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!