On MLB\\\'s Tenuous Labor Situation And Recent Extension Glut

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On MLB\\\'s Tenuous Labor Situation And Recent Extension Glut  

Post#1 » by RealGM Articles » Sat Apr 13, 2019 12:52 pm

Baseball is back and, with only a couple of weeks of games to work with, we’re fully engaged in the dramatic joys of small-sample-size theater. While there are certainly some meaningful things to be parsed from our limited collection of data, a lot of what we’ve witnessed so far is noise. The Mariners  (.813 winning percentage) are probably not going to continue on their current trajectory and win 140 games this year, as it’s more than a little unlikely that their entire lineup (157 wRC+) is basically Mark McGwire (career 157 wRC+).

The early runnings of the MLB season are certainly entertaining and, while it might be fun to dive headfirst into the shallow pool of data that we have on the 2019 season, you do so at your own risk. We’ll be diving in soon enough. Instead, today, we’re going to look at something that’s far more important for the sport as a whole: extensions, and whether there’s any deeper meaning in the ones we’ve been seeing as of late.

When we last checked in on MLB’s labor issues back in January, we were still waiting for Manny Machado and Bryce Harper to sign their respective mega-contracts. While they both eventually did, and they received large contracts befitting of the young superstars that they are, that doesn’t mean that everything is well and good in the land of free agency. Dallas Keuchel and Craig Kimbrel, two of the best pitchers to hit the market this offseason, are still without homes, despite the fact that we are a couple of weeks into the season and there are certainly teams that could use their services. 

However, we’re here not to talk about specifically about free agency, but rather to discuss the moves by players and teams to avoid having to actually confront it. The latter part of the offseason was basically an extension free-for-all, with another player signing a contract to stay with his current team seemingly every day. From the end of the season last year through the writing of this article, there were over 30 extensions handed out, at a value over $2 billion, with many, many decades of service time being accrued by teams.

To be clear, extensions aren’t necessarily a good or bad thing in and of themselves. The idea of a player spending his entire career with one team is a romantic one, and if I’m an Angels fan, I’m pretty excited about the fact that I’m going to get to watch Mike Trout play for my team for an awfully long time. But if you Google the meaning of “romantic,” you see “of, characterized by, or suggestive of an idealized view of reality.\\\"

When people talk about the good ol’ days when players spent their entire careers in one uniform, those were the days before free agency. Players were stuck with their team because of the reserve clause that existed in their contracts which allowed their team to “reserve” their services for the following year and forbade them from seeking employment with another team. They played on one-year contracts on a take-it-or-leave-it basis, and they weren’t paid well. They lacked pensions, insurance and access to quality medical care. Free agency changed all that, and players have gone from making a minimum of several thousands of dollars a year to over half a million dollars a year. 

While that amount is eye-staggering to most of us, it’s worth noting that the players have struggled through the shameful conditions of the minor leagues to make it to the majors and actually get reimbursed for their services by an industry that’s worth billions. And, while we’ve focused so much on the plight of free agents over the last couple offseasons, most baseball players don’t make it to that point. Think of all the players you’ve watched for a season or less and then never heard from again. 

Returning specifically to extensions, we first need to note that there come in a few different flavors, and we tasted all of them multiple times over this offseason. Generally speaking, players receiving extensions generally fall into three overall categories: the player is (1) approaching a walk year, (2) in salary arbitration and at least a couple of years from free agency or (3) not yet eligible for arbitration.

The five-year, $130 million extension to Paul Goldschmidt by the Cardinals this offseason is a stereotypical model of the first, even if it’s a rarity in this day and age. You can understand why Goldschmidt might not want to have to deal with free agency next offseason, given the rough rides that so many position players experienced over the last couple years. While Goldschmidt (who has been one of the best players in baseball for years) wouldn’t have sat out part of the season or had to settle for a one-year contract, something that we’re seeing more and more of (whether in reference to a good, useful player like Mike Moustakas or an excellent player like Yasmani Grandal), the fact that it took players of Harper and Machado’s caliber so long to find homes was pretty clearly a motivating factor. 

But the vast majority of the extensions were to players not in that first category, and who were more than a year away from free agency. Mike Trout’s extension falls here, as did the extension the Mets worked out with reigning Cy Young winner Jacob DeGrom, who would have been a free agent following the 2020 season, just like Trout. All these contracts take players into their mid-to-late thirties, though. While it’s certainly interesting that players are choosing to eschew free agency that late in their MLB careers, they’re not the most interesting extensions that were being inked, as that distinction belongs to the ones given to pre-arbitration players.

Houston’s Alex Bregman signed a five-year, $100 million contract that buys out two years of free agency and gives him the third-largest deal ever to a player with less than three years of service time (with Trout and Buster Posey holding down the first and second spots). If Bregman continues to be as good as he was last season (7.6 fWAR), this deal will look like an absolute steal, but he doesn’t have to a perennial MVP candidate for the contract to work out in the Astros’ favor. And regardless of how it actually all works out, locking a player up through his age-30 season is a move we saw a lot of this offseason and we’re probably due to see a whole lot more of. 

