What does this have to do with labor battles? Well, speculation has abounded for years that Harper in particular, the youngest unanimous MVP in baseball history (2015, age 22) and a major drawing card all by himself, would seek to set a new record for the largest contract in North American professional sports, a mark currently held by New York Yankees outfielder Giancarlo Stanton and the ten-year, $325 million extension he inked with the Miami Marlins after his age-24 season four years ago. Much of said speculation has involved a number around $400 million, and it is known that towards the end of this season the Washington Nationals, who drafted and developed Harper, offered him a ten-year, $300 million deal before he officially hit free agency (knowing, of course, that he was extremely likely to turn it down and seek more money elsewhere). Machado, meanwhile, is seen as potentially having more value because he produces with his bat while playing a much more difficult defensive position (he can handle shortstop okay but is an elite third baseman), and the hope for any star free agents is that they will raise the bar of what their lesser peers have the potential to earn. There are 1,200 players on forty-man rosters counting on Harper and Machado to help make their future paychecks larger.
But there are some significant obstacles that are driving the market down for all free agents, including (so far) Harper and Machado. The first and most important is that all major league front offices are now extremely data-driven, with every team employing at least a couple of statistical analysts and frequently well-staffed departments with very smart people that help drive their decision-making. The days of ex-player or ex-scout general managers making trades or committing to massive free agent contracts over drinks at a hotel bar are gone forever. Teams are making far fewer mistakes with regard to the money that they commit to players. The most significant way in which that has manifested itself is that teams are more reluctant than ever to pay premium costs for the past performance of free agent players, the vast majority of whom (unlike Harper and Machado) have already played some or all of their prime seasons. Why pay $20 million or more per season for someone whose production you may well be able to replace with someone in your own minor league system for as little as five percent of that cost?
Seven years ago Albert Pujols, coming off his age-31 season and a three-time MVP widely viewed as the best hitter in the game, signed a ten-year, $240 million contract with the Los Angeles Angels, seen as an overpay at the time (at least in years if not in dollars), even more so with the benefit of hindsight. First basemen tend be be among the least athletic hitters on the diamond, with body types that age poorly, a general fact that most executives recognize now, making them loath to pay players of that demographic any sizable amount of money. In the table below I have placed the offensive numbers for seven different first basemen; six of the stat lines are from 2018, while the other is Pujols from his first year with the Angels.
Age
|
AVG
|
OBP
|
SLG
|
HR
|
OPS+
|
wOBA
|
wRC+
|
|
Player A
|
24
|
.247
|
.335
|
.453
|
29
|
116
|
.340
|
117
|
Player B
|
28
|
.274
|
.352
|
.539
|
35
|
135
|
.374
|
134
|
Player C
|
32
|
.229
|
.352
|
.413
|
24
|
105
|
.333
|
109
|
Player D
|
31
|
.285
|
.343
|
.516
|
30
|
138
|
.360
|
133
|
Player E
|
28
|
.253
|
.322
|
.398
|
18
|
99
|
.309
|
95
|
Player F
|
29
|
.305
|
.364
|
.457
|
17
|
124
|
.356
|
125
|
Player G
|
27
|
.263
|
.391
|
.582
|
35
|
161
|
.407
|
162
|
*For the non-statheads out there, OPS+ is simply a player's on-base percentage and slugging percentage added together and adjusted to league average given their home park, with 100 being exactly average. wOBA stands for weighted on-base average, and is on the same scale as OBP. wRC+ is weighted runs created plus, also adjusted for league average due to park effects.
With the exception of Player A, all of these players are right around the same age, at or near their peak production years. A cursory glance shows that the best season by a fair margin belongs to Player G, with sizable advantages in the three most important rate stats (batting average is a poor measure of performance compared to OBP, SLG, or wOBA) and in both numbers that are adjusted to league average, plus a tie for the lead in home runs. The worst season belongs to Player E, who came in slightly below average in both adjusted stats despite playing a position where hitting ability is the most important thing one brings to the table, with Player C not far ahead of him. Without knowing anything else about the players (notably their contract status or any defensive or base-running value that they may add), I would probably rank them as follows: Player G, Player A (bumped up because his age indicates substantial future improvement is possible), Player B, Player F, Player D, Player F, Player C (again, I switched C and F because of their ages).
