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MLB free agent market: Making sense out of non-cents

A guide to untangling the confusing web of free agency

Tampa Bay Devil Rays v Los Angeles Angels of Anaheim

Theories are everywhere about why the market for MLB free agents is so slow this off season. At first, observers blamed the Giancarclo Stanton trade combined with the Shohei Ohtani situation. Once that passed, most pointed to the holiday season as being notoriously slow. But now that both of those have passed, some are now reaching even further and saying that Manny Machado and Andrew McCutchen being available in trade is also slowing the market.

While all of those theories have some merit, they surely cannot be the entire reason. It’s possible that they’re not even the majority of the reason.

And don’t blame Scott Boras who seems to bear the brunt of some attacks. All he’s doing is outstanding work for his clients.

But he, and all those seeking free agent contracts, need to be cognizant of trends. We are looking at a very different talent market this year than we have in years past, and there are a few interesting factors to help explain it.

Let’s start with a few observations. First, if MLBTR’s predictions for the top 4 free agents this offseason pan out (all still unsigned), Yu Darvish (6 yrs/$160M), J.D. Martinez (6 yrs/$150M), Eric Hosmer (6 yrs/$132M), and Jake Arrieta (4 yrs/$100M) would combine to represent $100M in salaries for 2018 based on the AAV.

Keep that number in mind.

Secondly, as of yesterday and as reported by Ken Rosenthal, there were 135 free agents remaining. Let’s call it 131 after we take away the top 4. They’ll combine to fight over what’s left once we take away the $100M presumably going to the front-four for 2018.

And thirdly, let’s assume that MLB’s salaries will increase at the same pace as they grew in 2017 over 2016, which was approximately 5.03% (calculations made using Cot’s Contracts at beginning of the season).

MLB Salaries

Using 2016 salaries, 2017 salaries, and what we have for 2018 salaries we get the following intriguing numbers:

  • 2016 Beginning of Season Salaries (MLB): $3,903,750,767
  • 2017 Beginning of Season Salaries (MLB): $4,100,091,927 (increase of 5.03%)
  • 2018 Beginning of Season (so far) (MLB): $3,776,824,678 (7.9% lower than 2017)

If we turn those percentages into amounts, and we expect salaries to rise 5.03% in 2018 over 2017’s totals, we should expect MLB teams to spend $529,337,869 before the season begins.

MLB Salary Totals: Impacts

There are a many things that bring the money available to free agents down significantly.

The first is the top four free agents, as noted above, who take a significant $100M chunk out of the total, bringing the number down to $429,337,869.

The second issue is that four of the biggest spending teams, the Yankees, Dodgers, Nationals, and Red Sox, are either attempting to remain below the luxury tax threshold, or have already exceeded it.

Based on a luxury tax threshold of $197M, the following situations exist for these teams

  • Yankees: $16,005,400 below $197M
  • Dodgers: $14,311,114 below $197M
  • Red Sox: $10,649,600 over $197M
  • Nationals: $4,483,976 over $197M

This is a significant issue because it takes away much of the leverage the free agents have in negotiations, and it also makes them a lot more expensive to teams over the threshold, making it unlikely they’ll open up the coffers for them at their expected amounts.

For argument’s sake, let’s say we can expect spending of $30M (Yankees and Dodgers space below $197M) towards 2018 salaries, it’s something we can work with and provides us with a ballpark figure.

If we also take a look at teams that have already surpassed what they spent in 2017, we get the following list:

So simply based on the list above, we have the basic knowledge that 14 out of 30 MLB teams have already increased salaries pre-2018, and that nine of these teams did so at a significant level (more than $5M added).

Again, for argument’s sake, let’s say the 9 teams who’ve added significant salaries will not be interested in adding much more before the season begins, let’s call it $2M a piece on average, without first passing the burden of their current salary obligations on to another team. Combined with the Yankees and Dodgers amounts below the luxury tax ($30M), that takes us to 11 teams spending somewhere approximately $50M.

Make that 12 teams, since the Marlins are also unlikely to add salary at all.

The “Spending” Eighteen

Using the information above, this leaves us with 18 teams expected to spend $379,337,869 on 135 players, or $479,337,869 when we include the top four who are expected to receive $100,000,000 in salary.

So who are these supposed big spenders? Who has the room to make additions based on 2017?

Here are the teams who have spent less to this point than they managed pre-2017 (what they would have to spend this off season to get to 2017 levels with 5% increase omitted):

What this all amounts to if we include $50M from the 12 teams noted previously as having already spent more than they had in 2017 or having CB tax issues, and if we add the 5% increase onto the teams noted above AND actually expect them to spend every single cent of that amount, is this number:

  • $421,982,821

Without the 5% increase that number is reduced to $400,883,679

The problem with those numbers include the fact that not every team wants to spend as much as they did in 2017, particularly the Tigers who take out as much as $79,565,804 from our total. For argument’s sake, let’s say they add $14M during the remaining of this offseason (take away $65M from our totals), and do the same for the rebuilding White Sox (let’s use the same amount of $14M, so we take away $13M).

What does that leave us with?

  • $363,982,821 with 5% increase included ($345,783,680 without)

As compared to the possible expectations of the market, the noted $429,337,869 displayed above, that leaves us with the following gap

  • $65,355,048 with 5% increase included ($83,554,198 without)

And again, that’s only if the rest of the teams spend their entire freed up budget room from 2017 to 2018 and add 5% to their 2017 totals, and if the few that have already exceeded their 2017 totals significantly add another $2M in salaries on average.

Those are all very questionable increases at this point.

Making Sense out of Non-Cents

So what does this all mean?

In short, some MLB teams have overextended themselves significantly recently, some rebuilding teams have no interest in adding salary, and CB tax issues have combined to make this market one saturated in MLB talent but very dry when it comes to available funds.

Then we have other intangibles that impact this market.

Compare this year’s free agent class talents with that of 2019, when Bryce Harper, Manny Machado, Josh Donaldson, and possibly Clayton Kershaw will headline the class, and we get the sense that there’s even less money available than what’s been noted above.

A new focus on spending to sharpen up bullpens also reallocates much of the available money from position players and starters, to those in the relief role, which explains much of the spending completed.

And finally, there are rising arbitration costs and expectations that many players — many young superstars — will need to be signed shortly. Names like Nolan Arenado with the Rockies, Corey Seager with the Dodgers, and both Kris Bryant and Anthony Rizzo with the Cubs come to mind, taking yet another significant chunk out of what may be available in this market.

Flaws to this theory

Yes, there are flaws to this theory. Some teams may be willing to take on salary in return for prospects and or other benefits (cash, international money for example). But with the expectations that some teams may actually be looking to cut salary expenditures from 2017 levels — the Tigers and Rays come to mind — it may all average out and still points to a significant gap between expectations in salaries and what may be available to these players within the market place.

Message to Free Agents

For those free agents sitting out there and holding out for more money, if we average out what we noted as being available (which is extremely optimistic), we get an average of $2,778,495 per player (for the 135 remaining less the top 4). So if you’re holding out for a major increase, this may not be the year to do so.

It may be a better year to bet on yourself and take the highest AAV you can get, even if it is a one year deal. Let teams adjust to the new CB tax system in place, give them time to reset their budgets, and then cash in.

Of course, when you’re a pitcher, that’s not always an easy thing to do, and that’s understandable given the risks involved.

However, when all of the numbers are shaken and stirred, you realize that it may very well be the best thing free agents can accomplish this off season.

Hopefully, I’ve been able to make some sense out of this non-cents, or at least opened some eyes on the larger and very daunting financial picture the current free agent class faces.