Baseball as a War of Attrition

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There is a new shift in the market taking place: more and more teams are locking up players over their arbitration years, often extending into free agency. For example, look at some of the recent signings teams have made (most of which for players who haven’t hit arbitration): Ryan Braun, Scott Kazmir, Evan Longoria, Aaron Hill, Alex Rios, Troy Tulowitzki, James Shields, Justin Upton, Chris Young, Hanley Ramirez, Ian Kinsler, Robinson Cano, Adam Wainwright, Curtis Granderson, and Brandon Phillips. There seems to be a divergence from free agent contracts, which have become very expensive, in part because baseball is awash in cash, and also because teams feel they may be one piece away from putting themselves over the top. Eighteen seems to be the new magic number to lock up star players, as most of the highest paid players hover around 18 million per year (+/- 1): Wells, Zito, Zambrano, Matsuzaka (incl. posting fee), Hunter, Lee, Jones, Ichiro, Soriano, Peavy, Cabrera, and Beltran. That of course excludes Santana and Rodriguez, who are both exceptional cases.

Thus, teams are trying to maximize their young superstar’s years before they hit free agency. What sort of affects will this have on team construction in the future? For one, so many young players locked up means fewer will hit free agency, and that may be part of the reason why the last few years have had such a dry crop of free agents. Second, teams are building up to be competitive for a long time, because they control the core of their young player’s contracts for a long time. Another advantage is that players tend to peak in their late 20’s, whereas many free agents are being signed for their decline years, in their 30’s.

Third, there will be more sunk cost contracts in the future. Tying up Scott Kazmir for potentially 4/$40 million is a potentially incredible steal. But if he blows his arm out, then they are looking at a $28 million loss (which is what is currently guaranteed). Fourth, it is smart to trade for prospects who are late bloomers and thus are not incorporated into their teams’ long-term plans, such as Carlos Quentin (who’s killing the ball in Chicago right now). If I were another GM, I’d be eyeing Adam Lind on the cheap right now. Conversely, teams should be wary of overvaluing a rookie who got off to a hot start. But if there is a consensus of positive evaluations from the scouts, then it is a safer bet to lock up a young star.

Some other nuances are worth noting. Even the arbitration process is not immune to inflation. Ryan Howard won an arbitration case this year for $10 million in his mere first year of arbitration. Since players make what comparable players make, there will be an increase in other arbitration salaries in the ensuing years. Nevertheless, it remains a fraction of what the inflation on the free agent market is worth. Second, I am predicting a more aggressive approach by teams to give out major league deals in the draft this year. For example, Jonathan Mayo of MLB.com predicts the Pirates (yes, that’s right, the Pirates) will draft Pedro Alvarez, since he is both the most expensive player they can get, and also, the best one.

Finally, where do the Jays stand? Marcum and McGowan are the front runners to be locked up long-term. They are both a bit on the older side, so perhaps a pitcher’s injury might be a bit less of a risk. As well, Travis Snider is a good candidate to start well in the majors and hopefully be a Jay masher for a long-time. But he’s still extremely young.