When you add names and contracts to the list, it becomes immediately apparent why teams don't want to sign players around their thirtieth birthday to huge contracts. Player D is Pujols in 2012, his first season in Orange County, when he was fairly productive but clearly not a world-beater, and in the first year of that massive contract (which still has three years and $72 million left!). The two least productive stat lines on that list belong to Carlos Santana (Player C), in the first year of a three-year, $60 million deal with Philadelphia (he was recently traded away this winter) and Eric Hosmer (Player E), in the first year of an eight-year, $144 million contract with San Diego. The remaining four players? Matt Olson of Oakland (Player A), Jesus Aguilar of Milwaukee (B), Jose Martinez of St. Louis (F), and Max Muncy of the Dodgers (G). Those four players combined made a little over $2 million in 2018, or roughly one tenth of what Pujols, Santana, or Hosmer made individually. Whom would you rather have on your team? Additionally, of the four cheaper options, only Olson (a first-round draft pick) was ever a hot prospect; Aguilar and Muncy were both picked off the scrap heap by their respective teams (from Cleveland and Oakland, respectively), while Martinez bounced around the minors for a decade before finally getting a shot with the Cardinals.
This is merely one example that well illustrates how market factors are actively hurting the market for free agents, even possibly for Harper and Machado. After all, if you don't have to pay top-of-the-market prices for anyone else, won't that hurt their offers some as well? Last year may have been a blip, but two years in a row, with a much more talented class of free agents, illustrates a trend, and now the onus is on the players to figure out a way to realize their market worth, which is the point of this entire column (I know, I'm sorry it's taking forever). The system is currently built to reward older players, and the market has universally decided that older players are not worth the risk. The current collective bargaining agreement runs through the 2021 season, so the players have three years to figure out a path forward.
A work stoppage would not be in the players' best interests. Despite the fact that the players themselves are the primary product of an industry that produces roughly ten BILLION dollars in annual revenue these days and the owners are virtually all old white multi-billionaires who have never set foot on the field of play themselves and who in most cases foist the cost of building the palaces that their teams play in upon the local taxpayers, fans are conditioned to take the owners' side in any labor dispute.* Why is this? Baseball players making less money does not mean that teachers or bus drivers are making more, or that tickets and concessions at the ballpark will cost any less; it means that owners are pocketing that revenue. Without the players, there is no product, and that product, as illustrated by the figure of $10 billion, is immensely popular. So unless there is a VERY compelling reason, one should always side with the players in labor disputes.
*This is not to say that owners are necessarily bad people. I happen to be acquainted with an MLB owner, well enough for him to pick me out of a police lineup, and he is a very nice man who runs a first-class organization.
What is very interesting is that Major League Baseball is the only one of the four major North American sports leagues that does not have language in its collective bargaining agreement mandating that players receive a certain percentage of revenues: NFL players are guaranteed 47 percent of football revenues, while NHL players receive an even half and NBA players somewhere between 49 and 51 percent in any given year. What makes baseball's lack of such language more puzzling is that the MLBPA is historically the strongest in professional sports, and yet, against that $10 billion in baseball-related revenues, the thirty MLB teams paid out $4.18 billion in payroll, a full five percent less than any other league. Even factoring in minor league salaries makes that number just a shade higher, $4.33 billion, if you take the high end of minor league salaries and apply them to all thirty teams and their affiliates (more on this later).
