First Pitch: What If Teams Weren’t Restricted From Spending on Certain Players?

There was a lot of discussion today on the qualifying offers and the impact to the current free agent market. Most of the talk comes from the fact that five players are still free agents with very little interest, all due to the qualifying offer and the draft compensation that is attached to them. Dan Szymborski broke down the long-term value of a compensation pick, and noted that the pick could be impacting the price on these free agents by $23 M. That means that someone like Kendrys Morales, who would be worth two years and $24 M on the open market with no compensation, is actually worth two years and $1 M with the loss of a first round pick.

Dave Cameron wrote a great article this afternoon, discussing some changes that could fix the current system. He suggested a standing offer for the qualifying offer, meaning that if you made the offer, it was there until the player signed with another team, or accepted the deal. This would prevent situations like Kendrys Morales, where the Mariners didn’t want him back, but made the offer for compensation. Cameron also suggested that players traded mid-season should also be subject to the qualifying offer. The first suggestion would remove the qualifying offer from players who didn’t deserve it, and the second suggestion would add a qualifying offer to players who did deserve it. This would even out the money, making sure the MLB wasn’t giving a large amount of additional money to players, without getting anything in return.

That’s the key to any change. If you remove the qualifying offers, the prices on free agents go up. On the surface, the objective of the offers is to compensate former teams for losing a player. In reality, this doesn’t work as intended. However, it does a great job of limiting money for free agents, as we’re seeing with the five remaining free agents who have compensation attached.

I have a different suggestion. Why not get rid of the qualifying offer entirely? If a player is good enough to get a big deal (perhaps the top ten deals based on average annual value, or maybe any deal with an AAV over X amount), then the former team should get compensation for losing that player. The team shouldn’t have to make the formality of an offer. It shouldn’t matter if the team has a good internal replacement to take over and doesn’t really need the departing free agent. These restrictions only hurt small market teams, especially the teams that build the correct way through the farm system. Furthermore, the signing team shouldn’t be penalized for signing a top player. This hurts small markets more than big markets, since smaller markets have a higher dependency on draft picks.

The problem with this approach is that it drives more money to free agency, with no counter moves to balance the scales. There needs to be a rule change to drive money away from free agency. That rule change should involve reverting the draft back to the way it was, where teams were free to spend as much as they wanted.

A big reason the draft changed was because veteran free agents weren’t getting big offers from teams like the Pirates, who were spending a ton in the draft. I remember talking with scouts and college coaches around the time of the 2010 draft, who were dismayed at the draft spending. That was around the time that Jermaine Dye couldn’t get a deal in free agency, yet teams like the Pirates were spending $6 M on guys like Jameson Taillon. As we know, the smart move for a small market team is spending $6 M on a guy like Taillon, rather than spending that $6 M on one year of a veteran like Jermaine Dye. Yet the system was changed because the players union was upset at the growing amount of money going to draft picks, who are not represented by the player’s union.

By removing the restrictions on the draft, it allows teams like the Pirates to divert money to building through their farm system, rather than spending money in free agency, which is one of the worst places for a small market team to spend money. The compensation changes would bring more money to the players, while the draft changes would give some teams the freedom to divert their money away from free agency, thus taking money away from the MLBPA.

The end result here is that you let teams spend their money how they want. If the Pirates want to spend $17 M per year in the draft, rather than spending most of that on one free agent, then let them do it. If a team wants to give Kendrys Morales a two year, $24 M deal without punishment, then let that happen too.

All of these problems stem from a larger problem that goes un-changed: the ridiculous finances in Major League Baseball, which lead to big market teams being the only ones who have a shot at the biggest free agents. This leads to the higher prices in free agency, and it leads to small market teams looking at other avenues for talent because they can’t compete with the big market teams for the best free agents. Obviously MLB is not going to change this broken system. So they’re going to make rules like adding a qualifying offer, or restricting draft spending, all to try and limit the overall problem.

Unfortunately these rules usually make things worse for small market teams. They make it so that small market teams can’t afford the risk of giving qualifying offers. The rules make it so that adding a QO player is too prohibitive for a smaller market, due to the draft pick compensation attached. And they make it so that small market teams can’t take their money to the draft and use that money on a much better investment for small market teams.

