In order to fully grasp the implications of the twelve player trade between the Miami Marlins and Toronto Blue Jays – Josh Johnson, Mark Buehrle, Jose Reyes, Emilio Bonifacio, and John Buck in exchange for Henderson Alvarez, Jeff Mathis, Yunel Escobar, Adeiny Hechavarria, Jake Marisnick, Justin Nicolino, and Anthony Desclafani – one must understand a thing or two about baseball transactions.
The first thing to understand is that it’s financially advantageous for a club to have players with less than six years of service time, and the further a player is from playing six years at the highest level, the better. This is because prior to a Major League Baseball player’s sixth season, he’s ineligible for free agency, and his contracts are not guaranteed unless the team wishes to guarantee them in order to save money by avoiding paying a player year-to-year. The amount of money that a team typically pays a player for his first six years in the league is far less than what he would likely receive on the open market.
The second thing to understand is that once a player becomes eligible for free agency, he will sign a multi-year deal if he’s considered to be very good. In order to become a free agent signing a multi-year deal, a player will have already played six years in the league. This means that by the time the majority of players are able to sign free agent contracts, they are about to or have already entered their decline phase. As a player ages, his skills diminish and the value he’s able to provide to a signing team decreases. Most multi-year free agent contracts, though, pay a player a similar average annual salary through the life of a contract.
So, even if the value provided in the sixth year of a long contract isn’t as great as the value provided in the first year, a player is likely to be paid a similar amount from year-to-year. This means that a good free agent contract will see a newly signed player provide more value at the beginning of the deal so as to justify the lower amount of value that they’ll provide at the end of the deal.
As an example, we heard earlier this offseason that Josh Hamilton wanted to sign a seven-year contract worth $175 million. Typically, we’d look at the previous few off seasons and figure that each win above replacement on the free agent market was worth something between $5 million or $5.5 million. We’d then assign an inflation rate of 5% and carry on to figure out how a player would have to perform, given decreased production via standard aging curves, to make the contract worthwhile over the entire life of the contract.
With new ownership in Los Angeles, and the increased money from television deals – both regionally and nationally – that will go into revenue sharing, it’s quite likely that the cost of a win above replacement and the inflation that’s governed that cost are about to go up significantly. However, the accuracy of the details in this case aren’t important, as the schedule below has been created merely as a means of showing how teams don’t actually expect to literally get what they’re paying for until the middle year of a multi-year contract.
If a win above replacement was worth $5.5 million, and that figure was expected to increase by 10% each year, any team meeting Josh Hamilton’s demands would consider the deal like this:
2013 – $25 million salary – $5.50 $/WAR – Paying for 4.6 WAR – Anticipating 5.0 WAR
2014 – $25 million salary – $6.05 $/WAR – Paying for 4.1 WAR – Anticipating 4.5 WAR
2015 – $25 million salary – $6.66 $/WAR – Paying for 3.8 WAR – Anticipating 4.0 WAR
2016 – $25 million salary – $7.32 $/WAR – Paying for 3.4 WAR – Anticipating 3.5 WAR
2017 – $25 million salary – $8.05 $/WAR – Paying for 3.1 WAR – Anticipating 3.0 WAR
2018 – $25 million salary – $8.86 $/WAR – Paying for 2.8 WAR – Anticipating 2.5 WAR
2019 – $25 million salary – $9.74 $/WAR – Paying for 2.6 WAR – Anticipating 2.0 WAR
In other words, a team receives value at the beginning of a long-term contract in order to pay for the cost of the contract in later years. The way this works has been likened to paying off the equity versus the debt of a mortgage, but perhaps something like a paying off a loan for a vehicle, which depreciates much like a baseball player, would provide a better analogy.
This is important to the trade that the Blue Jays and Marlins agreed to because two of the players coming to Toronto were signed to multi-year free agent contracts only a year ago. Under normal circumstances, this means that the team acquiring these assets is likely to receive less value from the current contractual situations than what the signing team was prepared to gain with the original contracts.
In the seven year contract example above, we see that the team gets three years of plus value and three years of negative value according to the annual salary that it’s paying out. This is with a fairly neat and orderly schedule of payment. However, the Miami Marlins don’t typically sign players to such neat and orderly schedules of payment.
