Nationals Arm Race

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Qualifying Offers; are they working?

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In the wake of several posts I’ve seen on the topic of Qualifying Offers (one long-winded piece from the long-winded windbag Murray Chass here, accusing the owners of collusion in the cases of Stephen Drew and Kendrys Morales instead of just understanding the state of the game, another from the more reasonable Jayson Stark here, talking about some potential fixes, and their respective agent Scott Boras whining about anonymous executive quotes in an ESPN article here), I thought I’d do some quantitiative-summary analysis of the Q.O. so far.

I think its fairly inarguable to state that the system isn’t really working how the players envisioned; especially as two decent FAs still sit un-signed.  Clearly the players union did not realize just how much teams are valuing draft picks, to the point where they’d rather keep a mid-first rounder than sign a decent middle-aged free agent.  I also believe that several of the players this past off-season got *really* bad advice on the state of the market for their services, and wholy deserve their fates.  Baseball is changing; we’re seeing metrics highlighting the value of defense, we’re seeing positional flexibility win out over inflexibility, and we’re seeing teams go with youth over veterans even when the cost difference is rather negligible.  That middle-aged, defensively challenged free agents (especially Morales) didn’t see this is entirely on them.  The situation is even worse for players of advancing years, who are not even getting contract offers after decent seasons and are being forced into early retirement in some cases.

Here’s part of a spreadsheet I put together, analyzing the eight guys who were faced with Q.O. decisions after the 2012 season:

Year Player Old Team New Team Draft Pick Forfeited Signing Date Subsequent contract (w/o options) Money up/down per AAV Q.O. Screw the player?
2012 Josh Hamilton TEX LAA 1-22 12/13/2012 5yrs/$125M 11.7 No
2012 Michael Bourn ATL CLE 2sup-69 2/11/2013 4yrs/$48M -1.3 Sort of
2012 Kyle Lohse STL MIL 1-17 3/25/2013 3yrs/$33M -2.3 Yes
2012 Adam LaRoche WAS WAS none 1/16/2012 2/$24 -1.3 Yes
2012 B.J. Upton TB ATL 1-28 11/28/2012 5/$75.25M 1.95 No
2012 Hiroki Kuroda NYY NYY none 11/20/2012 1yr/$15M 1.7 No
2012 Rafael Soriano NYY WAS 1-29 1/8/2013 2yr/$28M (lots deferred) 0.7 Sort of
2012 Nick Swisher NYY CLE 2-43 12/23/2012 4yr/$56M 0.7 No

Arguably, 3 of the 8 players in question were never going to be affected by the Q.O. (Hamilton and Upton because of the known long-term deals they were going to get, and Kuroda for being nearly guaranteed to return to the Yankees).  So, by my way of thinking 4 of the remaining 5 players in the  2012 FA class had their earnings either curtailed or affected by the presence of the Q.O.:

  • Michael Bourn got a longer deal with more guaranteed money, but he got less in AAV than the Q.O. he turned down, so perhaps my view is arguable that he was affected.
  • Rafael Soriano languished on the FA market until the Nats suprisingly signed him; his AAV in “real” dollars was significantly less in its estimate per year than the Q.O. he turned down (most estimates i’ve seen are at $11M/year with all the deferred money in his deal).  I hope Soriano keeps sending his agent Xmas cards; clearly Boras pulled a rabbit out of a hat to get him signed here.
  • Adam LaRoche saw very little interest in his services and returned to the Nats on a discounted deal; meanwhile players with comparable skills but without compensation issues earned more years and more dollars.  Shane Victorino; 3yrs/$39M as an example.
  • Kyle Lohse probably suffered the worst fate; he didn’t sign until a week before the season and for more than a 15% discount per year.  Meanwhile lesser pitcher Edwin Jackson got 4yrs/$52M by way of comparison, without a Q.O. attached to him.

