Passan: Baseball is obsessed with value — and it’s changing contracts forever
They’re killers. Two agents used the same word last week to describe this generation of baseball executives. It was meant as a compliment. Modern general managers are single-minded. Uncompromising. They spot weakness and exploit it. This is not personal, not some indictment on their character. It is what the job demands because owners believe it is how championships are built.
For Major League Baseball teams in 2019, value trumps all. It is their lodestar. Every trade, every free-agent signing, every draft pick, every international amateur — every single transaction in baseball can be commodified. Run it through a proprietary computer system, receive a value. And if the value happens to be negative? Well, there better be an awfully compelling reason to make a move with negative value.
It is important to understand the adoption of this philosophy, because it, more than anything, explains the sport-wide hand-wringing Thursday over a contract extension. It was unfortunate how Ozzie Albies, by all accounts a person whose own value system is based on more than dollars, saw a conversation about how he left incredible amounts of money on the table unfold alongside one of the greatest days of his life. It also happened to illustrate how the killers are winning.
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The sabermetric revolution wrought a value-worshipping machine in front offices that for decades operated on a combination of gut feelings, snap decisions and antiquated conventions. Players’ motivations are not nearly as blinkered. Some do prioritize money and proper valuation above all. Others, like Albies, do not.
And so when the Atlanta Braves secured seven years of his services at that $35 million with options for two more seasons at only $10 million total more, this unprecedented run of extensions — in which teams over the last two months committed more than $2 billion to players already under contract — found its flashpoint. All of the behind-the-scenes chatter among agents and executives, the inside-baseball stuff that peppered discussions about larger economic issues, burbled to the surface in one remarkable deal for a 22-year-old second baseman.
In his first full season in the major leagues, Ozzie Albies made the National League All-Star team, whacked 24 home runs, played Gold Glove-caliber defense and ran with the stealth of a wise veteran. He established himself as, at very least, an exceedingly capable second baseman. If he develops — if his left-handed swing catches up to his right side, if his plate discipline improves, if his natural leadership skills flourish — Albies is the sort of player around whom a killer can build a championship-caliber team. The last 21-year-old, switch-hitting second baseman with 20-plus homers was … no one. Albies was the first.
There are, of course, unique players all across baseball. It’s just that those of Albies’ ilk, whose combination of age and skill make them exceedingly valuable to teams, are expected to extricate that value. Not just for themselves but for their fellow members of the Major League Baseball Players Association. Because MLB is not a capped sport and players don’t receive a fixed portion of revenue like the NFL or NBA, baseball contracts often rely on precedent — and a precedent is only so good as someone who cares to set it.
Here is the quandary for players: Whereas mandates from ownership force executives to wring value from transactions, there is no particularly compelling reason for Albies to care about anything beyond his own satisfaction. Even if past groups of players felt obligated to look out for their union brethren by agreeing to deals that potentially would enrich future generations of players, MLBPA officials often remind players that the union exists to afford them choices in how to handle their own careers.
These choices can be influenced factors that tilt the leverage in negotiations decidedly toward the team. Albies checked a number of those boxes.
As a 16-year-old, he signed with the Braves for $350,000. For the next four years, Albies received minuscule pay as a minor leaguer. The collective bargaining agreement negotiated by MLB and the MLBPA has capped bonus spending on international amateurs such as Albies, and minor league pay is notoriously miserly. Together, the two factors can hasten a player’s desire to pursue a contract extension.
The economics of extensions are fairly well-established. In exchange for the certainty promised in guaranteed baseball contracts, players are expected to give up value. In most cases, that value comes from the team buying out free-agent years. Earlier this spring, Eloy Jimenez, a well-regarded outfield prospect who had yet to play in the major leagues, agreed on a six-year, $43 million deal that included two club options. The Chicago White Sox bet a record deal on Jimenez — and for that bet, they received one free-agent year and control his rights until the cusp of his 30th birthday.
Albies’ deal lasts one year longer than Jimenez’s, includes $8 million less guaranteed, maxes out at $32 million less if the options are exercised and buys out four free-agent seasons. While the overall dollars stunned the industry, it was giving up four free-agent years — particularly when Albies could have hit free agency as a 26-year-old — that felt egregious.
It was the sort of deal the union strongly advises against, because precedent can go both ways. As much as the industry may regard the Albies deal as an outlier, it is bound to come up as a starting point in discussions on second basemen and young, elite talent. However much damage such deals can cause the union, it is incapable of scuttling them. The onus is on agents to properly educate players on the benefits, drawbacks and risks of all deals — and that can present another barrier for players seeking fair deals.