This means that although baseball players have the highest maximum salaries in North American professional sports* as well as the longest contracts, they make a much smaller percentage of total league revenues compared to their peers in basketball, football, and even hockey. Baseball also differs in that the vast majority of players make the big bucks later in their careers than in any other sport on average, if they make them at all. Remember, Harper and Machado, as 26-year-old free agents, are anomalies; most baseball players hit free agency for the first time between 29 and 32. Why is that? Well, even the best players spend some time in the minor leagues, where teams control their rights for seven years, a clock that restarts when they make the major league roster. Thus, a player drafted out of college at, say, 22 years old who winds up being a late bloomer and doesn't stick in the majors until his sixth professional season might not hit free agency until just before his 33rd birthday, meaning that even if he has become a legitimate star he is almost certainly hitting his decline phase by the time he hits the open market. Sound familiar? That's because this is exactly what happened to Josh Donaldson, who was drafted in 2007, made the majors for good in 2012, and thus wasn't eligible for free agency until this winter, when after a season lost to injury his best offer was a one-year "pillow" contract with the Atlanta Braves in the hopes that he can reestablish himself and hit the open market again next winter with more leverage. But how likely will it be that Donaldson is a better, healthier version of himself as he approaches 34, particularly when he plays a physically demanding position (third base)?
*This qualifier is important when you consider that European sports clubs not only pay their players sizable amounts, but ALSO pay their taxes on top of that. And those tax rates are higher than they are in the United States. Ergo, Lionel Messi makes 30 million Euros per year, but Barcelona pays another 15 million Euros in Spanish taxes, for an equivalent of more than 50 million dollars.
This is not to say that we should feel too sorry for Mr. Donaldson. After all, he has already earned over $55 million in his career to date, with another $23 million coming this year and potentially more after that. Scroll down to the bottom of his Fangraphs page, however, and based on his wins above replacement, you will see that thus far he has been worth $284.1 million to his various employers, a massive delta of more than $200 million even if he does diddly-squat this year for the Braves. The biggest single-season discrepancy happened in his first full season (2013), when Donaldson broke out with a 7.2-WAR campaign that Fangraphs valued at $53.6 million...but because he hadn't even played long enough to hit arbitration yet, Oakland paid him a hair under $500,000 for his work. Donaldson will almost certainly never make nearly as much as he has been worth in his career because he happened to be a late bloomer.*
*And it's not like he came out of nowhere; Donaldson played at an SEC school (Auburn) and was drafted with a supplemental pick (48th overall) in the first round.
Okay, you say, that's a star player, but that doesn't happen to role players, right? Well, let's turn to the case of Michael A. Taylor, the perpetual fourth outfielder for the Washington Nationals who in three of the past four seasons has played a full season thanks to injuries among his teammates. Taylor is thought of as a young player because he is babyfaced, but he will turn 28 in spring training and has accumulated more than four years of service time, meaning that he will not become a free agent until after the 2020 season, just before his thirtieth birthday. Taylor has made a shade more than $4 million in his four seasons, the first three of which he was paid roughly the league minimum as just about all players are. Taylor is a below-average hitter who happens to be an elite defender, and despite his shortcomings and fluid role in Washington Fangraphs pegs his career value to date at $33.5 million, mostly on the back of his 2017 season, when he combined his usual stellar glovework with competent hitting and 19 home runs for $25 million of that aggregate. Regardless, Taylor has realized an eighth of his value to date, and is even less likely than Donaldson to reach that number in his career, given that he brings a lot of said value with his glove (which is more nebulous).*
*Taylor was less of a prospect than Donaldson as a sixth-round draft choice out of high school, but he also didn't stick in the majors until 2015, six years after being drafted.
Compare Donaldson and Taylor to an NBA player, let's say Russell Westbrook. By the age at which Donaldson reached free agency for the first time, Westbrook could already have done so at least twice (had he not signed extensions with the Thunder ahead of both times). Westbrook just turned 30, and through last season had made over $132 million in his NBA career, with a further $205 million coming in his latest contract, which runs from the current season through the spring of 2023. That $337 million is twice as much as Donaldson will likely make in his career, although both have been top-ten or even top-five players in their respective sports for several years of their respective careers. How can baseball players begin to close that gap (even though the comparisons are certainly not linear, either between the individual players or the leagues)?
