Perhaps even more relevant- 13 years ago was 4 Giants GM’s ago; and they’ve been a really successful franchise.
Funny, just 2 years ago it was the Rays and how they can find bargains from the leftovers bin...These long dated contracts are how teams get premium players. That's how MLBs talent market works now.
Indeed.Funny, just 2 years ago it was the Rays and how they can find bargains from the leftovers bin...
I'll concede that this may be what teams are doing, but I think we won't know how well this works for several years.
This was a pretty damn close prognostication, if I do say so myselfAgree with your overall points. On Correa, I’d quibble a bit. I’m not sure there’s another team left like Padres and Rangers that’s desperately willing to overspend. The Twins want Correa back, but I’d be stunned if they were to go over $250 or 8 years. Cubs? Maybe, but kind of doubt it; they look like they’d rather get multiple good players than outspend everyone for Correa. Giants? Most likely. If they sense they’re at the top on money, they’ll probably get an AAV break by adding years. So my guess would be something from SF in the 11/$330 or 12/$350 range. That’s comparable to Seager but maybe a bit more manageable for the team and in line with other deals this off-season.
This year's contracts are markedly different from past years. Previously, these types of long term contracts always ended in a player's late 30s. Machado (35), Tatis (35), Arenado (36), Cole (37), Seager (37), Semien (37), Lindor (37), Stanton (37), Trout (38), Harper (38), Betts (39). Miguel Cabrera's extension is the only one I could find that guaranteed money at or past age 40, so the only guys who got guaranteed money past age 37 were perennial MVP caliber players. Under the market as it existed up until this offseason, Turner, Bogaerts, Correa, Nimmo, even DeGrom, all these guys get at least two fewer years.Indeed.
That said if you look at MLB franchise values they continue to outstrip inflation and these massive contracts have been given out for a few years now. Without seeing the financials its hard to say but it feels like MLB franchises have the room to make these deals. I think fans would be surprised by how much money some teams make but maybe not.
Entirely fair. Markets move constantly.This year's contracts are markedly different from past years. Previously, these types of long term contracts always ended in a player's late 30s. Machado (35), Tatis (35), Arenado (36), Cole (37), Seager (37), Semien (37), Lindor (37), Stanton (37), Trout (38), Harper (38), Betts (39). Miguel Cabrera's extension is the only one I could find that guaranteed money at or past age 40, so the only guys who got guaranteed money past age 37 were perennial MVP caliber players. Under the market as it existed up until this offseason, Turner, Bogaerts, Correa, Nimmo, even DeGrom, all these guys get at least two fewer years.
The MLB labor market is cyclical, like many others. We've seen booms in size and length of contracts before, usually followed by a regression as most of those contracts don't work out. This may be the market this year, but I would be very hesitant to say this is the new normal moving forward.
And yet most of the contracts signed this off-season are for lower annual values than the ones you listed. It’s almost like teams are doing something different trading off lower AAV for longer commitments to defer luxury tax payments and spread them out over more years. If Correa had signed for 10/$350 or Xander 8 years at $35m, people would be like “wow that’s amazing, clubs must have a lot more money than we think and the new CBA must’ve changed how they spend, guess the market’s going up again after pretty much stalling out for a decade.” (That was generally the reaction to Judge’s deal, the earliest to sign). When superstars started signing $30m/year deals, that was just natural growth. If you could understand these as $35m/year contracts with some dead cap space at the end, maybe it would make more sense? The length of these contracts are breaking people’s brains in a very weird way. It’s an accounting trick. Nobody except the players themselves (and maybe not even then) think they’re going to be useful major league players at age 41.This year's contracts are markedly different from past years. Previously, these types of long term contracts always ended in a player's late 30s. Machado (35), Tatis (35), Arenado (36), Cole (37), Seager (37), Semien (37), Lindor (37), Stanton (37), Trout (38), Harper (38), Betts (39). Miguel Cabrera's extension is the only one I could find that guaranteed money at or past age 40, so the only guys who got guaranteed money past age 37 were perennial MVP caliber players. Under the market as it existed up until this offseason, Turner, Bogaerts, Correa, Nimmo, even DeGrom, all these guys get at least two fewer years.
That’s a great link because it really emphasizes the point - take the Mets, sure they’re losing $100M per year, but the valuation alone is increasing 8% - which is $212 million per year. So even ignoring the billions Cohen has outside the Mets, and believing those operating income numbers (I suspect there’s more income that they aren’t up front about), he could lose another $100m/yr and still be net worth positive on the team alone.Indeed.
