Long-Term Contracts are Bad for Baseball

This offseason, free agents Eric Hosmer and JD Martinez are being promoted as $200 million players. Quite plainly, they are not.

From the advent of professional baseball in 1869, players had few rights and were poorly paid. Players were essentially the property of team owners, unable to ply their trade for whichever team they preferred, including the highest bidder. Baseball contracts contained reserve clauses, which forced players to stay with one team in perpetuity, unless traded.

However, St. Louis Cardinals’ outfielder Curt Flood became the first professional athlete to fight for free agency rights in 1969. When Flood found out that he was being traded from the Cardinals to the Philadelphia Phillies, he wrote a letter to baseball commissioner Bowie Kuhn protesting the trade and asserting that he was entitled to consider contract offers from other teams. Commissioner Kuhn denied the outfielder’s petition, so Flood sued Major League Baseball for antitrust violations.

Flood challenged Major League Baseball’s reserve clause, claiming it violated antitrust laws and his 13th Amendment rights. His case made it all the way to the US Supreme Court, where the justices ruled against him, 5-3. The majority determined that baseball was a sport and not a business, and therefore exempt from anti-trust law (imagine that).

In December, 1975, an arbitrator reversed the Supreme Court’s verdict and declared that Major League Baseball players had the right to become free agents upon playing one year for their team without a contract.

With the ruling, the reserve clause was forever terminated from sports, allowing free agency to begin. Major League Baseball also implemented federal arbitration for salary demands, allowing players to negotiate their salaries when their contracts expire.

These changes shifted control from team owners to the players, giving the athletes freedom to block trades and request higher salaries.

In 1976, Major League Baseball and the Major League Baseball Players Association signed an agreement which allowed players with at least six years of experience to become free agents.

These were watershed moments. I am all for players being fairly compensated and having the freedom to play for whichever team wants them. After all, they are the ones the fans come to see. In essence, they are the ones putting asses in seats at ballparks all across the country. They create enormous revenues from live attendance, television ratings and from the sales of hats, jerseys and other paraphernalia. Simply put, the players should be well-paid.

I also understand that it must be very difficult for a player to be traded, especially in-season, which also affects a player’s family. Players have homes, put down roots in their adopted cites and often have kids in school. This is why free agent veterans sometimes fight to have no-trade clauses inserted into their contracts.

Having said all of that, we have reached a time when too much power has shifted to players.

Top free agents are now insisting on opt-out clauses, as well as no-trade clauses, in their contracts. Why do owners agree to such excesses? If the player performs well, he can opt-out and walk away, under no obligation to honor the remaining years on his contract. On the other hand, if the player is injured or otherwise underperforms his contract, his team is obligated to pay him in full for the contract’s duration. If the team wants to rebuild, or unload the player’s contract for any reason, that player can also refuse to be traded.

This is insanity and the owners need to make it stop.

Giancarlo Stanton is just the latest example of this extreme power shift to star players.

Stanton had a no-trade clause and an opt-out clause inserted into his mammoth, 13-year, $325 million contract. The contract was so long, and so expensive that it was far too cumbersome for the Marlins, as well as for the vast majority of major league teams.

Point in case: the Marlins recently sold for $1.2 billion to Derek Jeter and a group led by New York businessman Bruce Sherman. So, Stanton’s ridiculous contract represented more than a quarter of the team’s price. The MVP of the league is so grossly overpaid that his contract was a liability to the organization that gave it to him, as it would be to all but a handful of teams in baseball.

Former Marlins owner Jeffrey Loria signed Stanton to that deal knowing it wouldn’t be his burden for long. Loria had every intention of selling the club, which is why he backloaded the pact for the next owners to deal with.

The Yankees were among a handful of clubs that could financially absorb Stanton’s contract and they still got $30 million from the Marlins (which will only kick in if he refuses to opt out after the 2020 season) to help pay Stanton.

Stanton has been on the disabled list in four different seasons and averaged just 117 games over his first seven years in the majors. He may be just 28 now, but players don’t get healthier in their 30s and most don’t get better either.

That speaks to the insanity of long-term contracts. They almost never work out for the team that signs them. Players typically hit free agency at around age 30, the decade in which they become more susceptible to injuries and begin their inevitable decline.

As history shows, massive, long term contracts are only good for the players who sign them. The teams that agree to such deals are usually left holding the bag, and with many regrets.

Alex Rodriguez, Joe Mauer, Prince Fielder, Mark Teixeira, Jayson Werth, Troy Tulowitzki, Carl Crawford, Jose Reyes, Jacoby Ellsbury, Josh Hamilton, Matt Kemp, Ryan Howard, Shin-Soo Choo, Albert Pujols and Jason Heyward, for example, all vastly underperformed their expensive, long term contracts and the teams that signed them would surely love a do-over.

This offseason, teams seem to think that keeping top free agents in limbo for as long as possible will drive down prices. We can only hope they are right. Teams believe that players will eventually worry about getting a job, which will result in a discount from the original asking prices.

Most teams can’t afford to spend huge sums in free agency, only to have the decision blow up in their faces. They cannot afford to have a high-priced player fail spectacularly on their watch. The smart GMs are perceived as the ones who spend wisely and win with low to moderate payrolls.

Organizations see free agency as a big, risky gamble. Huge sums of money will be wasted on players who will eventually get hurt or underperform. Guaranteed contracts are a game of roulette for the owners. Such terms don’t exist for almost any other workers in any industry.

In short, free agency is widely viewed by clubs as inefficient and wasteful. Yes, there are rosters to fill and needs to address, but teams need to spend their money wisely, not foolishly. The reality is that almost all long-term, big-dollar contracts ultimately prove to be a mistake for the teams who sign them.

Players such as JD Martinez and Eric Hosmer — both Scott Boras clients, not incidentally — are being promoted as $200 million players this offseason. Such a claim is without merit; neither player is worth anything near that amount. We can only hope that sanity prevails.

A player will get whatever the market will offer. However, if owners were smart, or had any guts, they would stop paying players in their 30s for past performance.

Any contract of at least six years, and certainly of seven or more, can be deemed long term, and they are a minefield of risks. There are few teams that can afford to fail spectacularly with players such as Carl Crawford or Jacoby Ellsbury, for example.

The entire system is backwards and geared toward failure. Young players are under team control for six years and only become arbitration eligible after three. Breakout rookies and young stars in year-two or three shouldn’t have to wait be among the highest-paid players in the game.

Players such as Aaron Judge and Cody Bellinger should have been among the game’s highest paid players last season. Instead, Judge was paid a mere $544,000, while Bellinger earned just $468,000.

On the other hand, Ellsbury was paid over $21 million for slashing 264/.348/.402, with 7 HR, 39 RBI, 20 doubles and 22 steals. Crawford was so awful that the Dodgers paid him $21 million to simply go away in 2016 and then they paid him another $21 million to not play for them again in 2017. It’s madness.

Aging, underperforming veterans should be paid like first and second-year players, while young stars should be able to cash in right away. Baseball earnings should be a merit-based system, related to current performance, not past performance or the fact that a team controls a young player.

The current system isn’t working, and the repeated failure of large, long-term contracts proves it.