, in particular, should take the QO.
You think a 32 year old Wade Davis should take $17.4M/1 year QO
instead of $52M/3 year he got?
Or Jansen should have taken $17.2M QO rather than the $80M/5 year deal?
Maybe we can add some more bizarre rules and asterisks and categories of free agents to shore everything up. Surely there will be no more intended consequences from that path! Or maybe we treat players like any other type of employee all the time and the free market will become truly efficient.
I have a vague memory of being told a story about a player who asked for a raise after a great season. His team told him “we could have finished in last place without you”. Unfortunately for the player, the team in fact finished in last place with him. His request was turned down.
The Marlins have not reallocated their savings from trading away an all-star outfield to their rotation, they simply decided they could lose just as easily without those players.
Competitive balance is necessary to get big paydays for a wider range of players in the short run. In the long run, it may be necessary to keep the league from contracting and losing fans.
It’s another example of the player’s throwing amateurs under the bus and it coming back to bite them. They agreed to the draft slot and the IFA cap cause they don’t care about amateurs. But now that makes every pool dollar and every pick drastically more valuable than it was before since a team like the yankees can’t just spend like 15 million on the back end of a random draft to make up for lost picks.
There should be enough teams with only trivial draft pick costs to sign these guys, even if this won’t likely lead to a bidding war. The rule would work pretty well and not cost the players very much if there was robust competitive balance.
This imbalance, when paired with an odd reluctance to accept the qualifying offer, may leave some players seeking a “band-aid” offer so they can try again in next year’s market with no compensation attached.
“If given a mulligan, perhaps Cobb, Holland, and Moustakas would all agree to the one-year qualifying-offer contract.”
I think that’s very likely correct for Moustakas, possibly correct for Holland, and not correct for Cobb.
Cobb’s market looks soft relative to his expectations, but there have been reports of offers for him of at least 3 years with guaranteed money of $40+ million. That seems preferable – especially for a pitcher – over taking the QO.
I think that Moustakas has a problem in part because of an unintended consequence of something that the players wanted and got in the last CBA: no more than one QO for a player in his career. So, under the prior QO rules, a team offering a 1 year pillow contract to a QO’d player (such as Ian Desmond) could see the possibility of getting back the lost draft pick by QO’ing the player after one year. That’s no longer the case.
conversely, a player with a qualifying offer, who is still being dogged by the offer, can sign a one year contract without having to worry about getting a qualifying offer the next year too
Teams that try to count on that draft pick were assuming a lot of risk. I doubt it has much of an effect.
Even if a team doesn’t count on it, let’s say that a team would have thought that it has a 50% probability of offering the player a (near certain to be rejected) QO after a 1-year contract. That level of probability hardly seems outlandish. That reduces the assumed draft pick cost of signing a QO’d player to a pillow deal by about 50% (perhaps a bit less due to the NPV of the reclaimed pick being a year later).
This was the very odd Ervin Santana situation with Atlanta. He signed a one year deal for the QO amount with a different team after rejected the qualifying offer from his original team. At least from the public discussion, it seemed that the ability to reissue the QO was a factor in Atlanta’s decision to make the offer even though they were losing the draft pick in exchange for only one year of pitching.
I suspect this is merely a symptom of the larger problem, which is that most of the remaining unsigned free agents simply aren’t that good, relative to the years and dollars they’re purportedly asking for.
It is all too easy to overestimate one’s capability. It is particularly easy when your agent’s marketting book emphasizes the positives in a vacuum without factoring in the negatives.
In other words, yes: many of them have bought into their own hype.
Moustakas is one player who really should have looked at the Depth Charts and realized he would face a soft market with at most four potential landing spots. He lost the best option when the Angels chose to go with Cozart At 3B. Then SF traded for Longoria and the Mets went with Frazier. All cheaper/shorter commitments.
Right now I doubt KC would take him back on QC terms
Barring an injury to a contender’s incumbent he will probably have to come down significantly off his ask. In money, years, or both. But then, his agent is Boras…
I hadn’t realized the Phillies were losing $1 million in international pool for signing Santana.
Now their Rule 5 wheeling and dealing (selecting Nick Burdi, flipping him to the Pirates for $500,000 in international spending) makes more sense. It’s not a case of there being a specific international prospect they were aiming for, but trying to recoup some of what they lost.
Players unwillingness to accept QOs has made it easier for clubs to offer them to players with the hope that the player doesn’t accept.
Sure, the union has been getting lightly spanked in the last couple CBAs, but not everything is their fault. A factor they can’t control is general league depth. This is the longest MLB has gone without expansion. Foreign markets are being more and more efficiently mined for talent, and as a result there is a lot more positional parity than in the past. My belief (true or not) is replacement level is way higher than at any time in my lifetime. This causes less demand for mid-range players especially at the 1-2 WAR level.
It’s an interesting hypothesis that replacement level is higher than at any point in history. I think that this would also mean also that the standard deviation in performance should be lower than at any point in history. That should be testable.
QO, “smarter” front offices, less than stellar FA class, Scott Boras, etc. At the end of the day if players do not receive what the union perceives as a fair percentage of MLB revenues there will be strife. Maybe instead of only team to team revenue sharing it’s time to consider team to player revenue sharing. Maybe a pay structure that compensates team controled players could be devised in a way that shifted some dollars to younger players, especially in light of teams seeming reluctance to compensate older players once they become eligible for free agency. Just a thought.
BTW, I wonder how many of the “smarter” teams not signing FA’s this year have increased ticket prices while reducing payroll.
The second rounder is not so bad (Maybe on average worth 5M of future value – real value, not pool value of course) but the 1M in that reduced international pool does hurt.
Look, the QO was always a tool to tax FA and reduce the amount a signing club pays them using the penalties as justification. Now its morphed into a reason to justify signing no QO FA.
Its not like the money (500K) cant be reaquired by trading prospects who have lost their value or with limited upside, and 2nd or 3rd pick loss is nowhere near a 1st round pick.
Searching for excuses to explain this years market to avoid the elephant in the room seems to be the norm. The elephant wears a big C on its cap and its name rhymes with illusion. Your illusion renders him invisible to all but that little girl in the room, the same girl who sees the emperor is naked and not finely clothed
Its also interesting that stars like JDM and Darvish received no QO and remained unsigned into February
The MLBPA needs to push for a 2nd year player option on the QO. Something like $20M (so, 17.4M on the 1st, player option makes it a 37.4M 2 year deal) and make it so that the player has until say December 15 to accept. Keep all the penalties – those were intended to help small market teams when elite talents leave…
That would swing a lot of money back towards the players – I think.
Perhaps non-elite free agents should be content with $17.8m….or 7yr/$140m
Better assessment of their competituve value (by modern analytics) would also help.