The glaringly obvious solution here is that the MLBPA, in order to help all their members make something closer to their true value, should prioritize shortening the service time clocks that lead to arbitration and free agency. The market is clearly prioritizing younger players, and with the reliance on statistical analysis that all teams employ that trend is here to stay. If I were union executive director Tony Clark, I would do what I could to cut the minor league clock from seven years to five, and the major league clock to four (or five in the case of current "Super Two" players - such as Harper and Machado - whose call-up dates lead to an extra year of arbitration with the teams that hold their rights). This would still give teams plenty of time to evaluate the players they drafted and signed themselves before potentially losing them to another organization, and allow players the option to test the open market when their skill set still warrants an opportunity to maximize their contract values.
Along with cutting the service time from six or seven years to four or five, I would also say that the union should push for two years on minimum salary (instead of three) and two to three years of arbitration. Not everyone is going to be Mike Trout, who produced $200 million in value to the Angels during his first three full seasons while being paid a cumulative $2 million over that time, but more and more younger players are becoming stars in their early twenties shortly after they have broken into the majors, and getting paid relative peanuts for that production. This is again related to baseball's statistical revolution, as modern players are better trained (both as amateurs and once they become professionals), better scouted, and better taught and developed once they join a major league organization than their forebears. Yet they are still on a pay scale that reflects the timetables of days past. For the best players, enduring several years of seasoning in the minor leagues (a la Donaldson) is becoming rarer, even if they were drafted out of high school or signed out of the Caribbean as a teenager. Check out this list of current hitters, all of whom had debuted in the major leagues by their twenty-second birthday, when most college players have just been drafted:
C: Salvador Perez, Yadier Molina
1B: Freddie Freeman, Cody Bellinger, Anthony Rizzo
2B: Ozzie Albies, Rougned Odor, Jose Altuve
3B: Jose Ramirez, Manny Machado
SS: Carlos Correa, Francisco Lindor, Javier Baez, Xander Bogaerts, Gleyber Torres
OF: Mike Trout, Mookie Betts, Bryce Harper, Juan Soto, Ronald Acuna, Christian Yelich, Giancarlo Stanton
Yikes. Break that down any way you wish; you could make two dynamite offensive AND defensive lineups from that list, with room to spare. Pitchers who crack the majors at such a young age are harder to find, in part because developing three quality pitches to turn over a major league lineup multiple times is a skill that takes a little more time. Clayton Kershaw and Zack Greinke (for example) both debuted before they were old enough to drink, but they are exceptions. In any case, star players are trending younger, but their salaries are not keeping pace.
Shortening the service clock and increasing the players' percentage of revenue are pretty big asks, even for a union as historically powerful as the MLBPA. If they were to "win" on those fronts, what concessions would they or could they make to the owners? Perhaps the biggest thing that they could give on would be an international draft to mirror the draft that currently only affects players from the United States, Canada, and Puerto Rico.* The owners pushed hard for this change the last time around, but several Latino players lobbied against it. Their reasons are easy to see. Given the levels of poverty that many of the Dominican and Venezuelan athletes endure as children, the signing bonuses that they are eligible to sign as sixteen-year-olds can be life-changing all by themselves. But now that there are hard caps on international spending (which, if broken, do in fact lead to serious consequences - just ask the Braves), changing the current system to a draft would not restrict earnings, while also potentially further limiting the role of the greasy middlemen who prey upon so many of these teenagers.
*Whether or not the draft format that every sport uses is proper or ethical is a whole 'nother kettle of fish, one that I could write a book about. For the record, I think the best thing written about the subject is this 2013 Grantland (RIP) article by dermatologist-cum-sabermetrician Rany Jazayerli.