It’s probably a pipe dream to write about an idea that would help small market teams and make it easier for those teams to be competitive. That’s usually how it feels after every “MLB should change this to give small markets a fair chance” article I write. I’m sure there will be some sort of change to draft compensation in the next CBA, and I can’t imagine it’s going to help small market teams get compensation, make it easier for them to sign qualifying players, or make it possible for those teams to divert their smaller amounts of money to better avenues of finding talent.

Links and Notes

**The 2014 Prospect Guide is now available. You can purchase your copy here, and read about every prospect in the Pirates’ system. The book includes our top 50 prospects, as well as future potential ratings for every player.

**Fangraphs Has Seven Pirates In Their Top 100 Prospects

**Pittsburgh Pirates 2014 Spring Training Preview: The Outfield

**The Cost of a Draft Pick is Probably Greater Than You Think

**Pittsburgh Pirates 2014 Draft Preview: College Pitchers

First Pitch

  • Steve Necaster
    February 12, 2014 1:00 pm

    Tim, love your work. Quick question-why can’t all milbers be members of the MLB union? Seems like if you let that happen then the union wouldn’t be upset about draft spending.

  • I wonder what has happened with Johan Santana? Must be in bad shape i have not heard a word about him all offseason.

  • Every time MLB makes a rule change it always ends up hurting or restricting small market teams.
    Lets face it all MLB wants is a bunch of Washington Generals for their Globetrotters.
    The Yankees just spent $500m and they are going to spend more before the season starts, they don’t want small revenue teams competing with them with a $60 – $90m payroll , it makes them look bad.

  • IMO, until teams like the Pirates, Rays, A’s and other small market teams fail miserably, changes are only going to be made to benefit the rich teams. It could very well be that management in the small market teams does not go to bat for themselves near enough because they see move up jobs with the rich teams as a goal, they might look at it like they are playing in the minors right now.
    I feel very sorry for the low revenue teams because winning is much more difficult for them than the rich teams, not impossible, but difficult. The public is so poorly educated in these low revenue towns, they expect their teams to win and throw money at over the hill, overpriced players because the rich teams do it. The Pirates are in the Majors, the same as the Yankees, but not really.
    So many fans would have taken 500 wins for the Pirates last year, now if they win 85 the Pirates will get blasted for not doing this or that.
    I would like to see a top cap put on players prices, not a team cap, I think if you look at the team cap in football and hockey, it handicaps the teams that have developed super players and does not allow them to spend much on players around the good ones, the good ones take up most of the salary cap. Then you could do away with QO, compensation picks and let teams pay what they want for draft picks.
    I am a union man, but in all honesty, the union has been great for major league baseball players, but it has really screwed the fans.

    • “So many fans would have taken 500 wins for the Pirates last year”. Sorry, should have said finished with a 500 record.

  • Tim good stuff and I agree, abolish free agent compensation, and remove strict draft slotting restrictions. Question about Taillon, that $6.5 million figure is somewhat deceiving how much over the suggested slot was it?

    He was the second overall pick you still have to pay him, I honestly cannot understand what the MLBPA was doing last CBA. The Pirate were only spending around $ 4.2 million/year above average on the draft, and that was while consistently drafting high. There was not a massive pot of potential payroll money being diverted into the draft.

    • At the time that was a few million dollars over slot. His slot price was $3.25 M, so he got double that amount. When they added the new draft slotting, they increased the slot amounts.

  • “Furthermore, the signing team shouldn’t be penalized for signing a top player. This hurts small markets more than big markets, since smaller markets have a higher dependency on draft picks.”

    I disagree here. The pirates (or any small market team) should never be spending big money on high priced free agents who are likely reaching the end of their prime. Therefore the only time this scenario should apply is when the pirates are trying to retain their own players, in which case you would want the signing team to be as penalized as possible to encourage players to stay with their team.

    • I’m with you. If the draft pick compensation is what is preventing the Pirates from signing Kendrys Morales, then I’m all for it.

    • There was a lot in your article to digest but eliminating the compensation pick seems to be one sided favoring the players . In my opinion they carry too much weight as the CBA stands now . If I were King I would use the same system they have in the NFL and force a player to stay an additional year utilizing the franchise tag .

  • I know this is a reach but lets say volquez has a good year. Could the pirates financially offer 3 qualifying offers next year to him and liriano and martin. To me it is a no brainer but I thought burnett was also. Could they afford it since they would be relatively sure they would be turned down?