A Suggestion to Improve the Qualifying Offer System

Pitchers and catchers report to spring training this week, but there are still some pretty good unemployed players. And the most prominent of the remaining job-seekers — Ubaldo Jimenez, Ervin Santana, Stephen Drew, Kendrys Morales, and Nelson Cruz — all remain on the market in part due to the fact that they received a qualifying offer from their previous organization, attaching draft pick compensation in the process. All five will eventually sign, and like Kyle Lohse a year ago, most of them will probably end up with multi-year contracts for more than the $14 million in guaranteed money that they turned down in November.

However, several players and the MLBPA have been vocally unhappy with the way that the tax has encumbered some of the non-star players who have received qualifying offers, and even if we accept that the rule is designed to deflate player salaries and not actually compensate teams for losing players of value — if the system was just about compensating for a loss, it wouldn’t need to tax the signing team in the process — the drawn out process of keeping quality major leaguers on the market until February or March isn’t good for anyone. It is almost certain that the player’s association is going to ask for the qualifying offer system to be renegotiated in the next CBA, while MLB is likely to want to continue to keep some kind of compensation tax in place to help deflate free agent prices.

So, in thinking about potential alternatives to the qualifying offer system, I wonder if perhaps a very small tweak to the rules could actually produce a large change in how the system operates, and resolve perhaps the primary sticking point for the players. That change? Remove the expiration date from the qualifying offer itself.

Right now, players are given seven days to gauge their value on the open market before deciding whether to accept or decline the qualifying offer. In reality, the first seven days of free agency tell a player almost nothing about their own market, and for many of the players who have gotten caught in the qualifying offer net, their actual market didn’t develop until after the winter meetings, when the big fish get out of the way and let teams shift their focus to secondary players. Players can’t really shop themselves around during that seven day window, because in nearly every case, teams are not prepared to extend contract offers to free agents in the first week of November.

So what if we just got rid of that seven day window, and made the qualifying offer a standing contract that was available to the player for the entire off-season? If a team wants draft pick compensation for losing a free agent, then they would have to essentially guarantee a one year, high salary safety net to a player, giving them the ability to seek a longer deal in free agency while always having the ability to take a “pillow contract” at any point during the off-season.

For the elite players, the ones where the qualifying offer is a no-brainer, this would essentially have no effect. There is no point in the winter in which the Yankees wouldn’t have gladly taken Robinson Cano back on a one year, $14 million contract. This rule change would have no effect on the top tier of free agents.

But it would likely act as a significant deterrent to teams making qualifying offers to players that they hope turn the offer down, rewarding them with an extra pick and no commitment to the player beyond that first seven days. Would the Mariners have made Kendrys Morales a qualifying offer if they had to essentially hold back $14 million and their DH spot until he made his decision, knowing that he could choose to rejoin the organization at any point during the winter? Applying an actual cost to the offer from a team’s perspective would help ensure that the players who received a qualifying offer were actually players that the teams didn’t want to lose. Which should be a requirement for a team receiving compensation, I would think.

The direct result would probably be that fewer of these bubble players would receive a qualifying offer. Forcing a team to put part of their off-season planning on hold while the player shops himself around would force teams to only make the offer to players that they are either sure will sign a larger deal with another team or that they would love to have back for that one year at the qualifying offer price. But the league isn’t likely to agree to a rules change that simply reduces the number of qualifying offers that are made, so the player’s association would have to make a concession to try and keep the rule balanced between team and player interests. The nice thing about this rule change is that it would naturally setup a second rule change, fixing another problem with the system: players traded mid-season could be eligible to receive the qualifying offer again.

Right now, getting traded during the year is a get-out-of-jail-free card for players, and getting moved at the trade deadline can be a huge financial boon to the player. Players who get traded to contenders at the deadline immediately become more attractive as free agents, and this creates two tiers of free agents not based on their own abilities or market values, but based primarily on a decision made by a third party that has little or nothing to do with what that player should make as a free agent. If the worthiness of a team receiving compensation was based not upon how long they’ve employed that player, but upon their willingness to extend a standing qualifying offer, then traded players could also be included in the qualifying offer again.

So while players like Nelson Cruz and Kendrys Morales might get removed from the pool of players who receive a qualifying offer, players like Zack Greinke, Ricky Nolasco, and Matt Garza could be added back in. Essentially, these moves would take qualifying offers away from marginal players but restore them to better talents who happened to be traded mid-season, which is a more logical place for those qualifying offers to land. The number of qualifying offers probably wouldn’t change that dramatically, but the quality of the players receiving the offer would go up substantially.

