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Are MLB teams tanking?

There was big news during baseball’s off-season. The big news was that there was no news. The off-season is when teams make trades and sign free agents to fill the holes in their rosters. This year, however, the free agent market has been quiescent.  What’s up with that?

Just to get it out of the way, I don’t think the answer is collusion.  This isn’t because I am endearingly naive about ownership and don’t think they would ever dream of doing such a thing. Of course they would if they thought they could get away with it. I don’t think that is the answer here because I don’t think MLB’s counterintelligence capacity is up to the task. If they were getting together and agreeing not to sign free agents, some email or text message would have leaked by now. Perhaps their message discipline is tighter than I get them credit for, but I am working on the assumption that something else is going on here.

The second part of the initial throat-clearing is that we really need to separate free agents into two discussions. There are the big-ticket nine-figure many-year contracts that produce the big headlines, and the routine journeyman contracts for a year or two for modest figures (by baseball, if not real world, standards). These are different phenomena.

The story has kind of fizzled for the big-ticket players. It was chugging along just fine until a week and a half ago, when the Cubs signed Yu Darvish to a 126 million dollar contract. Since then the Padres signed Eric Hosmer to a 144 million dollar contract, and the Red Sox signed J. D. Martinez to a 110 million dollar contract. Prior to these signings one theory floating out there was that clubs had realized that these contracts are almost always terrible for the club. The way the system works, players hit free agency at the peak of their careers. This sounds great, but it is just another way of saying that free agents are about to go into decline. A club signing a six year contract is hoping to get three good years out of the guy and that the decline won’t be so steep that they end up paying superstar money for worse production than they would get out of some random AAA guy. So, the story went, maybe clubs were finally getting smart. This turns out not to be the case.

That’s OK for my purposes, since I am more interested in the journeyman free agents. What’s up with them? While the big guys are signing, there are still so many unemployed free agents that the players’ union has set up its own spring training camp for them.

I offer here two possibilities. One is that more clubs have adopted a strategy of going for cheap pickups at the last minute. Suppose it is November and there is a free agent out there who you think is Your Guy. You are going to sign Your Guy right away, so that no one else snags him first. But you still have to negotiate the price, and by going after him right away, you signal to his agent that you consider him Your Guy, putting you in a weak bargaining position. So if you go after Your Guy you have to expect to pay a premium.

But suppose there is no one in particular you have in mind. You have a hole to fill. You want, say, a left-handed outfielder, but you don’t care which of several plausible candidates you get. So you don’t go into serious discussions right away. You wait until the candidates start to get nervous and pressure their agents to get them signed somewhere. This reversed the bargaining position, and you might pick up a perfectly serviceable veteran for cheap.

This is an established strategy. The Orioles have been doing this for years. It drives the fans wild as they look at the hole in the roster and the apparent inaction by the front office, but then some guy turns up at the last minute. While he doesn’t tear up the league, he does OK. In this theory of this year’s free agent market, more clubs have adopted this strategy. Now that we are in spring training, there will be a flurry of signings over the next week and the story will go away.

I think this is part of what is going on, but it shares space in my head with another explanation: teams are tanking.

There is productive tanking and there is unproductive tanking. North American team sports are set up such that a team can trade current wins for future wins. There generally is some sort of amateur draft where the worst teams get the early picks. In basketball a teenager can sign with a club and contribute–or even dominate–right away. But only the right teenager, and they are rare. So there is a strong incentive for a bad basketball team to tank the season so they can draft Their Guy the next year. This has gotten so bad that the NBA has had to partially randomize the draft order to discourage the practice.

This doesn’t really work in baseball because the separation between the amateur draft and productivity on the major league level are too far removed. In other words, no one can really predict which teenager, or even college grad, is going to be a star player. The way productive tanking works in baseball is to trade your good players for prospects. Even a mediocre team has a few players other clubs want. If you are willing to slide from mediocrity to outright stinking, you can pick up future wins. Gather together enough prospects, get the timing right so they come up to the big club at about the same time, and you can build yourself a winning team this way.

None of this is new, but we have seen recent spectacular success with this strategy. The Cubs, after an epic run of failure, went all-in on the stinkage strategy and came out of it winning the 2016 World Series. The Astros stunk even more than the Cubs had, and won the 2017 World Series. This here is a trend! So perhaps, the theory goes, more clubs are trying to emulate the Cubs and Astros. Key to the strategy is not wasting any resources on striving for mediocrity. Embrace the sucking. Be one with the sucking! If you sell it right, the fans will praise you for it. With more clubs not trying to get better, at least not right now, free agents naturally find they can’t demand the same salaries as of old.

Productive tanking is a legitimate strategy and smart team-building. Only the wealthiest teams can pay what it takes to be good all the time. Once you accept that your team isn’t one of those, then most fans would agree that it is more fun to oscillate between good and bad rather than live in an eternal limbo of .500 play. There is another, darker, unproductive, more pure sort of tanking. This is simply a money grab by ownership.

