Photo Credit: Brad Rempel-USA TODAY Sports

Josh Donaldson and the strange free agent market

Collusion may just be a fancy word for misreading the market, at least in baseball.

Various theories exist to what caused such a slow offseason, at least in terms of free agent signings. Jonah Keri at CBS touches on a few – namely, “that spending in free agency is actually inefficient in too many cases”, “this free agent class is very mediocre”, and agents are making promises to players, “that they’re unwilling to fall short of.” Moustakas’ rejection of $17.4 million to sign with the same team for $6.5 million a few months later is a perfect example of an agent promising more than they can deliver.

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Next off-season’s star studded free agent class isn’t helping. Nor is the focus of some perennial free agent spenders (Yankees and Dodgers) adjusting towards managing a team salary that is no longer subject to the luxury tax – it is assumed the intention is to spend big next year.

But…spending on who? Donaldson is an obvious target. The question remains, will teams be willing to spend on him?

We all thought – lumping myself in – that Moustakas would be earning more than $6.5 million this season. When you start to dig deeper, $6.5 seems fair considering he is a comp to Nick Castellanos. Forget his unreal home run total or whatever individual metric everyone wants to focus on and glance at the pair…

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If the market read Moustakas’ value so poorly, is it fair to consider that we all have been misreading Donaldson’s in the same vein? This could be a very good thing for the Jays and – sorry Josh – a really bad thing for Donaldson.

The plan is to analyze Donaldson’s potential contract over the next few weeks by considering it from a few different points of view. Before delving into all the various angles, how about we consider this offseason’s market and how Jeter’s involvement threw everyone for a loop – especially J.D. Martinez.

This isn’t saying the same thing will happen to Donaldson next year, but never say never.

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MLB front offices are changing. Mostly, MBAs are causing a transition in how the economic environment of baseball is considered. Contracts are reaching upwards of $200 million, the risk/reward is higher than ever; cost certainty is the new name of the game. Cost certainty must parlay with performance, otherwise the value provided is meaningless.

Contract values are being reduced through the game’s economic conditions altering what players can earn through free agency. Moustakas was expected to get paid – he didn’t, at least not relative to his QO. Martinez was expected to get paid – he did, but at $22 million rather than the requested $30 million per year.

Donaldson is expecting to get paid – but what market conditions will he face?

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Back to cost certainty… the Marlins were selling it in spades. Add in that each of the big three (Stanton, Ozuna, Yelich) are all either in or entering their prime and serious value was available through trade that wasn’t originally expected. Martinez got screwed by this and Donaldson could too – if a team sees value in replicating the Marlins’ approach.

Our own Ryan Di Francesco highlighted Shapiro’s sentiment earlier this week – “free agency players are past their prime by the time they get to free agency – or, at least, right in their prime and they are going to be declining over a free agent contract.”  This concept could be the Achilles heel to any Donaldson contract.

Tough to say Stanton, Ozuna or Yelich are declining in the next year or two, but the same cannot be said about J.D. Martinez – or Donaldson who turns 33 before next season – considering age and debate surrounding his defensive prowess – same could go for Donaldson.

Is there a lesson to be learned through Martinez’s experience that could benefit Donaldson?

The Jays were in on Yelich to the very end, only to lose out to Milwaukee. The price, presumably Vlad or Bichette, was too high, otherwise Yelich would be shagging flies in Dunedin. Martinez was rumored as a possibility for Toronto, but the price, presumably, was too high for him as well. Over the four year period, Yelich costs $51.75 million less than Martinez – for the Jays, this suggests they value the prospects necessary to acquire Yelich as greater than $50 million. There is an assumption here the Jays valued Martinez at his current cost, which they obviously did not; hence Martinez is in Boston not Toronto.

Dollar for dollar, Martinez’s annual hit of $22 million pales in comparison to Yelich’s hit of $11.65 (average of remaining salary). Throw in the fact that Yelich’s contract includes his age 30 season while Martinez’s does not begins until his, the value of Yelich over Martinez becomes even greater.

The Marlins flooded the market with younger, better talent than what free agency had available. No offense to Martinez – he is one helluva player but his value is nowhere near that of Stanton, Ozuna or Yelich.

A flooded market should concern Donaldson as sports teams are paying attention to each other’s actions and any subsequent benefits gained. The Marlins clearly gained some benefit by trading the big three, however questions remain – are they better off? That is a matter of perspective.