Restoring the qualifying offer to traded players would trickle down in to the value teams receive when they trade players at the deadline; if a buying team knows they can attach a qualifying offer to a high quality player they acquire in July, they are more likely to give up better prospects to obtain that player, leading to a better return for the seller. And if we’re really looking to compensate teams for losing players that they can’t afford to retain in free agency, increasing the trade value of players traded at the deadline is likely a better way to do it than giving them a draft pick after letting the player walk for nothing.

By making these two small tweaks to the system, we would likely see a near elimination of the qualifying offer being made to marginal free agents who may not realize that they are marginal free agents until the offer is no longer on the table, while simultaneously restoring the offer to higher value free agents who happen to have enough value to be moved at the trade deadline. The system likely wouldn’t move the total number of players receiving the offer by a large degree, but would ensure that teams only get compensated for players that they actually wanted to retain.

Any system is going to have its flaws, and the current system is certainly better than the ridiculous Type A/Type B distinctions of the past. But with a few tweaks, the qualifying offer setup could work even better than it does now, and eliminate scenarios where decent enough players are unemployed in February and March because they misread their own market.

Addendum: As pointed out in the comments, an additional improvement could be to make the standing offer revokable by the team, so that a team could choose to move on and sign another player to replace the QO player if they felt it was necessary. By revoking the QO, the player would no longer have compensation attached, and would be free to sign with any other team as a normal free agent. You would need to require teams to give some sort of notice to the player, letting him know he had ~48 hours to accept before the QO was revoked, but this would be an interesting additional option to allow players and teams to fully flesh out the market without being held hostage by the qualifying offer.




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Dave is a co-founder of USSMariner.com and contributes to the Wall Street Journal.


112 Responses to “A Suggestion to Improve the Qualifying Offer System”

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  1. triple_r says:

    Can you stop being so smart? You’re making the rest of us look bad.

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  2. byron says:

    Joe Sheehan’s latest newsletter addressed this, and I liked his idea of moving the pick protection back to the top 15, rather than 10, so that 5 more mediocre teams who might benefit from a free agent the most would be in the market. He also pointed out that the market is likely to figure this mostly out next season, players will remember Morales and be more likely to take the high salary for one year, and teams will anticipate this and be less likely to offer it.

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    • LaLoosh says:

      Yeah they need to go back to protecting the 11-15 teams if they do nothing else.

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    • question time says:

      “the market is likely to figure this mostly out next season, players will remember Morales and be more likely to take the high salary for one year, and teams will anticipate this and be less likely to offer it.”

      This.

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    • stan says:

      I don’t think any of these cases had anything to do with the team wanting a draft pick. I think in each case the team actually wanted the player back, but only on a one year deal. If you think about it that would make sense in each of their cases too. The M’s clearly needed a dependable bat, the Indians and Royals clearly needed a reliable starter, the Rangers wanted a big bat, and the Bosox have been the most open about saying they want Drew back so he can provide insurance at both SS and 3B. I think each of these teams would rather have a draft pick and still have the money to spend (who wouldn’t?) but in each case they were prepared to take the player back on a one year deal too. After all “there is no such thing as a bad one year deal”.

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        • RC says:

          Me either.

          There’s almost no way that Stephen Drew being on the Red Sox helps the Red Sox. He’s a decent player, but he’s only played SS and he’d be blocking one of the best prospects in baseball.

          Benching a veteran who plays elite defense and is good for his position at the plate in favor of two youngsters would cause a shitstorm.

          The only way Drew makes sense on the Sox is if Middlebrooks is gone, and Bogaerts is moved to 3B, and there’s way more value lost than gained there.

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        • Ben Hall says:

          Having Stephen Drew play short and Bogaerts play third is almost definitely a better lineup than Bogaerts at short and Middlebrooks at third. Drew would not block Bogaerts.

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        • dudeOfTheWorld says:

          The Rangers are actually reluctant to make an offer to Cruz now that they signed Choo and lost their 1st rounder. The supplemental pick they get for letting Cruz walk will be their highest pick in June.

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  3. Brad says:

    You could even possibly allow teams to revoke the qualifying offer at any point. So, if they want to spend the 14 million elsewhere, they have to relinquish the compensation pick. It would create an interesting game of chicken, at the very least.

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    • Matt K says:

      I was thinking having the revocation clause expire at the end of the calendar year. I see that as enough time for the free agent to gauge the market and determine if that 1 year is a good deal for them.