That said if you look at MLB franchise values they continue to outstrip inflation and these massive contracts have been given out for a few years now. Without seeing the financials its hard to say but it feels like MLB franchises have the room to make these deals. I think fans would be surprised by how much money some teams make but maybe not.
Teams still need to cash flow to operate though. A guy like Cohen isn’t likely to spend like this forever. I think he realizes his team is close and is willing to Steinbrenner his way to a title, which will immortalize him in NY sports if he’s successful. If they’re losing money, he’ll need to take on debt (not as easy now) or dilute his ownership and bring on more LPs. And the latter is where the valuations are helpful. Private equity is all over minority stakes in sports teams so getting an influx of cash isn’t difficult if he’s willing to dilute his ownership percentage a little bit.That’s a great link because it really emphasizes the point - take the Mets, sure they’re losing $100M per year, but the valuation alone is increasing 8% - which is $212 million per year. So even ignoring the billions Cohen has outside the Mets, and believing those operating income numbers (I suspect there’s more income that they aren’t up front about), he could lose another $100m/yr and still be net worth positive on the team alone.
Until the valuations start dropping, we’re going to continue to see craziness
I'm not sure if you're responding to me, or just talking generally, but I haven't seen much indication that peoples' brains are being "broken" by these contracts in any way. What you're noting is consistent with my post: these contracts are markedly different than those from prior years. Teams are well aware that most stars will stop producing at star level somewhere in their mid-30s, and by their late 30s will produce little or no value. Many of those pre-2022 contracts represent substantial "dead cap space" (to use your term) years where teams added years to offset AAV, it's why both Stanton and Harper got 13 year deals, and Betts and Trout got 12. The difference is that those offset years extended into the late 30s, with the only exception being a deal that was underwater by year two (Miguel Cabrera). And again, the guys who got guaranteed money into their late 30s to lower their AAVs were exclusively MVP (or multi-time MVP) winners. The market has changed, whether it will continue to operate in this way however is not certain: again, we've seen cycles (early 2000s, mid 2010s) where longer deals became en vogue, and then the market reacted and deal length shrank when most of the deals went belly up. Maybe that won't happen again as the luxury tax system continues to change payroll economics, but it's too early to say.And yet most of the contracts signed this off-season are for lower annual values than the ones you listed. It’s almost like teams are doing something different trading off lower AAV for longer commitments to defer luxury tax payments and spread them out over more years. If Correa had signed for 10/$350 or Xander 8 years at $35m, people would be like “wow that’s amazing, clubs must have a lot more money than we think and the new CBA must’ve changed how they spend, guess the market’s going up again after pretty much stalling out for a decade.” When superstars started signing $30m/year deals, that was just natural growth. If you could understand these as $35m/year contracts with some dead cap space at the end, maybe it would make more sense? The length of these contracts are breaking people’s brains in a very weird way. It’s an accounting trick. Nobody except the players themselves (and maybe not even then) think they’re going to be useful major league players at age 41.
Historically, baseball has been a fairly rational market in terms of operating on a profit maximizing, marginal revenue=marginal cost sort of basis. You can basically look at marginal revenue and marginal cost on a wins basis, but what complicates the analysis is that wins are worth vastly different amounts. Wins have effectively zero marginal value up until about the 70th or so, and minimal marginal value until you start to hit playoff contention (low 80s). Then you have a sweet spot of wins from the low 80s to low to mid 90s where each win is incredibly valuable, before you plateau. Further complicating this is the fact that a lot of MLB income isn''t really marginal revenue; TV and streaming contracts, sponsorships, etc., most of these are driven more geographical/market factors than they are team success, and there are some income streams (like leaguewide contracts) that are completely fixed. The reason I bring this up is to say that's not really how teams think or operate; even Cohen has hedged on spending by talking about "3 to 5 years" which leads me to think that there's some kind of accounting shenanigans related to the debt from the purchase of the team and maximizing losses over some set period, as Cohen didn't get SNY which was the Mets' primary profit center under the Wilpons...and coincidentally, the Mets-SNY deal expires in 2026.That’s a great link because it really emphasizes the point - take the Mets, sure they’re losing $100M per year, but the valuation alone is increasing 8% - which is $212 million per year. So even ignoring the billions Cohen has outside the Mets, and believing those operating income numbers (I suspect there’s more income that they aren’t up front about), he could lose another $100m/yr and still be net worth positive on the team alone.
