Unexpected free-agent spending spree likely a sign of things to come
Baseball's power brokers were said to have gone to Orlando last week for the winter meetings, but it seemed as if they had actually headed south for Spring Break. They ate. They drank. They sang karaoke. They got into parking lot fistfights. Rumors that James Franco performed an acoustic version of Britney Spears' "Everytime" remain unconfirmed.
One thing they didn't appear to do much was work. In the modern era, in which execs like to negotiate via text while they draw upon the wealth of stats and scouting reports they have at their fingertips, "Everybody just holds their cards when it's face to face," one MLB exec told me.
There was, of course, less business to be consummated than usual. The winter meetings used to be considered the de facto beginning of baseball's offseason, but this was the year that notion became obsolete: Of the game's top 50 free agents, as ranked in SI.com's annual Reiter 50, 29 had agreed to new contracts, in many cases exceedingly lucrative ones, before anyone got to central Florida. Now that everyone has gone home to the safety of their computer-filled bunkers, we can expect this frenzied winter to recommence. Shin-Soo Choo, Ervin Santana, Ubaldo Jimenez, Matt Garza, Nelson Cruz: you're up.
Just after the World Series, I asked several general managers for their predictions as to what this offseason's free agent market would look like, on a macro scale. To a man, they believed that caution and tight-fistedness would prevail. They thought that clubs would follow the lead of the Red Sox and Cardinals, the World Series combatants from this past season, who built their rosters smartly and efficiently. Boston jettisoned its past free agent mistakes (like Carl Crawford) and focused on solid mid-range additions (even if those additions added up to earn a total of more than $75 million this year, none of them got more than three years and $39 million). St. Louis, meanwhile, has engaged only very selectively with free agents and made the right decision to let Albert Pujols, the modern face of the franchise, walk away two years ago, using the draft pick it received as compensation to select breakout pitching star Michael Wacha.
The GM's also believed that teams had grown wary of signing free-agent superstars to deals that would consume a great portion of their payrolls for years to come, and that the examples of Pujols -- already, at 33, injured and declining just two years into his 10-year, $240 million contract with the Angels -- and Alex Rodriguez, to whom the Yankees still owe $86 million through 2017, would give them fiscal nightmares.
"There are fewer and fewer teams willing to partake in the market to the extremes that many were willing to in the past," one said. "There's more awareness about the catastrophic risk associated with long-term deals with guys in their 30s."
Clubs were supposed to understand why Barry Bonds was able to hit 340 home runs after his 35th birthday, and why Roger Clemens won 146 games after his, and that it wasn't due simply to their commitment to squat thrusts. "I think people view the aging curve as a little more true than it was 10 years ago," says a GM.
It is naive to believe that baseball's stringent testing for performance-enhancing drugs has rid the game of them completely -- the vast majority of players suspended in the Biogenesis scandal never tested positive -- but it is reasonable to assume that their use has been mitigated. A much less discussed but equally important factor in baseball's changing aging curve is the ban placed on amphetamines after the 2005 season. "I think the lack of greenies is real and that its impact is much more significant than that of steroids," says an exec. Indeed, it is much more difficult to maintain your energy over a long season when you're pushing 40 than when you're 27 if you're not taking your coffee with cream, sugar and speed.
Last winter was the first since 2004 in which not a single domestic free agent negotiated a deal that lasted longer than six years, and the GM's I spoke with thought that trend might continue. But then the Yankees signed Jacoby Ellsbury, a 30-year-old with a concerning injury history and a playing style based on speed, for seven years and $153 million. And then the Mariners signed Robinson Cano, who is 31, for 10 years and $240 million. And then we started reading news like, "Eight teams interested in Johan Santana," and, "At least seven teams in the Eric Chavez market," and, "Boone Logan signs with the Rockies for three years and $16.5 million." What happened to caution?
