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The off-season has slowed to a crawl. Although Wade Davis became the first free agent ranked in the top ten of MLB Trade Rumors’ annual ranking of free agents to sign with a club, there are no signs yet that the market will begin to accelerate with a new year.
There have been a host of reasons to explain why the off-season has been so slow so far this year. Rustin Dodd laid out some of the more popular theories.
Industry observers offer a list of theories to explain the light spending. Maybe it’s a young generation of analytical general managers who believe more strongly in the flaws of free agency; maybe it’s the cyclical nature of a number of big-market clubs — the Dodgers, Nationals, Yankees and Cubs, to name four — having few holes and little motivation to spend big. Maybe it’s the desire of those same teams — the Dodgers and Yankees, in particular — to stay under the game’s competitive-balance tax threshold and reset the punitive taxes they pay in advance of Bryce Harper and Manny Machado becoming free agents next year.
It is very likely all of those are having an impact, in particular the more punitive luxury tax threshold under the new labor deal, which has helped rein in spending from the usually free-spending big market clubs.
But the trend of a slow-moving off-season in baseball began before this year. I took a look at the past five years of free agent signings, and you can see all the data I collected here. The group of free agents I examined included every free agent that was ranked as a Top 50 free agent before the off-season by either Fangraphs or MLB Trade Rumors that signed a MLB deal, or any free agent that eventually signed a contract during the off-season for at least $5 million in guaranteed money.
You can see that the percentage of free agents that have signed before January 1 has plummeted in the last three seasons. This year, the percentage of free agents from that group that has signed by January 1 is at its lowest level in the past five seasons, below 50%. However there is a caveat to that, in that the sample group from 2017-2018 could be altered, depending on who signs contracts worth over $5 million or end up signing minor league deals or not signing at all by Opening Day.
When free agents sign, 2013-2017
| Year | Before Jan 1 | Money | Total | Money | FA % | Money % |
|---|---|---|---|---|---|---|
| Year | Before Jan 1 | Money | Total | Money | FA % | Money % |
| 2013 | 45 | $1,359 | 60 | $1,747 | 75.0% | 77.8% |
| 2014 | 41 | $1,298 | 56 | $1,657 | 73.2% | 78.3% |
| 2015 | 37 | $1,506 | 62 | $2,311 | 59.7% | 65.2% |
| 2016 | 36 | $1,089 | 59 | $1,311 | 61.0% | 83.0% |
| 2017 | 28 | $426 | 59 | ? | 47.5% | ? |
Dayton Moore has talked in the past few years about waiting out the market, and finding bargains as the off-season progresses. Last year, he pounced late, signing Brandon Moss, Travis Wood, and Jason Hammel all after the start of the year. Prior to that, he was able to wait out the market and sign Alex Gordon just after New Year’s of 2016 at what was perceived to be a below-market price.
The strategy of waiting out the market seems to be a wise one, and could be the reason so many teams are sitting on their hands now. The price for free agents seems to plummet once the calendar year turns. I took a look at the perceived value for free agents at the outset of the off-season by looking at the Fangraphs crowdsourced free agent estimates for each year. I used the median estimate (except for 2013, when only average estimate was presented) and checked that against what the player actually signed for.
The Fangraphs estimates, as a whole, were fairly accurate until last year, when the actual contract values took a big dip against the estimates. This was in large part due a crashing market for players signed after January 1. Jose Bautista, Mark Trumbo, Colby Rasmus, and Jason Hammel were just some of the casualties whose paydays were not nearly as large as expected. Player do better than estimates before January 1, but after the New Year, they end up with contracts worth on average 25% less than what the crowd estimated the player would get
Drop in market value after January 1
| Year | Total Estimate | Total Actual | Difference | Before Jan 1 Estimate | Before Jan 1 Actual | Difference | After Jan 1 Estimate | After Jan 1 Actual | Difference |
|---|---|---|---|---|---|---|---|---|---|
| Year | Total Estimate | Total Actual | Difference | Before Jan 1 Estimate | Before Jan 1 Actual | Difference | After Jan 1 Estimate | After Jan 1 Actual | Difference |
| 2013 | $1,320.8 | $1,366.9 | 3.4% | $1,012.9 | $1,147.5 | 13.3% | $307.9 | $219.4 | -28.7% |
| 2014 | $1,396.0 | $1,498.4 | 6.8% | $1,037.0 | $1,166.0 | 12.4% | $359.0 | $332.4 | -7.4% |
| 2015 | $2,340.0 | $2,214.5 | -5.7% | $1,384.0 | $1,459.5 | 5.5% | $956.0 | $755.0 | -21.0% |
| 2016 | $1,441.0 | $1,146.5 | -25.7% | $1,077.0 | $969.0 | -10.0% | $364.0 | $177.5 | -51.2% |
| 2017 | $459.0 | $426.3 | -7.7% | $459.0 | $426.3 | -7.1% | ? | ? | ? |
| $6,956.8 | $6,652.5 | -4.6% | $4,969.9 | $5,168.3 | 4.0% | $1,986.9 | $1,484.3 | -25.3% |
This shouldn’t be much of a surprise of course. The most coveted players are going to be inked to deals sooner. The players that sign later are those less desired, or who perhaps misread the market. Often times this seems to be sluggers with defensive concerns, and of course, the previous draft pick compensation system weighed some free agents down in the market.
However if everyone is waiting out the market, will the market go down this time? Or are simply delaying the splurge of signing in an elaborate game of chicken that will see GMs blink first? Time will only tell. There are new rules, which creates a new reality for players and clubs. It may take time for everyone to figure out how to navigate this new system, but for now the wise move in free agency may be not to play.