So…if Ozuna does not go to St. Louis, does Grichuk end up a Jay? Probably not, unless Martinez ends up in St. Louis – which would have added another team into the mix, increasing Martinez’s free agent asking price. Without Ozuna ending up in St. Louis, the dominoes do not fall the same.

If Stanton does not end up in pin stripes, does Martinez sign in New York? Dollar for dollar, Martinez is cheaper – tough to make the age argument considering Stanton’s contract extends to age 38, rather than age 34 for Martinez. If not for Miami, New York would have been in the market for Martinez, driving his eventual free agent contract’s value even higher- sometimes the Evil Empire does its enemies good.

If Yelich does not end up in Milwaukee….yea not even going to build this one out, no chance Martinez becomes a Brewer based on cost alone.

The point is not to bad mouth Jeter – there are plenty out there already doing this. Rather, it’s to shed light on the affect his fire sale had on the league as a whole. Supply and demand saw drastic changes. Martinez is just one example of a causality, though it’s tough to call a $110 million contract a causality.

In the end, Jeter’s fire sale was the knuckleball no one saw coming and it changed the free agent market. The reality is free agency will continue to see changes and players need to be ready. What we think to be true now is turning out to be anything but. Donaldson’s next contract is one big question mark, mainly because the market conditions have not begun to even set.

  • Knuckleballs

    To me I am seeing a paradigm shift in the aging perspective in baseball. In the past ball players in their 30s where considered to sign large contracts in free agency and get payed (for passed performance). No longer the case – the drive now is to lower that age bracket and controllable. Seems like now the only free agents that will GET PAID will be guys like Vlad Jr if the come up in late teens early 20s and hit free agency in the 26 age range. If you are on the wrong side of 30 you are not going to get 7 year 250 million contracts any more. From what I understand really no contract has worked out they have all been duds (My mind tells in the past 20 years maybe 1 or 2 contracts have worked over dozens and dozens).

    • Blue Ox

      Agree with you completely. We can look at the game and see it. We can look at the numbers and see it. Heck, there are actual studies being done on this exact point that are proving this point – yet teams are still paying $$$ for post-prime years.

      • Abogilo

        It depends how you define “worked out”. There are times where a flat $/WAR is not what you are looking for. Two simple examples that complicate things:

        1 – To a playoff team, wins are worth more so you are not necessarily worried about short term $/WAR considerations.

        2 – Lots of WAR on 1 player is worth more than a small amount of WAR on few players since roster spots and playing time are finite. 1 Donaldson at 7 WAR is worth way more than 7 Barney’s at 1 WAR each.

        In summary, its not as simple as saying “free agent’s aren’t worth it”. I think there are just more teams right now where the added wins of free agents aren’t worth the extra premium in cash you pay to get them. This will change when big budget teams reset the luxury tax and more middling teams decide the front runners are not too far to make a push….

        Or maybe I am full of shit and players will get screwed and owners will get rich – it wouldn’t be the first time (looking at you NCAA football).

        • Knuckleballs

          I think you have provided a good point to discuss. Yes I agree 7 War Donaldson is worth more than 7 Barney’s, but I think this was mentioned before on this sight is this. Yes Donaldson has put up some significant war over the last 4 years (lets just say for the argument 16 War). But what is happening is that on a large contract in the declining years over the same period of 4 years that player may only put up 6 War and you are paying a ton for 6 War when the amount he was getting paid for 16 War was not nearly the same. So its understandable that a value on WAR is in play but that value is definitely swinging to the “left”. So key is to pay for break through talent that technically has years of top production ahead (like paying players who hit free agency at 26 or 27 years of age) then paying a declining player approaching their mid 30s. The only guy I knew of recent memory who was very productive in late years was David Ortiz and he was not getting any long term contracts he was going one year at a time from 37 on wards before he retired at 40.

          • Abogilo

            But if your early years were 7-8 WAR each, when your team needed them most, and did not consume extra roster spots to accumulate small amounts of talent on the margins, one can stomach paying 25-30M for 1.5 WAR seasons at the end of the deal because they spent 25-30M for 6-7 WAR seasons when they really needed it. SO even if the 9M $/WAR is what fangraphs says is free market rate, AND you could spend $4M/WAR on pre-arb guys (at the cost of future below market production in trade) a free agent contract that pays 12-15M/WAR can still “work out”.