Until the valuations start dropping, we’re going to continue to see craziness
This post is awesome. Thank you.I'm not sure if you're responding to me, or just talking generally, but I haven't seen much indication that peoples' brains are being "broken" by these contracts in any way. What you're noting is consistent with my post: these contracts are markedly different than those from prior years. Teams are well aware that most stars will stop producing at star level somewhere in their mid-30s, and by their late 30s will produce little or no value. Many of those pre-2022 contracts represent substantial "dead cap space" (to use your term) years where teams added years to offset AAV, it's why both Stanton and Harper got 13 year deals, and Betts and Trout got 12. The difference is that those offset years extended into the late 30s, with the only exception being a deal that was underwater by year two (Miguel Cabrera). And again, the guys who got guaranteed money into their late 30s to lower their AAVs were exclusively MVP (or multi-time MVP) winners. The market has changed, whether it will continue to operate in this way however is not certain: again, we've seen cycles (early 2000s, mid 2010s) where longer deals became en vogue, and then the market reacted and deal length shrank when most of the deals went belly up. Maybe that won't happen again as the luxury tax system continues to change payroll economics, but it's too early to say.
Historically, baseball has been a fairly rational market in terms of operating on a profit maximizing, marginal revenue=marginal cost sort of basis. You can basically look at marginal revenue and marginal cost on a wins basis, but what complicates the analysis is that wins are worth vastly different amounts. Wins have effectively zero marginal value up until about the 70th or so, and minimal marginal value until you start to hit playoff contention (low 80s). Then you have a sweet spot of wins from the low 80s to low to mid 90s where each win is incredibly valuable, before you plateau. Further complicating this is the fact that a lot of MLB income isn''t really marginal revenue; TV and streaming contracts, sponsorships, etc., most of these are driven more geographical/market factors than they are team success, and there are some income streams (like leaguewide contracts) that are completely fixed. The reason I bring this up is to say that's not really how teams think or operate; even Cohen has hedged on spending by talking about "3 to 5 years" which leads me to think that there's some kind of accounting shenanigans related to the debt from the purchase of the team and maximizing losses over some set period, as Cohen didn't get SNY which was the Mets' primary profit center under the Wilpons...and coincidentally, the Mets-SNY deal expires in 2026.
Source: Wrote my thesis in economics on the labor market of MLB.
When you say “the market has changed,” or that it’s “markedly different”, what do you mean?I honestly have no idea who you are arguing with at this point.
Contracts are longer and reaching into much older years than prior markets. There was only one 11+ year deal in FA ever prior to this season (Harper); this year had 3. As I went over in my prior post, previously teams almost exclusively extended contracts past age 37 for MVP/multi-time MVPs; 5 guys (Bogey, Turner, Correa, DeGrom, Nimmo) broke that barrier this year, most by multiple years. Ben Clemons on Fangraphs had an interesting article today talking about how interest rates may explain the motivations behind this (https://blogs.fangraphs.com/why-are-teams-issuing-extremely-long-contracts/, posting on my phone so excuse the lack of a normal link). It's not an "accounting trick", it's a change in how the market is structuring contracts as a result of various internal and external factors.When you say “the market has changed,” or that it’s “markedly different”, what do you mean?
Right. It's pretty straightforward. Let's say Correa was looking for an AAV of 30m, so he wanted 10/300. SF said, we want to lower the AAV and spread the cost, so we'll add 50m if he agrees to add three years. Unless Correa thinks he can do better than 3/50 in 2032 he takes the deal.Perhaps I am misunderstanding how folks are using the term "accounting trick" but my sense is that there is no actual trickery involved. Teams are just accepting tails or dead cap or however you want to refer to the part of the players contract where they are no longer productive as a standard part of the deal. As everyone has noted, few people in baseball are going to argue that Correa should now be expected to be productive at ~40.
In exchange, these teams get to sign a top shelf MLB talent at a lower AAV and all the benefits that entails.
Let's swoop in with a Prove You're Healthy 3 year deal at reasonable money lolSoYoureSayingThere'sAChance.gif
Haven’t heard about any knee/hip concerns. Other than the back issues he missed significant time in the minors due to a fractured right fibula and went on the 60-day DL in 2019 due to a rib fracture.I don't know much about Correa's injury history, but the things I would be most worried about as a team for this kind of deal would be severe hip or knee osteoarthritis. Has he ever had a knee or hip scope?
They obviously hope he can play SS or 3B a good chunk of this contract. Maybe they found out he's close to bone on bone or something....