MLBTR Polls

MLB players earned more than $4MM on average in 2017, with some players’ salaries exceeding $30MM.  For most people, that’s an unfathomable amount of money.  Many people feel that baseball players and other athletes are overpaid, with the median American full-time worker earning around $45K per year.

Why do people object to MLB player salaries?  One reason is the nature of the profession – Major League Baseball is a game played for the public’s entertainment, while baseball itself is a game many of us played in our youth for the sheer enjoyment of it.  MLB players don’t serve an essential function to society like a teachers or doctors.  And to many, the work of an MLB player seems less difficult and much more enjoyable than a typical job.  It can be difficult to stomach professional athletes earning 100 times or more than that of a typical American.

Another reason some fans consider players to be overpaid is ticket prices.  For a family of four to see the Cubs host the Cardinals on a Saturday in July, sitting in the upper deck, currently costs $565.91 on Stubhub for tickets alone.  Of course, context is everything.  Go to a Rays-White Sox game on a Wednesday afternoon in April, and a family of four can get in the door for $50 or less.  At the heart of the matter: how much do player salaries actually affect ticket prices?  I’m not an economist, but I think one would argue that teams will charge what fans are willing to pay.  If player salaries were magically cut in half tomorrow, but demand for tickets remained the same, would you expect teams to reduce prices?

The other side of the coin is that, as difficult as it may be to accept given their salaries, MLB players might be underpaid.  As an industry, MLB’s revenue has grown to $10 billion.  As Nathaniel Grow wrote on FanGraphs a few years ago, the players’ percentage of that pie has dropped from a peak of 56% in 2002 to less than 40% in 2015.  No one’s suggesting fans should feel sympathy for wealthy MLB players, but rather that they are entitled to fight for their fair share of the sport’s revenue.  After all, without these 1,000 or so players, there’s no MLB.  More money for the players doesn’t have to mean higher ticket prices; it would just mean less for the owners.  Those on this side of the debate would note that MLB players are highly compensated because there are so few people in the world capable of doing their jobs, and interest in watching them perform drives the sport’s revenue.

As tensions mount between the owners and players, let’s see where MLBTR readers stand.  App users can click here to take the poll.

The snail’s pace of the 2017-2018 offseason is painfully apparent, and it’s been painstakingly examined. One union official appears to believe it’s a symptom of issues that’ll inevitably lead to new labor negotiations, which in turn could reshape the infrastructure of baseball’s economic landscape. While such an assessment certainly seems extreme, so is the unprecedented territory the market is about to embark upon: if nothing changes in the next three days, February will emerge with the top five free agents lacking jobs, and ten of the top twenty.

Before we get too deep into the gravity of a situation that could still feasibly resolve itself ahead of spring training, let’s begin by rejecting the idea that just one factor is at play in this undertaking. The historic circumstances before us are likely due to a convergence of contributing powers (though one could feasibly make a case that the symptoms all stem from one singular disease). But as ever, we only know a laughable percentage of the information buried deep within the offices of ballclubs, player agents and the MLBPA. With that in mind, it might be more rational for us all to examine the individual catalysts on the surface rather than develop conspiracy theories about how they might all be interwoven.

To that end, here are some items that, in theory, could be holding up the market…

The Competitive Balance Tax: If the combined average annual salaries of all players on a team’s roster exceed $197MM in 2018, that team will need to pay a tax on the overage. The luxury tax isn’t anything new. However, with the escalating penalties built into the current CBA, some teams are paying as much as 50% on the surplus. The Yankees, Dodgers and Giants are all taking this heavily into consideration for the coming season, and are seemingly working very hard to remain below the threshold in order to reset the escalators. If they manage to do so, the incentive is that they’ll only need to pay a 20% tax on their next overage.

While one might react by pointing out that those teams can certainly afford high penalties, it’s fair to mention that resetting the escalators will save them money not just for one or two seasons, but potentially through 2021. That footnote is all the more relevant when one considers the caliber of players who will be available on the free agent market next season (Bryce Harper, Manny Machado, Clayton Kershaw, etc.), and the dollars those players are likely to command. If the Yankees, as a purely speculative example, were interested in vying heavily for the services of Harper and Machado, they could end up blowing past the 2019 tax barrier ($206MM) by over $50MM. In such an instance, resetting the cap in 2018 would make not only a difference of $15MM the following season, but perhaps some $10MM the year after that, and yet more dollars in the season that follows.

Tying it all back to the free agent market, these considerations could dramatically reduce the competition for the top tier free agents by removing three or four of their potential suitors. Because over a dozen teams are already eliminated from the running due to their market size (and resulting income), while still others may not have a need for a given free agent’s position, the upper echelon of free agents may be seeing their market value fall off due to the law of supply and demand. Looking at it from another angle, if a player was expected to have eight suitors and now has only three or four, those remaining teams may be less afraid of seeing their target scooped up, and may therefore feel more comfortable waiting for his price to drop.

