New trend of locking up young players changing MLB's landscape
News item: The Atlanta Braves announced they have reached agreement on a seven-year contract extension, plus two club option years, with bat boy Billy Johnson of Creekwood Middle School. Financial terms were not disclosed. "This move shows our commitment to keeping our young core together as we transition to a new ballpark in 2017," general manager Frank Wren announced.
Well, it could happen -- at least at the rate baseball is going. Locking up young players has become the new market efficiency, and we're seeing the baseball equivalent of a land rush. Teams are moving to hand out extensions to their players to keep them away from free agency -- and that has turned free agency from the Rolls Royce market segment into one more akin to a Chrysler Cordoba with the Corinthian leather. Ask Ervin Santana, Stephen Drew and Kendrys Morales how the land of milk and honey of free agency is working out for them.
The boom in contract extensions is being fueled by the increases in national and regional television rights, but that's not all that's behind it. Teams know that, in the drug-testing era, you no longer want players aging through their mid- to late-30s.
"What you're seeing is the industry showing an eagerness to buy up the best years of a player's career," one prominent agent said. "They want the ages 24 to 31 or 32 and don't mind doing long-term deals to make sure they get them. After that? You're still going to see some big deals here and there, but teams know the value isn't there. So you're going to see more and more of the [Freddie] Freeman type deals."
The 24-year-old Freeman was three years away from free agency this month when the Braves signed him to an eight-year, $135 million deal. They also bought up free-agent years of Craig Kimbrel, Julio Teheran and Andrelton Simmons.
Here's how much the game has skewed younger. In 2000, players aged 36 and older combined for a better OPS than subsets of players 31-35, 26-30 or 25 and younger. Yes, players were getting better as they got older! That's just crazy -- or the wonders of illegal chemistry. But last year, the 36-and-older crowd posted below-MLB averages in batting average, OBP and slugging. Here's how the 36-and-older set from 2013 compared to their peers in 2000. (Keep in mind that we have entered into an era of emphasis on run prevention, so all offensive numbers have been trending down.)
Almost 50 years after activist Jack Weinberg said it, baseball has borrowed its own version of "Don't trust anyone over 30."
Here's another way to think about what's been going on. The free-agent class after this season once looked like it could be historically great -- perhaps even recalling 1992-93, the height of free agency, when Barry Bonds, Greg Maddux, David Cone, Ruben Sierra, Randy Myers, Doug Drabek, Benito Santiago, John Smiley and Mark Gubicza all reached the market coming off their age-26, 27, 28 or 29 season. On track for free agency this coming winter were Clayton Kershaw, Justin Verlander, Evan Longoria, Jay Bruce, Homer Bailey, Elvis Andrus, Hunter Pence and Matt Harrison. None of them made it to free agency. All of them signed extensions somewhere along the way in which their current club bought up free-agent years.
What are we left with? Sure, you might get Max Scherzer, Jon Lester, Hanley Ramirez and James Shields -- but there's still time for extensions to weaken the free-agent class further. And besides, none of them offer the chance for another club to buy up a season in their 20s. Only three potential free agents will play next year in their 20s: Colby Rasmus, at 28, Pablo Sandoval, 28, and Asdrubal Cabrera, 29.
What we are going to see is a further eroding of the free-agent market as a place of any kind of efficiency. Teams will continue to make bad deals on free agents because it mostly involves paying too long and too much for the decline years of star players.
It may be a very long time before we see another Bonds or Maddux hit the free agent market in his prime. (Bryce Harper in 2018-19?) Forget about Mike Trout. The Angels will be absolutely bonkers if they don't lock up Trout before Opening Day. Even though Trout isn't eligible for free agency until after the 2017 season, when you have a franchise player like this, every day lost without buying up free-agent years only increases the eventual cost.
How much will the Angels have to pay Trout? Figure about $1.2 million for 2014 -- which, with inflation, rightly pushes him past the record for non-arbitration eligible players of $900,000 set back in 2004 by Albert Pujols and matched in 2007 by Ryan Howard.
Now you have to figure out how much his three arbitration years are worth. The last three years of arbitration were worth $54 million to Howard and $53 million to Tim Lincecum, though both had the advantages of one Super Two year of arbitration prior to those three. Figure Trout for $65 million conservatively.
Now comes the hard part: Buying up free agent years from Trout, which begin with his age-26 season.
"Four years is what clubs generally want when it comes to buying up free-agent years," one agent said. "You may do a deal for less if you're the club, but it makes the most sense to get four. I would expect four."
Pujols was Trout in 2004. The Cardinals, after buying out three arbitration years for $32 million, bought out five free-agent years (the last at their option) for $79 million. Pujols turned out to be a huge bargain. St. Louis bought out his ages 27-31 free-agent seasons at $15.8 million per year. Then they let him walk and allowed the Angels to be saddled with the overpayment: $24 million a year for ages 32-41.
Ten years later, the price of buying up prime free-agent years for the best player in the game has more than doubled. The Dodgers bought six free-agent years of Kershaw at ages 27-32 at $34.7 million per year (with the signing bonus prorated). Trout will get more.
Let's say Trout's free-agent years are worth $36 million. Let's say the Angels can get four of them. Now, if you set aside his 2014 salary, you're talking about a seven-year extension worth $204 million.
How seismic is that? The record average annual value of a contract signed by a player with less than three years of service time is $18.5 million, set by Buster Posey only 11 months ago. Trout's $29.14 million average annual value would blow that away by 58 percent.
The bottom line is that players like Trout just don't get on the market in their prime any more. For instance, say you are the general manager of a club that wants a young hitter in his prime. Good luck trying to convince somebody to trade you one. So you check to see when the next one will become available on the free-agent market. You look at the 11 best hitters from last season age-27-and-under, as ranked by OPS+. Then you check their contract status as to what year they might be available to play for you. Here's the bad news:
* Signed extension that bought up arbitration and free agent years.
Now you see the pattern: Draft and develop a star player, identify him early and lock him up through age 30 or so, then let somebody else pay more for his decline.
Extensions make it rarer that you will see star players in their 20s on the free-agent market. Over the past eight years, teams have bought only 50 seasons on the free-agent market that covered players in their 20s, or only six prime seasons per year. (Includes only key players signing multi-year contracts.)
Those numbers do not include international free agency, which has been a much more efficient market for prime talent (Masahiro Tanaka, Yasiel Puig, Yoenis Cespedes, Yu Darvish, Aroldis Chapman, etc.).
It's likely that we will see more extensions handed out before Opening Day, as happened last year when Posey, Justin Verlander, Paul Goldschmidt and Adam Wainwright all signed extensions within a three-day period just days before Opening Day.
Then we can start looking ahead to the 2015-16 free-agent class. On track to hit the market are seven players who still will be in their 20s: Jason Heyward, Justin Upton, Mat Latos, Neftali Feliz, Austin Jackson, Rick Porcello and Jhoulys Chacin. And you also have a bunch of players who will play in 2016 at age 30: Chris Davis, Matt Wieters, David Price, Dexter Fowler, Yoenis Cespedes, Ian Desmond and Jordan Zimmermann. Sounds like a great free-agent market, right? Just wait. It's two years and many more extensions away.