            The baseball market is more complicated than anyone likes to think about but it makes for good discussions.

            Perhaps the lack of incentive for owners to take risks to improve their teams is the real source of the problem. If my equity in the team can grow regardless of performance, and the base league income can cover all expenses, why risk a high payroll for marginal success on field? Why not follow the Marlins model? What risk is there to the owners for “missing out” on the marginal talent increase if they field a poor product because they missed out on available talent trying to pinch pennies.

            One might argue that we are *Gasp* lucky to have an owner who is leveraging on field success for year to year profits on other businesses (media division @Rogers) and not only trying to compete to earn a big payday once every 10 years when they renegotiate media rights.

          • Blue Ox

            Knuckleballs & Abogilo

            This conversation is fantastic as you’re both hitting on very valid points. Abogilo’s point that a single 7-WAR player is more valuable than seven 1-WAR players – unless of course the other eight players are negative WAR, but this is a straw man argument.

            Not to applaud Knuckleballs too much, but he’s hitting on the point I was trying to make – the production a player provides declines after a certain age.

            At what age will Donaldson decline? So guys feel free to keep this going and together maybe we can come up with something.

          • Knuckle Balls

            To your point below on the Market being complicated. I think its going to get worse where maybe the price structure for players could be two tiered. One tier for free agents in their twenties and free agents in their 30s. As for when production drops off that’s a crap shoot. But you can base some analysis based on pasted large contracts on individuals (as they regress over time). Stanton would be one to watch and learn from. Imagine if the Jays did sign Bautista to a 5 year 150 million contract. By all accounts he fell off a cliff. As for Donaldson I think 2017 would be critical to assess his future – injuries and production. Travis for example if he is like glass will never get paid, even though when healthy is AWESOME.

          • Abogilo

            I agree with you. The market has certainly changed. I also agree that we will see a decline in the number of huge contracts being signed for players who are older.

            I think the economics of baseball have shifted drastically (at the players expense). In decades past, when ticket revenue was a larger share of the baseball profits, there was a HUGE incentive to leave the pack behind and spend money to make money with a winning dynasty. There is less incentive to do that now that there is more base revenue, public money for stadiums, and guaranteed equity growth regardless of performance. Add to that the fact that the league is changing rules to increase parity where it did not exist before and baseball is moving more towards an NFL model where it is much harder to form a dynasty.

            These changes are likely good for the customer’s product and for the profit of the league/owners BUT it creates a market where the players cannot extract as much value as in years past because if an owner gives up a bigger piece of his pie, the whole pie doesn’t grow as much.

            Rogers has more of an incentive to grow its brand and put a good product on the field than other teams because it leverages the brand to float other industries in which it is heavily invested. This is good for BJ fans who want to win since our interests are more in line with ownership than on most teams.

            Should we sign JD to a big contract… that is a hard question that I go back and forth on all the time. Can you overpay on $/WAR on a declining player and still have the contract work out – i would argue that for Rogers and the Blue Jays, that is more true than for other teams.

          • Blue Ox

            You’re presenting a really interesting perspective that I definitely need to think more about – uhhh I can already sense the research nerd in me wanting to look deeper into sources of revenue.
            Have you guys heard of the Uncertainty of Outcome Hypothesis (UOH)? If you’re interested I’ll mock up a basic rundown on how it works in a future article – just lemme know. Basically, leagues want parity and that dynasties are actually detrimental to the overall state of the game, regardless of the sport in question.
            You’re bang on when you talk about players not being able to extract a greater percentage of the pie. The percentage players earn may fluctuate a bit here and there, but overall it is holding fairly constant (in terms of their percentage of the whole pie, not in terms of the take home pay). And, if we’re talking about a free market they are being gouged – but then again sports has never been a true free market *coughFloodcough*
            Uhhh damn you Abogilo – I was expecting to think this hard on a Wedensday morning!

          • Abogilo

            I appreciate the discussion Knuckleballs and BlueOx.

            Do you think that the market has changed permanently away from paying for past performance, or at some point do you think it will go back to the way it was when there are more teams whose immediate urge to win is stronger than its longer term need to maximize its $/production over the long haul?

