Market Realities

Two days and three eyebrow raising signings.

1. Angels ink Torii Hunter to a 5 year 90 million dollar deal

2. White Sox sign Scott Linebrink to a 4 year 19 million dollar deal

3. Reds sign Francisco Cordero to a 4 year 42 million dollar deal.

 The (almost) universal reaction has been to call the GM’s responsible for these signings idiots. This nothing new, every offseason baseball fans and scribes discuss the latest round of “terrible” signings. These signings of course end up working out and as a whole aren’t the reason a team fails to compete.

 This leads me to believe two things: Major League General Managers are good at what they do and the market realities are far different than what most of us on the outside realize.

1. Major league teams have placed a premium on club controlled players

Prospects like Adam Jones are viewed as about as valuable as superstars like Johan Santana. I realize that this is an exaggeration but in order to trade a top prospect for a superstar, that team is going to make sure that a number of other factors have aligned before the team pulls the trigger on such a trade. Teams don’t trade top prospects for rent a players anymore. As a result, the only way to get young cheap talent is to grow it yourself.

2. Teams are flush with cash

Major League Baseball is quietly sneaking up on the NFL is the biggest cash cow in professional sports.  I’m not sure if the MLB will ever pass the NFL, but I am pretty sure that each major league team has tons of cash to spend. Each team enters every offseason with a ton of cash to spend on the open market.

3. Teams are pretty good at keeping homegrown stars at below market rates.

Ichiro signed a hometown discount to stay in Seattle for about the same amount of money that Torii Hunter just signed for to play in LA-Anaheim. Ichiro is clearly superior to Hunter so does this make the Hunter signing a disaster? My answer is no, but I will explain this later.

4. Teams enter the free agent signing period with the previous 3 factors in place, and Free Agency is easiest way to get better

Teams have lots of money to spend in order to improve themselves. Free Agency is pretty much the only way to do it. The open market contains a bunch of left overs. These leftovers can still help ballclubs win games so they are throwing enormous sums of money at these players because it is the only way they can get better.

 Players like Torii Hunter and Francisco Cordero can be a big part of winning a division pennant (Hunter more than Cordero), and major league GM’s realize this so they dump considerable sums of money into the free agent pool. This isn’t going to change until big name players start refusing to give hometown discounts and demand market value contracts in free agency. Almost all the top free agents in this (thin) free agent class took themselves off the market before they hit the open market. As a result, any team hording cash in hopes of landing Mark Buehrle or Ichiro must now spend that money on Carlos Silva or Torii Hunter. More supply would lower the demand on free agents.

 In light of this I view the Torii Hunter trade as an overpay but a justifiable one. Anaheim has a window to compete and they have decided to take advantage of it. They are in a good position to win the division for a few more seasons before the team gets old and before that happens they can make a few moves to blunt the impact of father time. They will need to be aggressive, but I can see this team becoming the long term dominant force in the division. Too bad the Mariners didn’t do this at the beginning of the decade.

Scott Linebrink is a signing that hurts because it is a four year deal. Relief pitchers are probably the easiest thing to find in major league baseball and relief pitcher implosions are just as common managers bringing in the lefty to face Ichiro. I don’t like giving long term deals to RP’s unless they are truly relief aces and I’m not sure Linebrink qualifies.

Fransisco Cordero hurts. This is a contract I would never do because it has far too much downside. The arsenal of a relief pitcher is far less refined than that of a starter. If a starter flops, their is always the chance they can become a good relief pitcher. If a reliever flops they are done being an effective major league player until they get better. I think it is a much wiser use of resources to use the trial and error method in the bullpen (which provides many opportunites for trial and error).

Lots of contracts handed out this offseason will cause us to shudder, but lets not be too hard on the GM’s. Remember, bloggers try to sound smart while GM’s try to win pennent races.

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5 Responses to Market Realities

  1. brandonwarne52 says:

    You’re mixing Chad Cordero and Francisco Cordero in the article…

  2. ksks2 says:

    I’d be curious to see how the Mariners value their players 1-40.

    THe contracts get ridiculous because of the relative open market in baseball. The NFL has a system that saves the teams from themselves, they only have to pay 65% of their revenues to players, and can’t go over. MLB teams can spend 200% of revenues if they want. There is also the system of slavery, keeping guys at levels far below their value for their first six years, the revenues these guys provide get passed on to the free agents.

    Torii Hunter is not worth $19m. But that doesn’t make it a bad signing. A GM is given a budget, from that budget he looks at the question of can a player improve the team. If he doesn’t spend all of his budget, he is foolish. If the Mariners had 5m left at the end of free agency, and they would improve their team by signing linebrink, why would they not do so? I’m pretty much ok with all of these signings.

    If anybody has questions, every GM in baseball is better than you.

  3. brentschwartz says:

    The underlying point of this article is that free agency is a horribly inefficient way to spend money. There are historical reasons for this and perhaps my next article will cover some of these. Actually I think that’s a really good idea. I’ll do a history of free agency. Part one should be out tomorrow night or Wednesday at the lastest.

    Major League owners have been getting better and better at running organizations like businesses and the business end of things has been taken over by business people. I’m not convinced that MLB owners are going to kill the golden goose.

  4. ksks2 says:

    its terribly inefficient, but how else are you going to add 2 wins to your team in december. only a couple of teams can win by building through free agency, but everybody can benefit by it, even if they overpay.

  5. brentschwartz says:

    Free Agency has become (in a way) a punishment for being unable to fill holes on your roster from within.

    The Anaheim Angels have been punished, repeatedly, for being unable to find a CF. The Mariners have been punished for being bad at developing major league starting pitching.

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