Speaking of spending caps, another issue that is sure to come up is the concept of a hard salary cap, which some owners have agitated for since forever but which has fallen out of vogue now that MLB is so flush with revenue. If a hard cap comes up as a point of discussion, the union should absolutely hold firm against it unless there is a corresponding salary floor that keeps team spending a little closer to equal. Here are the largest and smallest payrolls for the most recent season or current season in each of the four major sports:
MLB largest 2018 payroll: Boston Red Sox, $227.4 million
MLB smallest 2018 payroll: Tampa Bay Rays, $68.8 million
NBA largest 2018-19 payroll: Oklahoma City Thunder, $145.6 million
NBA smallest 2018-19 payroll: Sacramento Kings, $90.8 million
NFL largest 2018 payroll: Jacksonville Jaguars, $199 million (counts dead money)
NFL smallest 2018 payroll: Indianapolis Colts, $144.6 million (counts dead money)
NHL largest 2018-19 payroll: Calgary Flames, $79.3 million
NHL smallest 2018-19 payroll: Arizona Coyotes, $60.7 million
With the delta between the largest and smallest payrolls in baseball, you could pay the most expensive NBA team, the least expensive NFL team, any two NHL teams of your choice, or the eleventh-most expensive MLB team (the Toronto Blue Jays, at $150.6 million). That is a gigantic spread, and should be addressed before there is any discussion of a hard cap.* Every other league makes sure that teams are generally within range of each other unless there are extenuating circumstances. Yes, NFL and NBA teams typically have national appeal while most MLB teams carry only regional appeal. And yes, the Rays would meet the definition of extenuating circumstances, playing as they do in a crappy stadium that is difficult to get to for just about anyone in their metro area, which is in any case full of transplants from elsewhere with preexisting allegiances. But that doesn't excuse (for example) the $71.8 million payroll of last year's Chicago White Sox, a 118-year-old franchise in one of the continent's largest cities that has a large and passionate fan base, a stadium easily accessible by public transportation, and has won a World Series in the 21st century.** So yeah, no hard cap.
*Which there shouldn't be anyway. Why should the players restrict their earning power?
**White Sox owner Jerry Reinsdorf has a general reputation for stinginess, and was one of the more vocal owners in terms of not conceding anything to the players in 1994-95. That and his frosty relationship with Scott Boras - which dates back at least that far - make me extremely skeptical that Boras will send his star client (Harper) to the South Side, or that Reinsdorf will make a legitimately competitive bid.
What other concessions could the players conceivably make in order to achieve their objectives? There do not appear to be many. I suppose one other alternative is shrinking the maximum length of free agent contracts or extensions to, say, six years, which would in reality not be a huge loss for the players. Ten-year contracts are rare enough that you can count them on your fingers (Alex Rodriguez twice, Robinson Cano, Pujols, Stanton - for thirteen years, Joey Votto, Troy Tulowitzki, Derek Jeter, Todd Helton, potentially Harper and Machado), and those of seven to nine years are hardly more common. Shortening the length of contracts would both relieve owners of some true albatross deals (Rodriguez the second time around, Pujols, Prince Fielder's nine-year, $212 million pact that has two years remaining - Fielder had to retire because of injury issues two years ago) and those that look like they will soon be disastrous (Cano, Miguel Cabrera's eight-year contract that runs through 2023).* Okay, so shortening contract lengths might put a small damper on career earnings for a few select players, but reducing the amount of dead money in conjunction with earlier free agency for all players and a larger slice of the revenue pie would certainly free up dollars to be spread around to more players. That could work two ways, either by boosting the earnings potential of supporting actors and role players, or by netting higher average annual values for the big stars. Or even both of those things. While on its face a cap on contract lengths might seem to hurt players, overall there is a significant chance such a "concession" would benefit more of them.
*This is, of course, ignoring the most ridiculous contract of all time - the one that has the Mets paying Bobby Bonilla a little less than $1.2 million per year through 2035, when Bonilla will be 72 years old. The Mets, everybody!
