Offday Musings: Free Agency

I was reading something recently that got me a little bit irritated, and you’ll never guess what it was:  the ‘Boston Red Sox Offseason in Review’ on MLBTR.  Why so irritating?  For starters, they’ve got our draft pick.  And a bunch of other ones, and we’ve got nothin’.  We know Boston is a team that, this offseason, last offseason and every other offseason makes the big splashes.  This year they gave that fat contract to Carl Crawford.  Still, they seem to be a prime beneficiary of the ‘Type-A’, ‘Type-B’ etc… free agent system.  As Tim Dierkes wrote on MLBTR “the Red Sox once again demonstrated that it’s better to sign someone elses type-A and let your own leave”.  Isn’t this system supposed to foster competition and level the playing field?

To hear why it’s broken, follow me through the jump

The way the system is supposed to function is that teams like Tampa Bay, who can’t keep a dynasty together and are gutted by free agent defections, receive plenty of high picks in compensation so that they can (eventually) rebuild from within.  For the most part, that works.  It’s also supposed to hurt the big market teams who are presumably doing the cherry picking, and provide a disincentive (don’t tell the MLBPA) to sign top free agents.  Because the league doesn’t want to enshrine the have vs. have-not concept in the rule itself, we throw bad teams a bone by letting them give up only a second rounder instead of a first-rounder if the sign somebody else’s type-A.

The Tigers have  been victimized of late by a couple of kinks in the rule.  The first is that mediocre teams still lose a first rounder, so we coughed up a fairly good pick for Victor Martinez.  If, say, Cleveland had signed him they would only have given up a second round pick.  The second kink is in the arbitration requirement… if a team literally can’t afford or has no use for a player AND the market for that player will be fairly weak the team won’t offer him arbitration and won’t get any compensation.  Boston didn’t need Adrian Beltre, but they could afford to keep him and they knew he’d rather get a lucrative multi-year deal elsewhere.  Zero risk to Boston.  The Tigers have been stuck with guys on the downside of their careers who are likely to get more in arbitration than their fair market value, guys at the bottom of type-A for whom that status would make demand dry up, etc…  Guys who would pose a risk in arbitration.  That isn’t to say that the system is beneficial for everyone but Detroit for some reason, simply that we have not been able to exploit that system.

Tigers aside, the system isn’t working for two big reasons:  the first is what was mentioned on MLBTR, that big-market teams benefit (at the expense of anyone else, in effect) from shuffling type-A free agents.  The Red Sox are not a team that invested in developing Adrian Beltre and then couldn’t meet his demands.  They signed him to a one-year deal as a type-B out of Seattle, sacrificing nothing, then made little attempt to resign him after a monster year elevated him to type-A status.  The best teams tend to have a lot of the best players (logically), so the best teams often have a lot of potential type-As.  From a cursory glance, we seem to have far more potential type-A free agents every year from mid-to-large-market teams than from weaker ones.  Beltre signed with the Rangers, who lost a first rounder.  The Red Sox gain a first rounder AND a sandwich pick.  The Rangers lost Cliff Lee to the Phillies, getting a first rounder and a sandwich pick.  The Rangers are up a pick.  The Red Sox sign Carl Crawford, giving up a first-rounder – still they are up a pick too.  The Phillies lose Jayson Werth to the Nats, but get two picks in return.  Now the Phillies are up a pick too.  Who loses?  The Nats (and the Tigers).  Are these the teams we are trying to punish for entering free agent bidding?  If you are the MLB, maybe.  Other owners can’t have been particularly happy about the ludicrous contract Werth was given – by a team that wasn’t even in contention.  Fewer bidders means lower prices for all, and more profits.

I don’t like a system that simply generates lots of sandwich picks for big-market teams, while providing a disincentive to holding franchise-type players long term.  What we like to see is ‘old-fashioned’ management, where a team grooms it’s stars, signs them long-term and makes them the face of the franchise.  The Tigers, the Rockies and some others do exactly that – but that is in direct opposition to the tactics a GM needs to employ to game the system.

That’s not the only problem with the system either:  the other problem is linked to the rapid inflation in signing bonuses for top draft picks.  Small market teams have been trying to exploit the  3-year reserve clause for a while, taking advantage of below-market-value salaries for younger players.  If we’re starting from the proposition that low-revenue teams need to be given some means to compete with the high-revenue teams, bonus inflation makes player development much less affordable than it used to be.  Big-market teams (or owners with deep pockets like Mr. Illitch) are the ones who can afford to sign picks above slot and who can afford to draft players with bargaining power (due to a college scholarship, etc…).  Tampa Bay is going to have a lot of draft picks this year [10 additional picks in the top 75 according to MLBTR], but I doubt that will affect their ‘draft budget’ much… how many do you think they’ll actually sign?  On the other hand… do you think the Red Sox will be able to afford their new picks?