Collusion: It’s important to note immediately that MLB has staunchly denied any collusion between its teams, and has made readily apparent the lack of evidence to support any such claims. Indeed, there is no legitimate reason to think that MLB isn’t telling the truth. That being said, I’ve included this in the list simply because the notion still going to be on some fans’ minds. The motivation for potential collusion is obvious: if all 30 teams collectively agreed to wait until free agent prices dropped, they’d stand to save tens of millions of dollars between them. At its core, MLB would still have baseball games to produce absent a couple dozen players… the players themselves would have much more to lose. Being that this is such a dark subject (and incredibly unlikely), we won’t spend any more time looking at it.

Agent Scott Boras: In its denial of collusion, MLB aptly pointed out that a certain agent who is know for being incredibly patient represents a large number of free agents who are still on the market. Furthermore, Boras was said to be seeking an astronomical deal for J.D. Martinez at the outset of the offseason. If the asking price for Martinez remains anything close to that number, it’s easy imagine that no team sees him as capable of providing value on such a contract. And if that’s also the case for Jake Arrieta, Mike Moustakas and Eric Hosmer as well, the fact that all four remain unemployed would simply make fiscal sense. Going deeper down the rabbit hole of this hypothetical scenario, it’s not hard to imagine that many teams would want to wait for these dominoes to fall before turning to inferior options.

Coalescence of Player Evaluation: With a statistical revolution already many years in the making, focus on advanced scouting and analytics has increased tenfold. But from GMs to interns, hundreds of employees have changed organizations, and it’s thought possible that teams are converging on uniformity by which they evaluate players. If that’s true, it wouldn’t come as much of a surprise if all teams quietly and unknowingly agreed on price points for free agents; that would obviously reduce the likelihood that two or more teams end up in a bidding war for a player’s services.

Focus on Next Year’s Class: This one’s pretty simple. Teams like the Phillies and Braves might not like their chances of competing this year, and therefore could be comparing members of this year’s class with those of next year’s. For example, why the Phillies spend on Moustakas when Machado is a possibility and they see themselves as unlikely to compete with the Nationals this year? It could be that they’re only interested in the former if he comes at a bargain (the latter certainly won’t), so it would make perfect sense that Philadelphia might be willing to balk at his actual market value.

Apathy Towards a Free Agency: Teams are well aware at this point that lengthy contracts given to aging players seldom work out well and sometimes handcuff a franchise for years. Albert Pujols, for example, was worth two full wins below replacement level in 2017, and he’s signed through the 2021 season. The aging DH is a liability on the roster at this point, meaning the Angels owe him over $100MM in what amounts to a sunk cost. Contracts given to Alex Rodriguez and Prince Fielder have worked out similarly towards the tail ends, and plenty of other large and medium-sized contracts have hurt a team’s ability to compete for years. Free agency, at its core, is an incredibly cost-inefficient market. It’s possible that teams have simply learned their lesson about promising too many years to players who are, by the very nature of an aging curve, in a phase of decline.

Lack of Effort to Win: The past two teams to win a World Series got there by tanking for years, putting that model firmly in the spotlight. In some cases, fans may now be rooting for their teams to lose for a few years in order to match the extreme nature of the Houston and Chicago rebuilds. As Jeff Passan of Yahoo Sports pointed out in this piece, there are at least eight MLB teams who have absolutely no intention to compete in the free agent market this winter, in part because those teams have no desire to put effort towards a title run in 2018.

Tanking has become an acceptable business model, and a lucrative one considering the money not spend on free agents can simply become revenue instead. With nearly a third of all teams content to sit out, it would make sense that the market just never developed like it has in the past. Indeed, many teams have turned to the trade market to fill their needs; a strategy that’s become that much more feasible due to the number of teams not trying to win.

Players Overestimating Their Markets: While there is certainly incredible upside to players like Darvish, Martinez and Hosmer, there are significant question marks surrounding each of them. Darvish had a dreadful World Series performance and has been through Tommy John surgery in his career. Martinez has missed significant time in two of the past three seasons. Hosmer has played at or below replacement level in three seasons of his career. And yet the latter two haven’t accepted reported offers of over $120MM. This year’s class of free agents is imperfect, and perhaps they simply overestimated their markets at the outset of the offseason.

While this covers the bulk of the obvious potential explanations, there are yet others I haven’t even touched on. But at this point, I’d like to ask you all to weigh in. Yes, the slow offseason has certainly been caused by a number of factors. But what do you think is the biggest contributor to the pace of the market?

(Poll link for app users)