The organization has a “club policy” that doesn’t allow them to include no-trade clauses in contracts. In lieu of this clause, both Mark Buehrle and Jose Reyes were convinced that by signing contracts that were end-loaded, their respective deals would ultimately make it too difficult for the team they were signing with to trade them later into the deal. This means that the Marlins, by including these two recently signed players with end-loaded contracts in their trade with the Blue Jays, gained excellent value by paying for a single year of full value at a reduced rate, even if, given the final standings of the National League East, it was all for naught. This also means that given the remainder of the contracts being acquired, the Toronto Blue Jays will be getting a worse deal than the Marlins had.
For instance the Blue Jays will pay 34-year-old Mark Buehrle a reasonable $11 million in 2013, then $18 million in 2014, and $19 million in 2015 when the pitcher will be expected to perform in his age 36 season. This is occurring after the Marlins paid the southpaw a mere $6 million for what should be Buehrle’s best year. Likewise, Jose Reyes earned $10 million for his age 29 season. A 30-year-old Reyes will cost Toronto $10 million in 2013, $16 million in 2014, and then $22 million from 2015 to 2017, before a 2018 club option that will cost the team $4 million to buy out. At the conclusion of the contract, Reyes will be 35 or 36-years-old.
The Blue Jays also received $4 million from the Miami in the deal, but this merely covers the $4 million deferred signing bonus that’s due to Mark Buehrle, and there’s still the matter of the $4 million buyout for Reyes’s 2018 season.
That’s not to suggest that the deal isn’t good for the Toronto Blue Jays. Far from it. By acquiring five Major League players, two of which might be considered elite performers at vital positions, the team has improved their lot in a fashion that would’ve been impossible if they were to attempt to acquire players through free agency alone. Yes, they give up cost controlled talent, and they take on a lot of salary – more than $155 million to be paid out over the next six seasons in total. However, given the almost certain rise in cost of wins above replacement on the free agent market combined with the perfect storm opportunity to exploit a franchise looking for salary relief, even the harshest of critics would have a hard time criticizing the risk that the Blue Jays are taking on in this deal.
However, shortly after the terms of the deal were announced, a sentiment among baseball fans was quick to arise. It suggested that Toronto robbed Miami, and that the Marlins franchise was somehow holding Major League Baseball in contempt like an irreverent member of a legal proceeding. When we look beyond the proven talent switching hands to consider the financial implications of the swap, it’s simply not the robbery that it was suspected of being.
While the motivation of a franchise that made such an enormous free agent splash twelve months ago – ahead of the opening of a brand new baseball stadium – only to find itself now in the midst of a massive fire sale should be questioned, especially considering that said brand new baseball stadium was paid with public money, and the organization is about to benefit from increased revenue sharing through new television deals, the trade was quite likely the right move for the long-term health of the franchise.
In a way, this is almost unfortunate. It’s impossible to write about the Jeffrey Loria-owned Miami Marlins without using the term cynical. Despite the underhanded treatment of the fan base in teasing expectations and the ever increasing equity of a Major League Baseball team, all reasons to despise the runners of this franchise, this deal is not without merit. It saves the team money that otherwise would’ve been sunk on an at best .500 baseball club, while improving the system with the addition of a good young pitching prospect in Justin Nicolino, a defense first future shortstop in Adeiny Hechavarria and a dependable, if not anything else, shortstop for-the-now at a reasonable rate in Yunel Escobar, who was born in Cuba and should provide for at least a bit of good will to be projected toward the many Cuban fans in Miami.
Obviously, the best case scenario for fans of a sports team is an ownership group that acts something like a benevolent dictator, not all owners are going to be Mike Illitch. Most owners are going to see a baseball club as a business in which they’ve invested. If Illitch and the Detroit Tigers are on one end of this imaginary spectrum, the ruthlessness with which he operates and the brazen and condescending manner with which he treats his team’s fan base puts Loria and the Marlins firmly on the opposite end.
However, cries for Major League Baseball’s intervention in stopping an owner from attempting to turn a profit are out of both place and order. Only nine years ago, the Miami Marlins were spending the off season celebrating a World Series championship. There are 23 other teams in the league that haven’t won a championship as recently. For instance, it’s been almost two decades since the Blue Jays celebrated a World Series victory. With its most recent transaction, it’s closer than ever before to stopping that dreadful streak.