What this seems to lead us to is further enshrinement of the pre-free-agent trade, maybe a deadline deal, maybe earlier.  When the Red Sox lost Victor Martinez, they got the 19th and 36th picks in next year’s draft (I believe that’s the right sandwich pick…).  To acquire him from the Indians, they gave up Justin Masterson (71st pick in 2006), Nick Hagadone (55th pick in 2007) and Bryan Price (45th pick in 2008).  That’s two sandwich picks and a second-rounder.  Why wouldn’t the Indians just hold onto him and get a higher pick?  Trading him away did nothing but accelerate fan rejection of the tribe.  For one thing, they get guys that are a little farther along.  And they don’t have to worry about Martinez losing his type-A status, or (heaven forbid) accepting arbitration.  But maybe the bigger issue is that it was the Red Sox who paid those signing bonuses, not Cleveland.  And, of course, the more deals like this we see the more we get bonus draft picks concentrated with the better teams – who then use those draft picks as trading chips to acquire the players from the low-end teams, which encourages the farm-systemization of small-market clubs.

Does anyone else see the problem here?  The MLB system has built in exploitable loopholes to encourage the bifurcation of the league into two distinct tiers – one tier which both signs and loses the majority of the free agents, wins the majority of the games & hands out the bulk of the signing bonuses – and another tier that cuts player expenses to the bone by trading arbitration-eligible studs for prospects in order to outsource said signing bonuses (and pad profits).  Boston wins, New York wins, the stupid Fish win and woe to the teams that can’t spend with the sharks but won’t cave like the minnows.

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Tags: Adrian Beltre Boston Red Sox Detroit Tigers Victor Martinez

  • tigerdog1

    Playing the compensation game is definitely one area where Dombrowski’s game plan has come up short. He has not let many good players walk as free agents, instead doling out lavish extensions that almost without exception have blown up in his face. He has signed a few Type A free agents, two in the past two seasons, depriving the team of their first round picks- and first rounders have an astronomically better shot at “making it” than any lower round picks. He didn’t even offer arbitration to Polanco (he had zero money to spend, thanks to all those lavish extensions) which WOULD have netted two top picks, assuming that the Phillies still would have made a multi year offer to Polly. Even Inge and Peralta were extended- no comp picks.

    Theo Epstein, on the other hand, will offer arbitration to Beltre, but he also trades for guys like Billy Wagner, who play half an hour in Boston to help them in a pennant drive, then offer arby and collect two more picks.

    The Rays will have a dozen- count em, TWELVE draft picks in this June’s draft before the Tigers make their first selection in the second half of the second round.

    I proposed some ways to reform the compensation system. Perhaps some of these ideas will be brought up in the next round of CBA negotiations.

    • Chris Hannum

      I just went and read your article, and I do definitely agree with you there, though I think compensation was on Dombrowski’s mind when he traded for Renteria, Huff and Washburn – but it backfired terribly. As far as reform is concerned, I do like your idea of making rental players ineligible but I think that would further increase the incentive to trade guys away earlier – which is really the worst thing going for competitive balance right now.

  • Gary M. Mugford

    A very solid analysis. I believe the every-burgeoning sandwich picks before the second round (and the smaller group before the third round) are being mined to good effect by teams like Tampa Bay and Toronto, but also by Boston and the Yankees. The ‘incentive’ to cast Victor Martinez adrift was a draft pick bounty that made Martinez more valuable as an ex-Red Sox than a retained one. And it effectively cut his job market by one, so it hurt the player too. The solution is to de-incentivise the big market teams from acquiring talents like Felipe Lopez ONLY for a sandwich pick later or from not negotiating with current players in order to land multiple top picks for fading veterans.

    How about this: Sandwich picks for later rounds, using payroll from the preceding year as a guideline. Make the tiers large for the bottom half, granularized for the top half. As with teams protecting their first-round pick if in the bottom 15 performance-wise, make sandwich picks for the bottom 15 spending clubs after the first round. Next five get their sandwich picks after the second round, next five after the third round and last five after the fourth round. And I’d even go so far as to limit the number of sandwich picks a club could get in any specific round. For example, a team in the bottom tier could have as many as two picks in a round. If they ‘earn’ more, the ‘excess choices’ get shifted one round later. If not in the bottom tier, a team could only have one sandwich pick per round. This might result in a team like the Yankees stringing out their sandwich picks through more than a few rounds, since their first sandwich pick might come after the fourth round. If they had say three sandwich picks in all, they’d get their sandwich picks after the fourth, fifth and sixth rounds.

    What this ‘thinning’ of the sandwich rounds does is return the value of the actual picks by round to closer to their original value and intent (equalization of talent). The sheer number of picks Tampa has before Detroit’s first trip to the podium highlights how broken the current system is.

    I think those sandwich picks after the first round have become the equivalent of trading/buying draft picks. The Blue Jays did exactly the latter by buying Olivo and letting him go, effectively making the cost of buying a sandwich pick the cost of declining his option and the purchase cost. Well under a million dollars. And the pick is essentially a second-round pick, with what they call the second round actually being the third round these days. If MLB wants to open the market to actually moving draft picks, then do it. Let’s get away from this back-door market.

    • Chris Hannum

      I agree about the draft pick trading – in principle. It seems a little silly that baseball teams are forced to go to such lengths to do what is done openly in other sports. Still, it would seem that the teams most likely to trade picks away would be teams like the Fish, not teams like the Yankees.

      If I was proposing a fix it would be this: draft-pick compensation only for players who have spent 4 full years and 3 years in arbitration with the team they are leaving. No compensation for players acquired and lost. Only picks taken from the signing team, no ‘sandwich picks’, and compensation for all such free agents regardless of where they fall percentile-wise, except that you would be giving up something like a 22nd rounder to sign Jeremy Bonderman.