Part of the answer can be determined by examining the supply chain of star-level, in-their-prime free agents, which has been gradually squeezed off for several years now. Talents like Johnny Cueto, Carlos Gomez, Alex Gordon, Adam Jones and Joey Votto might once have topped this winter's free agent market, but each signed contracts that will be in place for years to come -- Votto's, for instance, goes through at least 2022, when he will be 39 years old. Since December 2011, no fewer than 11 players named to last July's All-Star Game have signed contracts that wiped out at least some of their initial free-agency years (see chart below).
Such contracts make a lot of sense for clubs -- often mid- to small-market ones -- that don't want to lose their young stars, and a good deal of sense for those young stars themselves. "Most of them really value removing risk from the equation, being set for the rest of their lives," says one exec. "If they happen to have left money on the table, they'll just go out and get it in a subsequent deal."
A dwindling supply only means good things for the increasingly few stars who do make it through to free agency at an age at which they're still very desirable, like Cano and Ellsbury, and the benefits trickle down to the Chavezes, Logans and Santanas of the world. Also working in their favor is that clubs, buoyed by local TV deals and ever-growing shares of MLB's advanced media revenues, have more money than ever to throw at them. Since 2004, the league's collective revenues have doubled, from $4.5 billion to an expected $9 billion in 2014. Over that period, player salaries have increased by only about 46%, from an average of $2.487 million to an average of $3.626 million.
Clubs aren't close to bankrupting themselves; their only consideration is how much of their escalating profits they will redirect to their players. Even with artificial caps in place, like the $189 million luxury tax threshold on team payrolls, they still as a group have a lot of room to work with, and in the years to come promise to only have more of it. Perhaps the $24 million the Mariners will be paying Cano in 2023, when he is 40 years old, won't hurt very much at all, even if he is a shell of his former perennial-MVP-candidate self.
While supply and demand, on a macroeconomic level, can do much to explain why this winter's free agent market has been so frenetic, so, too, do the specific circumstances of the individuals involved, particularly on the club side. All it takes is a few hungry teams to drive up prices, and they're there, as they always will be -- that wealthy club willing to spend whatever it takes to win now, future be damned (like the Yankees); that GM on the ropes who is motivated to try to deliver one final uppercut (like, say, the Mariners' Jack Zduriencik). "You have to take into account the human element, and the pressures we're all under," says the GM of one big-spending team. "If your job's on the line, you haven't won for a while, a new ownership group wants to make an impact ... sometimes it works, sometimes it doesn't. Most of the time it doesn't."
Every year, though, what they tried doesn't work for 29 of baseball's 30 clubs. This past season we came fairly close -- perhaps a David Ortiz grand slam or a Joe Kelly fastball to Hanley Ramirez's ribs -- to having a World Series that featured the two teams that have been among the most aggressive free agency spenders in recent years: the Tigers (who two off-seasons ago gave a nine-year, $214 million contract to a 28-year-old Prince Fielder, whom they traded to the Rangers last month) and the Dodgers (who gave Zack Greinke last winter's biggest deal -- six years and $147 million -- and who have four other players signed until at least 2017).
Major League Baseball's biggest public relations coup of the modern era might be how it has convinced its fans to fret about their team's finances -- about the financial wherewithal of businesses whose revenues are only growing, and who operate in stadiums that are largely publicly funded. The enormous and often lengthy free agent contracts that clubs have rushed to dole out this winter are merely the result of healthy, profitable businesses operating out of their own self-interest. Perhaps one day, young stars will collectively decline the early career contracts now being thrust at them in favor of the much greater riches they might earn on the open market; perhaps one day, the players will fight the current labor structure in which they must play for six years at a below-market wage, thereby artificially depressing their earnings, before they can first become available to the highest bidder. That day is likely far off.
Next winter's free agent class looks to be even thinner than this year's. It is set to include very few superstars in their prime, beyond the Dodgers' Clayton Kershaw and Hanley Ramirez and the Tigers' Max Scherzer, and besides, Los Angeles and Detroit may not even allow those three to reach the market. Even so, anyone serviceable who gets there should expect to be handsomely rewarded, as this chaotic winter will likely prove not an outlier but the establishment of a new paradigm: one that is driven by the reality that baseball's teams have more money than they know what to do with.