Now here’s the same information for the thirteen players who dealt with (or who are dealing with) the issue after the 2013 season:

Year Player Old Team New Team Draft Pick Forfeited Signing Date Subsequent contract (w/o options) Money up/down per AAV Q.O. Screw the player?
2013 Carlos Beltran STL NYY 1sup-29 12/??/2013 3yrs/$45M 0.9 No
2013 Robinson Cano NYY SEA 2-47 12/12/2013 10yrs/$240M 9.9 No
2013 Shin-Soo Choo CIN TEX 1-22 12/??/2013 7yrs/$130M 4.47 No
2013 Nelson Cruz TEX BAL 2-56 2/22/2014 1yr/$8M -6.1 Yes
2013 Stephen Drew BOS unsigned ?? unsigned unsigned Yes
2013 Jacoby Ellsbury BOS NYY 1sup-30 12/13/2013 7yrs/$153M 7.76 No
2013 Curtis Granderson NYY NYM 2-51 12/??/13 4yrs/$60M 0.9 No
2013 Ubaldo Jimenez CLE BAL 1-17 2/19/2014 4yrs/$50M -1.6 Yes
2013 Hiroki Kuroda NYY NYY none 12/6/2013 1yr/$16M 1.9 No
2013 Brian McCann ATL NYY 1-18 12/3/2013 5yrs/$85M 2.9 No
2013 Kendrys Morales SEA unsigned ?? unsigned unsigned Yes
2013 Mike Napoli BOS BOS none 12/12/2013 2yrs/$32M 1.9 No
2013 Ervin Santana KC ATL 1-29 3/12/2014 1yr/$14.1M 0 Yes

Similarly to 2012, there were several FAs in this class for whom the Q.O. meant nothing: Cano, Choo, Ellsbury, McCann and Kuroda.  So, by my way of thinking 5 of the remaining 8 players had their contracts impacted … but two in a much more visible way:

  • Drew and Morales remain unsigned to this point … and its hard to envision a scenario right now where any team would sign these players until after the Rule 4 draft in early June.  Why give up a draft pick at this point?   On the bright side for both players, there may be a veritable bidding war for their services after the draft, and they could get decent contracts which have (by rule) no further draft pick compensation issues.
  • Nelson Cruz had to take a $6M pay-cut due to his not taking the Q.O., a serious miscalculation of his market by him and his agent.
  • You may argue whether or not Ubaldo Jimenez really got screwed here, since he got $50M guaranteed in a four year deal.  But his AAV is a good 10% less than the Q.O. that he spurned form Cleveland.
  • You can also argue about Ervin Santana, who signed for *exactly* the Q.O. amount once Atlanta lost most of their rotation for the year.  I still say he was impacted because of the amount of time it took and his subsequent service time loss to start the season.

If i’m a future veteran FA … i’d be rather worried.

So, what’s the fix?  Some say that this situation will naturally just take care of itself; next off-season maybe some players will finally take the Q.O. (remember; we’ve yet to have a single player take the offer), which in turn should make some teams wary of offering them in subsequent years.   But by the time this situation naturally plays itself out, it’ll be time for the next bargaining session.

I think the MLBPA needs to (in the next bargaining session) cut the cord on the link between draft picks and free agent compensation once and for all.  The entire reason draft pick compensation was invented was to “help” the little guys who lost free agents to the big teams.  But look at the list of the teams who are generally offering Q.O.’s to players right now: 6 of the 21 total offer’d players were from the Yankees, another 3 from Boston.  Those aren’t exactly teams “in need” of being given more picks in the draft.  In fact, of the 21 players who have gone through this system, by my count just THREE played for a team that I’d qualify as a “small market” (Upton from Tampa Bay, Jimenez from Cleveland and Santana from Kansas City).  Every other player plays for either a major market or a successful team in a mid-sized market.  How is this system “working” as per its original intent, at all??

Maybe the right way of doing things is to punish the big teams for signing FAs … but don’t allow them to “game” the system by subsequently gaining more picks back.   The Yankees signed four Q.O. affected free agents this past off-season … but only really lost one draft pick thanks to them having offered up and received their own compensatory picks for the players they knew they were going to lose anyway.  Why aren’t the Yankees being forced to lose their first four ROUNDS of draft picks?  If you’re in the top 10 in payroll, you only can lose in the draft pick compensation game, not win.

Footnote: Yes I acknowledge that, “in the grand scheme of things” it is really difficult to feel sorrow for a player for “only” earning $8M/year when he could have signed for $14.1M.  And its pretty hard to feel empathy for someone who feels slighted because he “only” got a 1-year 8 figure deal.  In some ways the money figures we talk about remind me of the infamous quote from NBA player Latrell Sprewell, who turned down a contract offer of $21M on the grounds that he “needed to be able to feed his family.”   For the sake of this post, lets dispense with the typical comments I see on the internet about how much money these guys are making as compared to middle-americans who struggle to get by on the median incomes for this country.  Baseball players participate in an economic market just like the rest of us; it just happens to value their talents at levels measured in the tens of millions of dollars instead of the tens of thousands that us normal people are used to.  For a huge, huge majority of professional baseball players, even a few seasons at the MLB minimum is all they’re ever going to see as payoff for years and years of incredibly curtailed earnings in the minors, and I’ll never consider these guys “overpaid.”