Franchises have minimum revenues. The key is that this revenue comes in regardless of the team being good or being terrible, and regardless of fans showing up for games. Some of this is local, typically where the team gets a sweetheart deal on the stadium (a huge topic in its own right) such that the fans of the visiting team alone will bring in enough revenue to be worth it, even if you have no local fans. The larger factor is revenue sharing.

The idea behind revenue sharing is the recognition that professional sports require plausible competition. If the only games that matter are those between the half dozen or so wealthiest clubs, with all the other games being completely one-sided or irrelevant, then people will stop paying to see those other games and league revenues will drop. Revenue sharing, in which cash flows from the wealthiest clubs to be distributed to the less fortunate, is intended to give the small-market clubs the resources to compete, at least enough to keep people interested.

Or so the theory goes. But if that podunk club can lower its expenses to the point that it turns a profit just from guaranteed revenue, the temptation is for the club owner to embrace sucking: not to build a winning team a few years down the line, but to bank the profits of suckage. The system is built on the assumption that the owners all want to win, simply because winning is more fun than losing. It turns out that the owner willing to flip this assumption can turn a tidy profit from it.

Do I think teams are doing this? I don’t think it is widespread, but it is hard to see what else is the Marlins’ strategy for the future. It’s not just that they are dumping their salable players. How they are going about it doesn’t look like a plausible rebuilding strategy. The Rays are similarly dumping payroll furiously. They got a couple of legitimate prospects in their most recent trade, so maybe they are trying to rebuild, but if so, their other actions are mysterious.  Perhaps this isn’t a pure tank, and the front office is simply incompetent.

Pure tanking, if it is indeed going on, is an existential threat to baseball as we know it. I am usually unimpressed by sky-is-falling discussions and baseball. It is doing just fine, thank you. But there are a few genuine existential threats. Game throwing was one, back in the day. This is why they came down so hard in the Black Sox scandal, and why Pete Rose has to buy a ticket to get into the Hall of Fame. Tanking is another. In both cases, the threat is to the legitimacy of the competition. This is MLB’s stock in trade. If they can’t sell competition, all that would be left would be to sell spectacle.

The NFL, with its older and larger tradition of revenue sharing, confronted this problem years ago. Its solution is to have a minimum team payroll. This minimum isn’t to protect the players’ interests–a topic the NFL regards with serene indifference. The minimum is to limit the profitability a franchise can get through tanking.  We will see if MLB thinks that this is going on. If so, expect it to adopt an NFL-style minimum payroll within the next few years. In the meantime, you heard it here first!

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Richard Hershberger is a paralegal working in Maryland. When he isn't doing whatever it is that paralegals do, or taking his daughters to Girl Scouts, he is dedicated to the collection and analysis of useless and unremunerative information.

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17 thoughts on “Are MLB teams tanking?

  1. I don’t know about the ‘Stros, but the Cubs tank strategy paid off in 2016 due to the confluence of several key events (for want of a better word). First, their prospects bore fruit at a historically high rate. Their infield is set for a decade or more with guys either traded for young or developed. Typically, a prospect is, at best, a AAAA player who bounces between the minors and the majors until the parent club finally gives up on him and either trades or outrights him.

    Second, they met 2 very depleted teams on their way to the NL pennant. The Giants were running on fumes and barely made the playoffs, with their second half collapse signalling the end of their first half of the decade brilliance. The Dodgers pitching staff was mostly injured, allowing the Cubs to make easy work of them. (Chicago outscored L.A. 31-17 in a 6 game series.)

    The Cubs have the most patient fans in the world. Who else would put up with a century of futility? It’ll be interesting to see what they can do in 2018 without a true leadoff hitter for the second year in a row.

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    • I posted before seeing your post, which I largely agree with but I don’t think the Cubs are set for a decade. They have young controlled talent that is about to become pretty expensive, they are approaching the luxary tax threshold which teams appear to take seriously, and they essentially have no prospects in the system after the Chapman and Quintana trades.

      This isn’t a knock on the Cubs, the team is one of the best in baseball, but there was a price to pay for maximizing the probability of a WS win, which is part of why I think baseball is interesting.

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      • The Cubs’ infield decade begins in 2015. Bryant at 3rd is 26 (kind of a strikeout king, but that doesn’t seem to matter these days), Javier Baez at 2nd is 25 (finds it impossible to lay off the low and outside third strike, but his glove more than makes up for his plate shortcomings), Anthony Rizzo at 1st will turn 29 this season (excellent fielder and batter, should be HoF material), and Addison Russell at SS just turned 24 (good fielder, decent at the plate). They’re all working pretty cheap right now. Heck, Bryant won WS MVP making barely above the league minimum. But, big paydays are on the way.

        You’re right, they have pretty much cleaned out their farm system. It’ll be interesting to see how the Darvish pickup pans out. He didn’t distinguish himself on the mound last fall, and 6 years is a long contract for a pitcher.

