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Thursday, February 07, 2019

Welcome to a small-market team’s worst nightmare

I bet most teams have done such a study. These teams know how much a win costs in each market. They now have a clear understanding of the risk/reward in each market.  (It’s clear the IFA market is the current market with the best opportunities.) Teams also have quantified how much the risk increases as salaries and contract-length goes up. The risk/reward for 8+ years and big dollars has certainly been exposed as a very poor bet.

Imagine, again, you’re the Rays. You figure there are a bunch of ways to get players, all with different levels of risk and reward. You have the folks in the analytics department do a study and they come back to you with this estimate of how much a “win” costs using each method:

      Rule 5 picks who unexpectedly turn into stars: $1 million per win   Draft: $2 million   International free agents: $3 million   Trades for young players: $5 million   Free agents: $10 million   Trades for old players: $15 million

(These numbers are all completely made up.)

A win in the Rule 5 draft is cheapest, but it’s also the least available. A win in the draft is nearly the cheapest but it takes a bit of luck and a lot of waiting, and access to those wins is restricted by how often you get to draft. A win in free agency is expensive, but it’s almost always available. There are scores of free agents available every winter, and while a team can’t force a player to sign, it can take control of the situation by offering the most money.

The Rays, and other small-market teams, have in the past decade taken a strong philosophy into the free-agent market: They essentially never, ever pay retail. Some seasons they won’t win enough games because of this, but they’ve got a philosophy, and they don’t break it. It’s not that they don’t sign free agents unless they can get the expected cost per win down to $8 million, but that they basically won’t unless they can get the cost down to $2 million.

Jim Furtado Posted: February 07, 2019 at 06:12 AM | 7 comment(s) Login to Bookmark
  Tags: economics

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   1. The_Ex Posted: February 07, 2019 at 09:07 AM (#5813071)
As the article notes, a small market team could win in the old days by being smarter or more innovative than a bigger team. Now with all front offices pursuing smart approaches, the benefit of a smarter idea is much smaller, or more marginal, than it was in the 1990's or 2000's. It seems now that the only way for a small team to win is to engineer it so they have half their roster peak at the same time and ride that for a year or two. So a lot of teams are tanking, building prospect funnels, and hope to hit big for a couple of years in the near future.
   2. DL from MN Posted: February 07, 2019 at 09:43 AM (#5813080)
The article also notes that even the worst teams haven't been that terrible lately. There are only so many roster slots and there is plenty of talent, especially with the growing percentage of international players. It's pretty easy to put together a team full of cheap veterans who can win 65-70 games as long as you wait until February.
   3. McCoy Posted: February 07, 2019 at 09:50 AM (#5813082)
As the article notes, a small market team could win in the old days by being smarter or more innovative than a bigger team. Now with all front offices pursuing smart approaches, the benefit of a smarter idea is much smaller, or more marginal, than it was in the 1990's or 2000's. It seems now that the only way for a small team to win is to engineer it so they have half their roster peak at the same time and ride that for a year or two. So a lot of teams are tanking, building prospect funnels, and hope to hit big for a couple of years in the near future.

For the last 20 odd years the only way for a small market team to win was to engineer it so they have half their roster peak at the same time and ride that for a few years. "Tanking" doesn't change that equation at all. In fact the only difference between then and now is that in today's game there are teams that are losing and not spending on free agents that are not small market teams.
   4. bobm Posted: February 07, 2019 at 10:01 AM (#5813091)
You have the folks in the analytics department do a study and they come back to you with this estimate of how much a “win” costs using each method:


This seems to me to ignore the changing view of risk in player acquisitions. FAs used to be viewed as low risk for the high cost, versus drafted players who were high risk and lower cost, which risk could be mitigated maybe by a portfolio approach. Now FAs are apparently viewed as high cost and disproportionately high risk of not producing due to age related decline or injury versus the lower cost draft and IFA options.
   5. Tom Nawrocki Posted: February 07, 2019 at 11:00 AM (#5813128)
The article lists Tampa Bay, the Reds, the Pirates, the A's, and the Brewers as small market teams, and I'd add the Royals and Padres to the list as well. Only the Reds and Padres on that list have failed to win at least 90 games in a season since 2015, and the Padres of course signed one of the biggest-ticket free agents last off-season.

I'm failing to see what the problem is here. As long as small market teams have a fair chance to compete, what difference does it make how they get there?
   6. Walt Davis Posted: February 07, 2019 at 04:28 PM (#5813448)
The risk/reward for 8+ years and big dollars has certainly been exposed as a very poor bet.