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      • Joshua says:

        This is much better than he original suggestion. Gets rid of the hostage problem

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        • stan says:

          That would be fun from a fan’s perspective if nothing else. You could really see faxes accepting or revoking a QO passing in the Ethernet though.

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    • Dave Cameron says:

      This is great. I like this a lot. If a team gets tired of waiting around for a player to make up his mind in January, they can pull the offer and go their own way, but get no pick because he didn’t sign while compensation was attached. Player gets to become unrestricted FA, but probably only after most teams have already spent all their money. Fun.

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    • Edgar4Evar says:

      I like this better than my idea (below) of the offer expiring automatically. It encourages the player to make a decision without crippling the market for their services.

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  4. srpst23 says:

    Yes, but this would completely let the player off-of the hook for misreading their market. Maybe if the players looked at their situation objectively (i.e. not listening to the BS spewed by their agents) a few would realize that the QO really isn’t a bad deal after all. Is there currently a cap on the number of times a team can give a player a QO? If there isn’t, that could be a solution too. Maybe if a team can only extend a QO once, Kendrys accepts it this year, knowing that he can be a FA the following off-season.

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    • Bob M says:

      For a player to reach free agency, they have been in the league at least 6 seasons. For a lot of these guys, it is longer than that. As you near the end of your playing career, one season can make a huge difference in the level of contract offers you will receive.

      In Nelson Cruz’s case, do you think a 33 year old or a 34 year old will receive the better contract offer?

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    • Atreyu Jones says:

      I think we should wait until these guys actually sign deals worse than the QO before declaring that their agents’ advice was BS.

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      • Jason B says:

        ^^This.

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      • BigPattyG says:

        It does happen – one instance off the top of my head was Jason Varitek, who turned down free agency arbitration (the predecessor to the current QO system) on the advice of Scott Boras. After the hoped-for market didn’t materialize, Varitek re-signed with Boston for much less than arbitration would’ve gotten him.

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    • Bip says:

      It makes sense to take a 1-year buffer deal for a player who is still establishing his value, or who is returning from injury, or who just had a down year. Basically, a player who would be a buy-low type player, who can reasonably reestablish his value in a 1-year contract. For someone like Cruz, each year he plays is another year of decline, each of which could be a total disaster.

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    • Travis L says:

      Why do you want to punish players for misreading their market? (serious question)

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    • RC says:

      “Yes, but this would completely let the player off-of the hook for misreading their market. ”

      Who cares?

      The goal here isn’t to punish players. The goal is to keep compensation down a bit, and to more evenly distribute talent. “Catching players” is not a positive side effect.

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      • byron says:

        You got 90% of the way there, but why should we care about keeping compensation down anyways? The owners are raking in as much revenue as they think they can get, why wouldn’t we want more of it to go to the people who actually entertain us?

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  5. I think a major issue is that lower budget teams would be less likely to make an offer, and this hampers those teams even more. A $14M offer from the Yankees doesn’t tie up their offseason as much as it does for say, the Pirates. Unless I’m misunderstanding.

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    • Bob says:

      I agree, it doesnt do much to help those teams and in fact will likely hinder them from being agggressive in making other moves.

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    • That Guy says:

      Right, but the point is that teams really should only be offering the QO to players they’d want at the price anyhow, not daring the player’s agent to gift a compensation pick to the original team. Tie in with the idea above, that a team can revoke the QO and relinquish the compensation pick. In that way, we would allow teams to continue their own offseason without having to be totally married to that relatively mediocre DH they extended the QO to.

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      • ALZ says:

        Right. Cruz/Morales really are not elite players, they should be happy with $14M. Cano/Ellsbury/Choo/Beltran/McCann are the types of players that you know can do better and there is very little risk of giving them the offer. Maybe ensure that the player can be traded right away if they do sign. Even if the pirates had Cano and he accepted he would be very easily tradeable.

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        • LaLoosh says:

          Yeah I still don’t know why this system needs fixing (aside from extending protection to the 11-15 teams) when these players turned down $14M to play in 2014. You can be sure that the teams that had these players accept the QOs won’t be extending those offers again the following year.

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        • Right, but the Pirates might not have offered a QO to a guy like Ervin Santana whereas it is a no-brainer for others. I don’t like that aspect of it, but I certainly see your point above.

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        • twac00 says:

          Maybe they would rather have a 3/$36M deal than a 1/$14M deal given their age and the fact that a bad 2014 could really hurt their chances at a big contract next year.

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        • dudeOfTheWorld says:

          Ah, yes, that is a very good point about someone like Cruz accepting the QO very late. If it screwed up the Rangers roster changes that were already made, he would still be a very attractive trade piece at QO prices.

