One of baseball player Yogi Berra’s famous quotes is, “When you come to a fork in the road, take it.” Whether Yogi actually said it is open to speculation, as are most Berraisms. Someone suggested years ago that Yogi was giving directions to his house in New Jersey, which was on a cul de sac. True enough, with the house sitting on the circular part of the road it didn’t matter which way the driver turned. Either fork led to his house! Baseball reached something of a fork in the road between the end of 2017 and the beginning of 2018 regarding the free agent market. The owners took the path leading away from veteran talent and toward locking up young baseball players for years to come.
The initial flurry of overpaying short relievers resulted in a bonanza for closer Wade Davis of Colorado and many setup men. Teams rushed to lavish higher salaries and longer contracts on pitchers who work after the sixth inning. What followed was a waiting period for the bigger name free agents.
Then Yu Darvish signed with the Chicago Cubs for six years and $126 million. Eric Hosmer, at age 28, waited for months before agreeing to his eight-year, $144 million deal with San Diego. The deal included an opt-out clause that would allow him to become a free agent again if he chose after the first five years of the contract. The Hosmer deal was worth $20 million for each of the first five years of the deal, dropping to $15 million for each of the last three years of the deal.
Agent Scott Boras used the same technique with J.D. Martinez as with Hosmer, adding an opt-out clause after two years. Martinez will receive $25 million for each of the first two years. He could then opt out of the remainder of the deal and become a free agent. If he elects to stay with Boston, his salary will drop to $20 million for each of the remaining three years. Martinez, who is 30, added a 45-home run season in 2017 to the Red Sox lineup, which was last in the American League in home runs.
The Dodgers and Yankees dipped below the luxury tax figure of $197 million in 2018, resetting their tax from 50% in 2017 to 20% in 2019. When the Dodgers and Yankees aren’t bidding for free agents, it’s not a good winter for players.
The owners shifted their sights to young MLB players who could produce very good results at the expense of baseball players who had crested the 30-year-old plateau. Team payrolls increased only 3%. They had increased about 6% per year for the previous 13 years. Until 2018.
The tectonic shift in the owners’ evaluations revolved around valuing players differently. Instead of paying a 31-year-old star player such as Robinson Cano or Albert Pujols $240 million over ten years for what he HAS DONE, the analytical front offices were focused on paying 27-year-olds for what they EXPECT THEM TO DO.
Here are some of the existing contracts regarded as dinosaurs in 2018:
Albert Pujols signed at age 31 10 yrs. $240 million
Robinson Cano signed at age 31 10 yrs. $240 million
Miguel Cabrera signed at age 32 8 yrs. $248 million
The player regarded by many as the best in the game, Mike Trout, at age 23, agreed to a six-year, $144 million deal. But not all of the contract signings will work out for teams, even with emphasis on youth. Jason Heyward of the Cubs had produced 18 homers and 108 RBI in the first two years of an eight-year, $184 million bonanza at age 26 in 2016. The next two years have been awful.
The sport is going through an upheaval of sorts. The extremely high costs of franchises led new ownership groups such as the Miami Marlins to trade high-salaried veterans and lower their payrolls to a minimal level so as to pay down some of their enormous debt loads. The cost of the Marlins was $1.2 billion, and the new owners also assumed heavy debt. Several teams could be grouped into that “restructuring” phase: Miami, Detroit, Cincinnati, Oakland, Pittsburgh, San Diego, the Chicago White Sox, Kansas City, Baltimore and Tampa Bay. Baseball does not operate with a salary cap, unlike other major sports.
The MLB Players Association filed a grievance against four teams February 23, accusing them of failing to spend revenue sharing money appropriately. The four teams were Miami, Oakland, Pittsburgh and Tampa Bay. MLBPA executive director Tony Clark claimed the Marlins’ route was different from the Cubs’ and the Astros’ methods. “Those teams didn’t tear themselves down,” said Clark. Players and agents used the word “integrity” often in late 2017 and early 2018 to describe what rebuilding teams were lacking. Wikipedia describes integrity as the quality of being honest and having strong moral principles. “I don’t think all of the teams are trying to be competitive or doing everything they can to protect the integrity of the game,” said Hosmer.
During spring training, the St. Louis Cardinals signed 24-year-old shortstop Paul DeJong to a six-year, $26 million contract that could turn into an eight-year deal if the club picked up two one-year options. DeJong made his major league debut May 28, 2017 and hit .285 with a team-high 25 home runs and 65 RBI in 108 games. While older but still productive baseball players were out of work, the Cardinals were committing themselves to a young player who played only 246 minor league games after being drafted from Illinois State. This signing continued the trend of young players being rewarded for many years at much lower prices than the average established free agent baseball players.
The Phillies stepped out to sign pitcher Jake Arrieta to a three-year, $75 million contract, which could extend to a five-year, $135 million deal. The Phillies, flush with cash from a low payroll and a top-dollar TV deal, were not regarded as contenders. This signing shot some holes in some of the statements made previously by baseball players and agents. “In a marketplace where you’ve got 30 boats in the blue lake of free agency and maybe as many as 12 are no longer fishing and the other five have determined that the gas tax is too great, and you’re left with a free agent model that is non-competitive,” said agent Scott Boras.
Then there was the new contract for Jose Altuve. The 27-year-old three-time batting champ agreed to a five-year, $151 million extension through age 34. Astros fans reacted with happiness. Altuve’s previous contract was a team- friendly deal. It was a four-year, $12.5 million arrangement including two team option years at more than $6 million each. He was currently about to begin the first of the two team option years.
The Astros are in an impossible financial situation when it comes to budgeting for multiyear contracts for Carlos Correa ($1 million in 2018) and George Springer ($24 million for 2018 and 2019). It was fitting, nonetheless, to deal with Altuve first. He is about to turn 28 and had 6 ½ major league seasons behind him. Springer, to the surprise of many fans, will be 29 in September. Correa will be 24 in September. Compared to the contracts signed since the end of 2017, Altuve is being paid as a younger player who is expected to play at an MVP level through the end of the deal. The contract he signed will take him well past the prime of the great percentage of baseball players. Instead of calculating what he WOULD be producing, the Astros might be paying him in the final years of the contract for what he HAD done. His value is at an all-time high after winning the batting title and MVP award. The team was willing to reward him for his play and his professionalism. The Astros were conceding that they should pay more than any statistical model would project because of his role in the organization, his loyalty and his complete devotion to the fans. Their plan is to have him follow Biggio and Bagwell into the Hall of Fame with only one team on his resume. His $30 million average annual salary 2020-24 will be more than the entire team’s payroll in 2012, his first full year in the majors.
The Philadelphia Phillies took the opposite approach. Their number two prospect, Scott Kingery, signed a six-year, $24 million deal before he spent a day in the major leagues. He was only the second player to do that. The Phillies might have saved themselves many millions of dollars with the deal.
On the heels of that announcement, the Arizona Diamondbacks agreed to a five-year, $24 million contract with 24-year-old infielder Ketel Marte, who had filled in at shortstop for them in 2017. A year from now the market may change. But for this year, youth is being served. And the over-30 set is worried.