About a dozen large agencies are employed by a majority of players. These agencies, because of their size, do not depend on single commissions for the health of their businesses and thus are inured from the moral hazard that can influence those with fewer clients. At 5 percent commission, a $20 million extension means $1 million for an agent. The incentive, then, to do an extension can be strong for smaller shops — Albies employs one in agent David Meter — which also fear client-poaching from larger agencies. Even among the larger agencies, the concern over losing a client — and a commission — can compel extensions.
Executives know this. When considering players to draft, a number of teams bake into their valuation a player’s agent — and the openness to a potential extension. It’s a small factor. It’s a very real one, too.
Sometimes, no matter how much an agent tries to educate and argue against an extension, the player’s insistence wins. Maybe it’s for his family. Maybe it’s for his security. Maybe it’s because he loves the city. Maybe it’s because he wants to play alongside his best friend. Ozzie Albies said it was all of those things.
And even though he could’ve had each without signing an extension, Albies is nothing more than a product of the system. His rationalizations were informed by emotion, which is well within his rights, even admirable. They also run in stark contrast to how teams operate. In almost all cases, value rules.
There are exceptions. Teams that want to accelerate a rebuild can disregard data-driven value and emphasize talent acquisition. Teams that have won can get caught up in keeping together a core of players. It can go both ways. Players simply devalue themselves far more frequently.
And whether it’s because of emotional traps or fear of the squeeze in the free-agent market or bad advice, the proliferation of below-market extensions has deeply impacted the direction of the game’s economics, which already had undergone a profound shift. Players, seeing what their teammates received in guaranteed money, are calling their agents, asking, “What could I get?” Contract extensions, once the exception, are becoming normalized.
The effect on free agency is clear: The more players sign extensions, the smaller the pool of talented free agents. Teams are targeting the best players for extensions, and all 29 of them signed in 2019 end with a player no longer in his 20s. That is no accident, not in a climate where 30-year-olds are not valued how they once were. It’s not so much deepening the pool of 30-something free agents as it is lessening that of bank-breaking 20-somethings like Bryce Harper or Manny Machado, each of whom received $300 million-plus this winter.
Extensions have a secondary effect that could be similarly problematic for pre-free-agents: The fewer the players in the arbitration system, the more difficult it is for them to set new standards. The arbitration system determines salaries for players with three, four and five years of major league service. Growth in top-end arbitration salaries has become one of the rare places in which players have made strong progress in recent years. When the best young players are signing extensions, the salary marks they reach cannot be used in the comparable-based arbitration system. If arbitration salaries stagnate, it’s another loss for the players.
With so much power and leverage on the team side, it’s not entirely barren for players, not when free agency remains an option. For players such as Albies — young, athletic, starring quickly — free agency isn’t a wasteland. It enriched Harper and Machado and gave Patrick Corbin $140 million. Free agency still treats the best like the best.
Even so, it was clear Thursday that Albies was tickled with his new contract extension. He smiled. He was thankful. He is a true success story: an undersized kid (5-foot-8) from a country, Curacao, that has produced only 15 major leaguers guaranteeing himself $35 million.
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His deal also managed to make the eight-year, $100 million extension his teammate and good friend Ronald Acuña Jr. agreed to 10 days ago look … reasonable. When Acuña signed, the industry buzzed likewise — that the Braves had gotten the deal of the decade, similar to the $100 million extension for Albert Pujols in 2004. That with the two option years on Acuña’s contract, the Braves had gotten four years of free agency at an incredible discount and kept him through his age-30 season.
Now, for a maximum of $169 million, the Braves get 19 years of Ronald Acuña and Ozzie Albies. It’s almost the exact same amount of money as another contract receiving attention for an entirely different reason. On Jan. 16, 2016, free-agent first baseman Chris Davis agreed with the Baltimore Orioles on a seven-year, $161 million contract. At the time, it was castigated as an overpay. Rare is the deal that doesn’t gin up an emotional reaction on one side or the other.
Today, it is a cautionary tale. Davis is hitless in his last 53 at-bats. The Orioles still owe him more than $90 million — and another $18 million on top of that in deferred money. The idea of Albies and Acuña or Davis is not some binary; it takes scouting acumen to identify Albies and Acuña as amateurs, a strong player-development system to cultivate their skills and a good major league environment to convince them to commit to a team for the next decade.
At the same time, it highlights why teams are that much more committed to pursuing extensions. Not all of them are created equal. The surplus value in Albies’ and Acuña’s will far exceed the five-year, $145 million deal Chris Sale signed with the Boston Red Sox, regardless of how good Sale is. They won’t cost half as much as the 10 years and $360 million the Los Angeles Angels tacked on to the two years remaining on Mike Trout‘s deal.
They are, in the eyes of the killers throughout the industry, the most ideal deals imaginable: Buy out the prime years of a player’s career at a discount and ensure flexibility at the back end. Forget the awards handed out at the end of the year. Ozzie Albies, Ronald Acuña and their peers are the game’s silent MVPs: most valuable players.