2018 represents the first time in more than a decade that total payroll for Major League Baseball decreased from the previous season. On the surface, this seems to have resulted from teams being less inclined to give large contracts to free agents who are reaching their early thirties. Another cause is that teams who do not view themselves as contenders have increasingly chosen not to spend payroll dollars to improve from the bottom to the middle; better, in their minds, to flatline for a few years, save money and stock up on draft picks, then spend big when those draft picks are ready to contribute.
Agents and union reps can bemoan these trends, and it’s their job to do so. Salaries have increased by an average of 5.7% per year since 2005; you would look long and hard before you found a blue-collar industry with those sorts of wage increases, so sympathy for the players is probably in short supply. But is the decrease this year the start of a trend?
It might be, because the free agent system is currently set up to give players their best shot at a big payday around the age of thirty, and teams have figured out that those kinds of contracts seldom return good value. Thus, the players’ union has two choices if it wants to reverse this trend before it gets going: they can either incentivize teams to stop tanking so that more teams are participating in the free agent market, or they can tweak the free agent system so that players have a shot at big deals earlier in their careers.
The latter may be a tough lift. Take Jake Arrieta, for example. He was a late bloomer, so he didn’t accrue enough service time to qualify for free agency until he was 32. Because of that, the Cubs got four years of elite pitching, including a Cy Young in 2015, for a total of about thirty million dollars. In previous years a guy with that resume would have had teams lining up to throw money at him; in fact, just three years ago the Cubs gave Jon Lester, who has never had a year as good as Arrieta’s 2015 — a seven-year deal worth $170,000,000 that will expire when Lester is 37. But Arrieta got no offers until halfway through spring training, then signed a three-year deal with the Phillies.
The only remedy that could have helped Arrieta get a better deal would have been for him to be eligible for free agency at a younger age, which would have increased his bargaining power even if it hadn’t coincided with his Cy Young. But why would owners agree to that, unless the players are willing to give something in return? Even allowing for advances in training and nutrition, most players begin to decline as they enter their mid-thirties. For most players, that means that they have little bargaining leverage during the best years of their careers. If you’re an owner, this works well for you, and you would only agree to change it if you got something in return. What could the players give up that the owners would consider a fair trade for an earlier free agency? Well, that’s the problem. Whatever the players gave up would likely also inhibit their bargaining leverage.
There’s money to be haggled over. Salaries may have increased by 85 percent between 2005 and 2017, but revenues increased by 91 percent! The NFL, NBA, and NHL all have collective bargaining agreements that tie payrolls to revenues. Baseball players have resisted this because the players’ share of the pie had grown for decades. Now that that is no longer the case, they might be willing to revisit this; the owners might be willing to give players a larger share in exchange for cost certainty.
The share of the pie that players are most concerned over is the part that goes to revenue sharing. In theory, teams in larger markets pay a chunk of their revenue to teams in smaller markets so that everyone can compete. The rules stipulate that revenue sharing income is to be spent on player salaries, but this is loosely enforced. The Marlins, who have regularly qualified for revenue sharing despite playing in the eighth-largest metropolitan area in the country, have annually stripped their roster of its costliest players and pocketed the money that they saved.
The solution to that, and to numerous other ills, is to change from a model based on revenue sharing to one based on cost sharing. This works for both sides because most owners probably don’t want to subsidize someone who isn’t trying. Players would win, as well, because if the payrolls of small-market teams are subsidized it creates a larger market for their services. Technically, the player’s union is not in the room when revenue sharing formulas are determined, but it would be simple enough to get a commitment in the next CBA to address the issue.
The fact is that there are more players making more than twenty million this year than last (44 to 37). So, the superstars are still getting their money. What has dropped are the salaries between ten and twenty million – the middle class, so to speak. In 2017 there were 97 such players; this year there are 89. Meanwhile, the number of players making between five million and ten million went up from 112 to 126.
This is a small sample, and the degree of change isn’t large enough to make any sweeping analysis. It makes sense, though. Superstars are valuable whether analytics are involved or not; it’s the next tier where value can be a matter of debate. If things continue in the same direction, it would indicate the end of the notion that players who hold down a starting job for several years would end up inevitably end up with eight-figure salaries. Mike Moustakas, for example, is a two-time All-Star who last season broke the Royals’ single-season home run record. He’s a decent defensive third baseman who has played in at least 136 games in five different seasons. In other words, he’s a guy you can put at third base and not worry about it.
Until this year, guys like Moustakas were getting multiyear deals worth more than ten million a year as a matter of course. But even in breaking the team home run record last year, Moustakis posted a 1.8 WAR. He has only exceeded 2.0 WAR twice in his career. In a world where 41 major league players hit thirty or more home runs last season, the irony is that so many players are swinging for the fences to increase their value that guys who derive all of their value from their power find themselves expendable. Moustakas signed a one-year deal with the Royals for 5.5 million, with a mutual option for 2019 at 15.5 million. By 2019 the Royals will be deep into a rebuild and won’t be inclined to pay 15.5 million for a guy who might help them improve from 71 wins to 73.
So, maybe there’s not really a problem here. Players are getting paid what they’re worth because teams are understanding that shiny numbers like thirty home runs don’t represent a guy’s true value. That sucks for players, who had come to expect that every foray into free agency was a lottery ticket. Players always wanted an unfettered free market because it only took one owner dumb enough to overpay them. Now that owner is either tanking or he has a GM with a spreadsheet telling him which players are actually worth ten million a year. It will be fascinating to watch how the players want to tweak the system now that it doesn’t work for them.