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.