Now it is time to address an issue that is related to the upcoming collective bargaining timeline, although it truly deserves its own, more detailed look. In changing their mindset regarding the evolving timetables of professional careers, the union would also do well to think of their younger selves, the minor leaguers riding buses and scraping by at as little as $1100 per month (only during the season). Precious few baseball players don't spend at least some time in the minors; the last player I can think of offhand to leap straight to the majors from amateur baseball is John Olerud, who retired in 2005. Yet the union consistently sells its future members down the river in collective bargaining negotiations. Not only are minor league players bound to the team that drafted and signed them for seven years, they are forced to work for less than minimum wage, a travesty codified in an omnibus law passed and signed in March 2018. The rationalization for paying minor league players so little was "to protect the teams and cities where they play from financial hardship," according to Cheri Bustos (D-Ill.), one of the sponsors and a resident of the Quad Cities, home of the High-A Quad Cities River Bandits (an Astros affiliate). She evidently missed the memo that major league teams pay the player salaries for their affiliated teams, so that argument holds no water whatsoever. After the legislation that Bustos co-sponsored was passed, Tony Clark said "We stand shoulder to shoulder with minor league players and the labor community in opposing this legislation." The next CBA will be an opportunity to prove the worth of that statement.
There is no reason to keep minor league salaries so artificially low. Sure, the average salary in AA is just south of $80,000 ($90,000 in AAA), but there are several levels below that, and those are the most affected. If you did the math from way earlier in this column, you would have seen that major league teams pay, on average, $5 million annually in total minor league salary, from AAA on down, or roughly what they spend on an above-average player in his second or third year of arbitration before free agency. They can afford to, say, triple the monthly salary of the 19-year-olds playing in Rancho Cucamonga and Lansing and Hagerstown without breaking a sweat. Maybe then those kids won't have to jam half a dozen players into a two- or three-bedroom apartment just to be able to keep a roof over their heads and feed themselves (and remember, it's not like they're renting in San Francisco or Manhattan). Securing a pay increase for the future members of their union should be an easy step for the MLBPA to take.
What I have not addressed here is the likelihood of either a strike or a lockout, should either side in these negotiations draw a hard line on any changes to the CBA. I honestly don't see, in the current market, how the players can set aside changes to the service timetable outlined above (or in the form of a flat "age cap" when every player is allowed to test free agency by if they have not signed an extension - say 27 or 28), and I'm not sure that I can see any more obvious concessions than those already outlined. But hey, there's a lot of things I don't know. There might be more playoffs (increased revenue for more teams) on the table, or expansion*, or something else that I have not turned up. But should the owners refuse to budge on service time (and it is definitely in their best interest to pay players close to the league minimum when they are producing up to one hundred and forty times that much in value on the field), then a stoppage of some kind might seem inevitable. There has been almost a quarter-century of labor peace, so long that the only current player who was active at any level of American professional baseball in 1995 was Bartolo Colon (Big Sexy spent the 1995 season at Cleveland's high-A affiliate in the Carolina League). We could be entering uncharted territory for virtually all players, and more than a few owners as well.
*This will be the focus of a future post sometime in the next couple of months.
So there you have it. While the financial landscape in baseball looks very rosy at the moment given annual revenues, there may be some serious issues that present themselves down the road when the current collective bargaining agreement expires. However they do it, it is important for the players to adapt to the changing landscape and make a serious effort to start making the big bucks earlier in their career, when they are still most capable of producing at their highest levels. Not everyone is going to be Bryce Harper or Manny Machado and hit free agency at 26. Most of them are going to be in the same range as Josh Donaldson or Michael A. Taylor, in danger of never realizing anything close to the value that they produce on the field, thanks to baseball's antiquated salary structure. For selfish reasons, I hope that there will not be a work stoppage of any kind, but the issues at play are serious enough that it will be, perhaps, a strong possibility.
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