Mother Nature has provided the perfect metaphor for this offseason with the deep freeze this past week. It is hard to talk about much else since one of our favorite pastimes in the winter months has been so boring, but it isn't just our imagination that this previous year's activity was different.
# of @mlbtraderumors Top 50 Free Agents to sign before New Year’s Day:
— Cespedes Family BBQ (@CespedesBBQ) January 1, 2018
But those numbers don't even fully encapsulate just how slow this offseason has moved with only the flurry of relief pitchers signings to keep us warm. The top 20 by this measure have been signed even slower.
# of @mlbtraderumors Top 20 Free Agents to sign before New Year’s Day:
2017-2018: 5 (!)https://t.co/EP0m1vq4ZA
— Cespedes Family BBQ (@CespedesBBQ) January 2, 2018
This is an arbitrary measure to be sure. There is a huge difference in value of the top two free agents this year and the top two free agents next year. However, the monetary value of contracts isn't an arbitrary measure. As of this moment the largest contract has been the 3 year pact the Phillies signed with Carlos Santana for a whooping $60 million. The last time a deal of only $60 million was the high for the offseason was all the way back in 2005-2006. Paul Konerko's 5 year and $60 million dollar deal (matched by Kevin Millwood's deal when including the option) was the high at a time when the revenue of MLB was nearly half of the present $10 billion plus.
$100 million deals are the norm in MLB these days for top talent. At least one such of these deals has been signed in every offseason before January going all the way back to the 2009-2010 offseason. That is the only such year since the aforementioned 2005-2006 offseason where not one $100 million contracts had already been signed at this point in the offseason. The 2009-2010 offseason was highlighted by the John Lackey signing of a 5 year $82.5 million deal that was signed on December 15, 2009. There was one $100 million deal, but that was the Cardinals extension of Matt Holliday signed in January 2010. The Paul Konerko and Kevin Millwood deals in 2005-2006 were also signed before the first of that year. Kevin Brown signed the first $100 million deal back in the 1998-1999 offseason, and there is no example where the most valuable contract bested the top signed before the first of the year by $40 million since that time. This is unprecedented the way that MLB teams have collectively waited out the free agent market.
There have been a lot of theories about why this has happened. This has been a unique offseason given the posting of Shohei Ohtani and the trading of Giancarlo Stanton. Many theorized that these two extremely unique talents availability was what held back the market. It had a certain logic that a 23 year old that signed for at least a hundred, if not hundreds, of dollars less than available on the open market would hold up the starting pitcher market. A 28 year old reigning MVP under control for at least 3 years could certainly hold up the position player market as well. And Stanton's trade to the Yankees did pave the way to the free agent relief market dam breaking. Brandon Morrow's 2 year deal with the Cubs lead to a flurry of 2 year deals being signed in the middle of December, and then the market went cold once again. Carlos Santana and Zack Cozart were the position players to land deals, but the big bats still remain on the board in J.D. Martinez, Eric Hosmer, and (figuratively big bat) Lorenzo Cain. The biggest contract signed by a starting pitcher remains Tyler Chatwood 3 year $38 million deal.
Jon Heyman wrote about five possible reasons for the slow market last week. He speculated that the top free agents not signing is one cause. That certainly makes sense but it also seems more symptom than cause. After all, there are some unique cases here in terms of valuation like Eric Hosmer, but virtually everyone agrees that the top pitchers were worthy of a $100 million plus on the open market this year. There has not been an offseason in this millenium where not a single top pitcher signed by this point.
Two other reasons listed by Heyman really dovetail together in several big market teams are sitting out this offseason and every team is waiting on the free agent class next year. Again this could certainly be a factor as the two teams spending by far and away the most in baseball have been slashing payroll the past several seasons to reset their luxury tax hits. There is also the belief that the stronger penalaties for going over have converted the luxury tax into a fake salary cap. Those trends are reflected in the chart below which shows the average opening day payrolls of MLB.
The top line shows the top five teams in baseball's average payroll, and it has remained relative stagnant since the Dodgers payroll exploded to over $270 million in 2015. That trend is likely to continue as both the Dodgers and Yankees are poised to dip below the tax threshold for the first time in five years and ever respectively. The bottom line shows the bottom five payrolls and that too has remained relatively flat since the overall jump in payrolls between 2013-2015. The middle two lines show the remaining twenty teams broken into two even groups showing the relative growth of payrolls in the middle. These trends seem to be occuring independent of external factors like revenue growth. As this article from Fangraphs with this graphic showed while payrolls were growing, players share of revenue was actually decreasing.
Things haven't improved much as Scott Boras asserted that MLB players salaries was just 43% of total revenue in 2016.
There is something different about this year though, and it still doesn't really explain the lack of movement in the starting pitcher market this year in a historic manner. Teams always need starting pitchers, and there are two clear cut top of the rotation starters available right now for just cash. There is also little hope that the market will be that much better next year as Clayton Kershaw remains unlikely to leave the Dodgers even if he opts out. The collusion word has been mentioned in a few places. Marc Normandin was the most recent to suggest it is a possibility for this strange market. He also mentioned that the Marlins firesale might be another roadblock. MLB teams have been aware from the start of the offseason that the Marlins would be unloading lots of position player talent, and Chritian Yelich and J.T. Realmuto represent incredibly desirable position player assets. But again this doesn't explain why teams are unwilling to sign any starting pitchers this offseason.
Now Yu Darvish, Jake Arrieta, and Alex Cobb are not without their flaws. Age, injuries (in two of three cases), and ineffectiveness have all affected these top starters. This could simply be a case of the players and teams not being able to agree on the proper value of their talents. The information available to us is imperfect and incomplete, but there is an interesting trend that suggests something else is happening. Or at least that the difference in valuation does not seem to be tied to the average annual value of the deals. Wade Davis just netted the highest average annual value of any relief pitcher at $17.3 million. Carlos Santana netted $20 million per year in his deal. It seems doesn't seem like teams are willing to invest large amounts per year in players. The collective restraint in the market seems to be teams unwilling to issue longer term deals.
There are few deals to analyze to conclusively prove that this is the trend, but this seems to be the issue that is holding up many deals. There is evidence to suggest that this is a trend. The Cubs are reportedly jumping back in (or they never left, or they are showing renewed interest, or whatever) on Jake Arrieta, and maybe among the top two teams bidding for the services of the presumed former Cub. The Cubs offer or maximum unofficial offer at the moment according to one source is a 4 year $110 million deal. If the Cubs were mostly concerned about the luxury tax this seems like the exact opposite type of deal to be interested in. The club would be much better off going for longer years to lower the average annual value of the deal, but instead seem to be following this trend of resisting long term deals.
Many fans have reacted positively to the financial restraint shown by these clubs. Praise for teams being wary of investing large dollars in declining assets, to use the parlance of our time, is not hard to find. It is easy to point to players earning large dollars for their relatively weak production. These deals certainly provide a warning for unlimited spending, but it doesn't reflect the way this franchise has been successful in the past. The Cubs have made the postseason in back to back years just twice in the previous century. The runs in 2007-2008 and the current run starting in 2015 were each directly preceded by an offseason of large spending in free agency. The 2016 team is the first and only Cubs team to exceed the luxury tax threshold. Spending money in free agency is not a panacea but it is also a method that a large market club deep in the heart of a contention window should be exploited.
The Cubs are certainly not sitting idly during this time, and the track record of deals signed in January and February tend to be more favorable for the club. The Cubs have an opportunity to take advantage of a unique marketplace caused by a variety of factors, whether collusion is one of those factors or not. There should be disappointment if the Cubs don't land one of the premier free agents in this class.