The Qualifying Offer Remains a Problem for Players

Jake Arrieta is one of six unsigned players to have received a qualifying offer.
(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.

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.

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6 years ago

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.

6 years ago
Reply to  tb.25

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.

6 years ago
Reply to  tb.25

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.

6 years ago

“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.