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        • Service rules give teams six years of player control, so a strategy of concentrating youth for a run is usually going to open up a six year window.

          Teams can play service time games, which both the Cubs (Rizzo) and the Astros (Springer), to get seven years. Putting a harder cap on service time is probably something that should be looked at. Probably all teams are doing this to some degree, its just more obvious when elite talent is still down on the farms while lesser talent is promoted.

          OTOH, both the Astros and Cubs were a mixture of starting players making league minimum balanced by more expensive veterans. After three years at minimum, they start making 10 to 20 times as much, so there is less cheap talent to balance free agent. So, maybe the window is somewhere btw/ 3 and 7 years.

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          • I was thinking more in terms of player longevity than service time. The Cubs have a very deep pocketed owner who is willing to spend for the talent his GM would like to see on the field, so the team control concept is out the window.

            When free agency was becoming a thing in the mid-70s Charlie Finley proposed making all players free agents, which would have really driven down salaries. Owners stuck in the reserve clause mindset of the time shot him down.

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            • It’s so much the ownership’s willingness to spend. Baseball now has a de facto salary cap, there are increasing penalties for exceeding competitive balance (or luxury) tax threshold (this year, $197M). The Cubs are at around $185M payroll, which gives them space to add payroll during the season if they wish. But the big spending teams mostly got under the threshold this year because the penalties are serious, particularly the redistributive part.

              I think this is part of the reason Richard is proposing minimum team payroll. The big spending teams already have their disincentive for spending too much, and the Dodgers and Yankees slashed payroll this offseason. But the smaller market teams don’t have incentives to spend more.

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  2. I think a lot of teams are more aware of their windows of opportunity, a concept which I prefer to tanking. The Cubs, for example, got most of their World Series position player talent by trading veteran plays for prospects (future talent), rather than benefiting from first round draft picks themselves. And while these are not unrelated avenues for acquiring talent, trades distribute value between teams and the Cubs traded existing talent for future talent and when that future talent hit its window of opportunity, the Cubs reversed themselves and traded future talent for existing talent. The attraction of draft picks is they don’t cost anything in players or prospects, so tanking is complete upside particularly in small team sports like basketball. Trades are usually between teams with different needs, either in terms of positions or timing and largely are self-policing.

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  3. Consider the Colorado Rockies. If I recall the numbers correctly, they’re typically a top-10 team for attendance and a middle-of-the-road team on payroll. They’ve been to the World Series once (where they were horribly outclassed by one of the big-money teams), and that required an historic 14-of-15 end-of-season run just to make the playoffs as a wild card. Every year the complaint by the sports-radio talking heads is that until the Monforts (owners) go, mediocre is the target.

    I suspect it’s a fairly unique situation, though. It’s >500 miles to the nearest city with a MLB team. Denver is a big summer tourist destination, and hitting Coors Field is on many visitors’ to-do list. Huge numbers of people moving here over the last 30 years means many visiting teams have a small but enthusiastic fan base here.

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      • Perhaps just locals interested in seeing the more famous teams and players? Certainly when the Yankees or Boston are in town, the ticket prices go up and the games get sold out. I saw something the other day suggesting that 2018 attendance at Coors Field would dip because neither the Yankees nor Boston will play in Denver this year. I seem to recall reading about a similar thing with the Nuggets in the NBA: nightly attendance is more about who they’re playing than anything.

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      • Huh, I would not have guessed that. IIRC, the Rockies were in the hunt pretty deep into the season last year.

        I know that the adding a couple wildcard teams has made making the trade deadline buy/sell decision tough for some GMs.

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      • This is essentially how minor league baseball markets itself. It is surprising on the major league level, if only due to the cost. Come to think of it, what do you mean by “regularly?” Season tickets, or a couple of times a year, or somewhere in between?

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        • Even as far away as the Springs, I know people who go to Rockies games 5-6 times a year for those reasons – and they’re adding a 3-4 hour commute to the game itself.

          Those same people also usually go to our minor league games down here, far MORE regularly, which you really have to be into for the present moment since they keep changing out who our team actually IS so you just get attached to one team and then they switch out completely…

          I will say I was fascinated when we had the Brewers farm team down here, and they did really well, to see MILWAUKEE fans who came all the way down to the Springs to root for “their” farm team and their favorite prospects. Superfans always amaze me.

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        • It’s Denver, with a team in the top league in most of the professional sports (football, baseball, basketball, hockey, soccer, lacrosse,…), plus minor league teams scattered up and down the Front Range. Everyone but the Broncos markets the experience, and pretty steep discounts on even small multi-game ticket packages.

          Keep in mind how much of the population is new. When we moved here 30 years ago, the state population was 3.3M. As of the middle of 2017, the estimate was 5.6M. Essentially all of that growth has been packed into the Front Range urban corridor.

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