  • fred2

    If you’re the Players Association , you need to be seriously considering what the hell you do. Back in the steroid era, players were entering their peak in the mid and late 30s. Bonds was MVP at age 40 and an All Star 3 years later. Clemens won his final Cy Young at 42. Those two may be the extremes, but the stars of the game until about 2010 were all in the mid to late 30s (Jeter, A-Rod, and lesser players like Carlos Delgado were still producing well into their second free agent contract) and there were countless players having some of their most productive years as free agents.

    So it’s not true to say it never made sense to spend on free agents, but it certainly doesn’t seem to any more. The games biggest stars are all producing their best years under team control. Mike Trout should have won 3 MVPs by the time he earned more than league minimum. That’s insane.

    The best players in baseball are still indentured servants, tied to teams they can’t leave, getting paid a fraction of what they’re worth. And now they can’t even look forward to a payday when once they hit free agency. It’s a crappy deal. The Players Association should be looking at getting their players paid what they’re worth from year one.

    • Knuckleballs

      Thing is, is that not what the arbitration process is all about. Get paid for what they are worth (Donaldson set a record this year at 23 million). So technically this already covered to some extent. Trout will get his giant pay day, cause he will hit free agency still in his prime pending injury (like 27 years).

      • Blue Ox

        Donaldson’s arbitration is a lil F’d in my opinion. The process itself inflates the player’s salary, which further inflates the salary for future arbitration. It’s a flawed system that actually might benefit the player more than the team.

        There are counter arguments that can sink this opinion, but this is exactly why it is just an opinion – I’d be a terrible lawyer eh?

      • fred2

        But arbitration doesn’t address it, does it? The players get to haggle over a number that is nothing to do with the true market value of the player on the open market. **This** year, in his final year of arbitration, Donaldson may be earning something close to what he has been worth since 2015. He’s still getting screwed. He’s just getting screwed less. And now, as a late developer, he can look forward to not cashing in on his free agent years.

        Sure, sure, he’ll end up a grotesquely rich man probably spending all his money on tacky mansions and cammo hunting gear. But, in the most capitalist of countries, in the most capitalist of professions – sport – why the hell is it ok to force people into contracts that deliberately pay them a fraction of what they’re worth? And why do you think that the MLB teams are so keen to extend the draft to the whole world? For the good of the game? Or so they can screw Japanese and Korean players just as hard as they screw ever other 19 year old prospect?

        The richest and most powerful players used to accept this deal with the devil. The most talented got the bulk of the money, and the youngest and most marginal players got almost nothing, even if they carved out a couple of decent major league years and provided a shit-ton of value to their teams before flaming out. And what if Trout has some career-ending injury before September? Is it ok that he’d end his career never having been paid properly for what he did?

        Either a) go full capitalist and just pay people what they’re worth
        or b) go full socialist (it’s already about 80% socialist), agree a percentage of MLB revenues that must go to players (they pretty much already do that), and then divvy it up based strictly on performance … previous year’s WAR. A 5 WAR guy get’s paid a shit ton, regardless of year, and regardless of team. All MLB teams already operate on the basis of a ‘fix’ that allows poorer teams to compete with the Yankees and Red Sox anyway, so why not treat all team revenues as a big pot, from which all players are paid centrally. The end result is that if Mike Trout is playing for the Rays, the Rays will be able to afford him, because it’s MLB that writes the cheque. The Rays just provide whatever proportion of their revenues to the MLB pot.

        I hearby nominate new commissioner of baseball – Mao Tse Tung.

        • Blue Ox

          Hard to counter what you’re saying as your points are so valid. I actually agree with you, however as the saying goes “there are two sides to every coin”.

          NFL and NHL have already instituted the salary cap; baseball has their own version with the luxury tax. It comes down to parity. If free market conditions were actually allowed in sports than you would see teams loading up on players just to sink them in their minor leagues with the intention of limiting the player pool for their competitors. Players will take this payday regardless of where they play – Wade Redden’s AHL career is a perfect example.

          How about we give Manfred a couple more years before we start looking for his replacement… (uhh I hate myself for feeling like I’m protecting the ‘establishment’)

          • fred2

            Manfred … Mao Tse Tung, Manfred … Mao Tse Tung.

            Oh go on then, I’ll give him a couple of years before we attach electrodes to the mummified corpse in Tiananmen Square.