6 Responses to 'Qualifying Offers; are they working?'

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  1. Several more articles on the topic:
    - http://districtsportspage.com/negative-media-and-the-mlb-labor-market-is-scott-boras-right/22793 : Ryan Kelley expanding on Boras’s comment and with links to a few other stories from other sportswriters.
    - http://www.cbssports.com/mlb/writer/jon-heyman/24524922/boras-drew-kendrys-damaged-mlb-disagrees-but-will-investigate : Jon Heyman’s follow up.

    Todd Boss

    15 Apr 14 at 10:43 am

  2. Todd Boss

    15 Apr 14 at 10:46 am

  3. I thought it was shocking that Nelson Cruz, Stephen Drew, and Kendrys Morales received qualifying offers in the first place. I thought all 3 were locks to accept the offers but I was wrong. None of them are $14mm a year playesr and never will be but at the same time I find it shocking that Drew and Morales did not get multi year contracts. I had Morales pegged at 2 years and $20 million or so and Drew at 3 years $27-30mm. I’m sure both would have easily gotten that if it wasn’t for the draft pick compensation. Cruz is an older, 1 dimensional player that was coming off a steroid suspension so I did not have a lot of faith in his market to begin with. I really thought he would take the $14mm and stay in the hitters haven that is Texas and try the market again next year.

    My real question is why do teams value the draft picks so highly? If you are a “contending team” ala the Toronto Blue Jays who have a black hole at 2nd base and an injured starting shortstop how much more value would a draft pick have than a solid every day player like Stephen Drew? The majority of draft picks flame out anyhow. This isn’t the NFL or NBA where almost all 1st round picks are game ready. I think this is the aspect that threw the MLBPA off when they agreed to it.

    pdowdy

    15 Apr 14 at 4:18 pm

  4. Draft pick valuation: I think its just a shift in the industry, as we see more and more young players (especially pitchers) providing huge value for no money. I feel like teams are getting better at finding 1st round talents, are getting better at developing them, and the risk/reward of getting 3 years of near “free” labor at MLB minimum salaries and another 3 years of discounted control is worth more than the $8-$12M contracts that we used to see.

    Think about the Nats just a couple yeras ago; signed Jason Marquis 2yrs $15M. And they got jack sh*t out of him in terms of production. Now adays, faced with the same situation you have to believe the team would have saved that money, brought up a AA or AAA starter and let him at it, opting to spend that money elsewhere.

    I think the Toronto team’s silence right now speaks volumes; everything has a value right? If a 1st round pick is worth $x dollars … and Drew is worth $y on the open market, then Toronto just cannot pay more than y-x for him at this point. And i’ll bet that Boras is now telling his two guys to just wait it out, get post draft contracts and play this out to get to next year’s FA w/o draft pick compensation.

    Todd Boss

    15 Apr 14 at 5:09 pm

  5. A lot of the articles asking “Is it working” kind of skim over the question of what it was supposed to do. My assumption is that, from the teams’ standpoint, part of the rationale was to make it easier for teams to keep their own players by offering them a “fair” salary (avg of 125 top contracts)… kind of like the “franchise tag” in football. From that standpoint, the system is clearly not yet working (since no players accept). I’m not sure either side really value keeping fan loyalty by retaining “top” talent, but this system doesn’t seem to add to that in any way. If on the other hand, it is just to “compensate” teams that can’t afford to keep their top players, then I agree they should just do away with the team that signs “losing” the pick and just have it be added to the pool.

    DaveB

    15 Apr 14 at 5:38 pm

  6. Excellent question posed by DaveB: “what problem was the Q.O. supposed to solve?”

    I thought it was supposed to be a “better” replacement for the whole Type A/Type B nonsense that had gotten out of hand, especially in relation to middle reliever free agents. Teams just did not want to give up draft pick compensation to sign a 7th inning lefty reliever for $3M/year who just happened to be very good at what he did and was qualified as a Type A.

    Perhaps the real issue is the amount of the Q.O.? $14.1M is a LOT of money (that’s 25% of the typical payroll of Oakland and Tampa). Maybe the Q.O. amount should be lower.

    Todd Boss

    16 Apr 14 at 1:12 pm

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