Reigning NL Rookie of the Year Ronald Acuña Jr. signed a deal for over $100 million that will take him through his age-30 season, thanks to a couple of team options. While it’s easy to see Acuña’s motivation in opting for the security of signing a deal that will make him extremely rich, it’s also all too easy to see the fact that the Braves’ ownership is pretty happy with the fact that they’ll only pay Acuña just $17 million a year from 2023 to 2028 and then not have to worry about paying Acuña at all after his age-30 season.

Like Bregman and Acuña, Blake Snell, José LeClerc and Aaron Nola will all be free agents after their age-30 seasons. While it’s a different beast, it’s worth paying attention to the fact that Xander Bogaerts extension includes an opt-out after his age-29 season and Machado’s contract with the Padres has one after his age-30 season.

The most extreme version of these sorts of extensions is the one the White Sox gave to Eloy Jimenez. He hasn’t even played a single MLB game and the top-prospect signed an eight-year, $62 million extension that will make him a free agent after his age-30 season. As with all contracts to unproven players, there’s risk here, as the Astros can clearly attest to with Jon Singleton. There will be busts, but there will also be Evan Longorias in the mix, and those players will underwrite the busts.

Then there’s the contract that Ozzie Albies just signed, which belongs in a class of its own, owing to the fact that people are calling it the worst contract for a player ever. Albies is a 22-year old second baseman who is coming off his first full season, where he hit .364/.429/.500 and was worth 3.8 WAR by both bWAR and fWAR. It’s a seven-year contract for $35 million and then a couple of team options that can max it out at nine years and $45 million dollars. The Braves are paying a player who’s already proved he can succeed in the major leagues $5 million a year to play for them until he’s almost 31. Given the contracts given to his teammate Acuña and Jimenez, this deal is borderline insane and basically shameful on the part of Atlanta and Albies’ agent. 

In a post-Moneyball world, with baseball teams hiring away extremely smart people from Baseball Prospectus and Fangraphs, every team has come to hold the (correct) view that younger players are generally preferable to older ones. Teams don’t want to employ players over the age of 30 unless they are truly special, which is perfectly logical, given what we now understand about the aging curves of the majority of baseball players. The problem is that now baseball teams are ruthlessly leveraging the fact that free agency isn’t working in the favor of players and signing the best players to extensions that will only pay them for their prime years. 

Baseball continues to post record profits, and yet overall payrolls are going down, for the second year in a row. The players know this and they aren’t happy about it. Teams are operating with a pack-mentality, collectively driving down the prices of the free agents who aren’t in the uppermost tiers, and then focusing on extending the players that are the most likely to succeed. 

There’s no easy answer to any of this, and when you look at it from the perspective of a fan, it’s easy to get caught up in the notion that any savings that your team incurs on a dollar-per-WAR basis is great. Now, my team can continue to improve and increase the likelihood of pennants and championships and all the feels (and accompanying merchandise expenditures) they entail. But that doesn’t mean that we shouldn’t think deeply about these issues, especially when they could potentially encroach on our ability to actually watch baseball almost everyday for over half the year in the not too distant future. 

And there are further questions to ask about the health of the sport as a whole, as well. Are we returning to the days of yore when it comes to player movement, with most players spending their entire careers with one team? I don’t really follow basketball, but the word on the street from my NBA-covering cohorts at RealGM (and confirmed by my Twitter feed as the clock rolls from June to July) is that the first few days of free agency are one of the most exciting times of the year. I get the impression that it’s like Christmas, with every fan waiting to see what Santa will bring them this year. MLB fans are never never going to get the chance to see if there’s a LeBron waiting for them under the tree. I, for one, wouldn’t mind unwrapping a Trout, even if it’s slightly used. 

But aside from the questions of whether there actually is some inherent value in watching the same player on your team for a decade or more, there are real issues with the way things are working out now, issues that will have potentially have real ramifications when the current CBA expires after the 2021 season. Maybe the owners and MLBPA will work out some sort of compromise and it’s at least heartening that the parties are actually discussing the economic realities of the sport in its current iteration. But, given what we know about how businesses operate, it seems unlikely that the owners won’t do everything in their power to decrease players’ salaries. 

It’s also possible that some of the players signing extensions are even doing so with the fact that there’s a labor storm a-brewing in mind. After all, if there is going to be a strike, better make sure you get paid before it happens. Traditional free agency seems to have gone the way of the dodo, and that means it’s all the more likely that this is going to prove to be a trend, and just another piece in a very complicated puzzle, which includes not only free agency and extensions, but service time manipulation and a plethora of other issues, that threatens to disrupt nearly two and a half decades of labor peace.

It’s too early in the season to make any grand prognostications about what the season will hold. But it’s far from too early to start worrying about whether we’re going to have a strike on our hands in the not too distant future. Free agency has failed and now teams seem to be using extensions to manipulate player salaries as well. Whether you want to call it “snuff contracts” or whatever else, the clock is ticking for the parties to sort out the situation and find a way to distribute the spoils of WAR. That being said, the Mariners’ Tim Beckham is apparently better than Barry Bonds, so it’s time to try and forget about labor issues and get back to April baseballing. 

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