Evidence?

FTA: If it means giving an eight-year contract to somebody we all know darned well won't be very good by Year 5, fine.

When have the Yankees ever done this?

The author should know better. Teams give out contracts roughly baeed on the total amount of expected WAR, the years are simply a matter of salary deferral. Still, as such, no long-term contract is given out under a belief that all of the value will fall in the first half. So, fine, "won't be very good" is carrying a lot of weight in that sentence. Is Cano, for example, no longer "very good"? Perhaps not -- but he was worth much more than the $120 M Seattle paid him ... which is why they had to eat money in that trade. (And they probably ate more than they needed to.)

So sure, the Cabrera extension was a really bad idea. It was bad because it started at age 33 and it was signed when he still had two years left. (It was doubly bad because just as it started, the Tigers switched to rebuilding mode.) Pujols was bad (a) becasue it was 10 years starting at age 32 ... and yes, anything after age 36 is a risk but (b) he went off a cliff faster and more completely than expected.

Cano at 10 years starting at age 31 ... was a perfectly reasonable deal and it has worked out just fine.

ARod at 10 years at age 25 was an awesome deal. ARod at age whatever for 10 years was not so bright.

Tex at 8 years was a perfectly reasonable deal that worked out just fine. Fielder at 9 years ... in real time I thought that was not such a great deal due to Prince's terrible defense and I didn't hold out much hope for his body type ... I've argued for years that DHs just aren't worth that much.

The "lesson" on long-term deals to position players has been obvious for ages -- anything after age 35/36 is a real gamble (from a perspective of 5 years out), price it accordingly. But even so, in fairness to the Tigers, there was no particular reason to think Miggy was gonna collapse completely and no particularly good reason he couldn't have been the next Edgar/Ortiz. In the first year of the extension, he put up 4.7 WAR -- 4.7 to 0 is not a common baseball occurrence. And he'd have been FA coming off a 5 WAR season, the man would have been paid by somebody and rightly so.

Kevin Brown at 8 years worked out fine and dandy. CC at 7 years plus 1-year extension all worked out fine although arguably they should have called his bluff on the opt-out.

Stanton was off to a great start on his 13-year, heavily deferred deal -- the Yanks priced him correctly in the trade, essentially getting the Marlins to pick up the deferred payment if it comes into play ... but he did have a disappointing first year with the Yanks. Still that deal paid him to produce probably something like 35 WAR over the life of the contract, he's produced 18 in 4 years (for which he's been paid just $55 M) and is still only 29.

So 18 WAR for $55 M and Stanton has been theoretically underpaid to as much as $90 M so far in that contract. Now the first two years were still arb years so he was never gonna make market value there so it's probably more like $75-80 M underpayment. Remember that when he's being paid $96 M to creak out to the DH spot for 400 PAs a year of 100 OPS+ at ages 35-37.

But yes, MLB created a league where 2 teams get to split a metro market of 21 million people while some teams sit in markets of about 2 million people. It's one thing to share revenue to try to balance out discrepancies, it's another thing when those market potentials are on a scale of 3:1 to 5:1. MLB made its job even tougher with its commandment that teams own their market areas forever, even to the extent the Giants can stop the A's from moving to San Jose.

The article also mentions the Indians. Well, those good ol' Indians teams sold out their park for 4 years in a row. They had a chance to become the next Cardinals ... and they blew it. The main issue facing the Rays may not even be their puny market so much as their utter failure to get people to come out to their crappy ballpark even when they are good. The Rox on the other hand, used to draw over 3 M, then sunk, but have been drawing 2.5 M for the last 10 years, breaking 3M ... and haven't been real players in the FA market since the days of Walker and Hampton. Their payroll finally broke $100 M only in 2016 (per Cots).

Anyway, my main gripe is this fiction that teams have only just discovered the aging curve. FA contracts have always been priced to compensate for age-related decline, they've just also always been set up to defer as much money as possible. Remember the days when basically nobody was signed past age 36 ... and practically everybody was signed through age 36 ... you think that had nothing to do with knowledge of age-related decline? The second fiction is that players crap out at 30 which is believed only by some misguided saber fans but of course a fiction that teams are happy to use to drive down payroll costs.
   7. base ball chick Posted: February 07, 2019 at 06:23 PM (#5813491)
small market teams are making lots of money and lots of profit

looks more like they prefer to not win and take home more $$$

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