          It would force the team to at least evaluate the true value of the player to be at or above the QO. A player not quite worth the QO might take the offer late in the offseason and not be tradable.

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      • Mr Punch says:

        The (original) proposal is indeed likely to tip the balance further towards big-money teams. They’re better able to wait on a $14m expenditure, and more likely to make mid-season acquisitions. The revocable offer is an improvement.

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  6. Joshua says:

    Major flaw: A team qualifies a player they will gladly take back and the player tells them he wants a multi-year deal elsewhere. As such, the team fills the hole with another player. All of a sudden the player’s market collapses and he accepts the offer, creating a massive roster problem for the team.

    You’re basically holding a team hostage to the whims of an individual player. You’re either potentially forcing them to miss out on other avenues to upgrade under fear the player will accept the offer, or potentially forcing them to accept having no real control over their budget going forward.

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    • Joshua says:

      Sure, the Morales types wouldn’t get this offer. But guys like Cruz, Drew, Santana, Jimenez? They were all seeking HUGE deals at the start of the spring. It’s not unreasonable that the clubs would have expected they’d at least find SOMETHING good.

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      • stan says:

        Jimenez and Santana were trying desperately to resurrect their careers last spring. Drew signed a one year deal for $8M last winter. He likely would have gone for about the same as Peralta had he been free, but he can still make more than Peralta over the next four years if he produces again next year.

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    • Matt K says:

      that’s the point he’s making. it keeps the teams from extending the qualifying offer, unless they’re superstars. Kendrys doubtfully gets a QO, while Cano still gets it.

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      • Joshua says:

        Yeah, that was his point re: Morales. But it shouldn’t keep teams from making an offer to people they reasonably expect WOULD get multi-year deals (even with QO) like Santana, Jimenez, Cruz and, to a lesser extened, Drew. But then all of a sudden the baseball world goes nuts, and those teams are screwed because the players misread their markets.

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    • j6takish says:

      Didn’t this happen under the old system? I’m thinking of Rafael Soriano and the Braves specifically

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      • Joshua says:

        Yep. The old system was REALLY bad because people who would never actually get huge deals would get type A status. The Elias rankings had RPs as an entirely separate category, so being the top 20% of FA RP made you a type A, but that led to people like Juan Cruz or (as you mentioned) Soriano getting killed in FA.

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        • Joshua says:

          So Soriano saw his market was falling apart and accepted arbitration, which forced the tapped out Braves to deal him to Tampa (funny saying that, by the way).

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  7. G-UNIT says:

    There has to be additional incentive for the teaming offering the QO. Otherwise, you have a qualified player holding a team hostage the rest of the offseason if budget becomes an issue. I get that teams with budget constraints are less likely to offer, but still, you never know what sort of scenario might present itself during the course of the offseason. Remove the expiration date, but with the caveat that if a player doesn’t accept by say January 1st, the value of the QO goes down by 25%. So 14.1 million would become 10.5 million guaranteed.

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    • LaLoosh says:

      agreed. the QO would have to go over time.

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      • LaLoosh says:

        meant to say that the QO amount would have to decrease as time elapsed. Maybe 15M thru 12/15; 10M from 12/16 thru 1/15. The offer should prob just expire by 1/15. Players have to have thoroughly explored their markets by 1/15. If they don’t take the 10M by 1/15 then the extending team still gets a draft pick if that player signs elsewhere but 1st round protection has to extend to the 15th team.

        Teams have the ability to withdraw the offer (if they decide to redeploy those funds or replace that player). I suppose some notice mechanism would have to be deployed if a QO were going to be withdrawn.

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  8. eddiegaedel says:

    I like the suggestion, but what if the QO was instead a 1/$20 million dollar contract. Teams would still offer it to elite players such as Cano, but bubble players like this will be left alone. I also do not think teams should be able to place a QO on a player two years in a row.

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    • Bob says:

      Just because they arent superstars like Cano, it doesnt mean they arent valuable. I think setting the barrier that high is again unfair to the smaller market teams. With caps on the amateur and international markets along with the new transfer rules, the big money teams have an even greater advantage/incentive to spend in the FA market. If you are truly going to fix the system you need to do it from the bottom up. Band aid solutions like this one dont solve the problem. As things stand now a handful of players ability to score a huge multi year deal are affected. I think there are bigger issues like the international draft and the new transfer system to worry about first. Again i dont feel exactly sorry for a member of a union that is turning down $14 million a year in guaranteed money after they agreed to screw over the amateurs and international players to benefit themselves.

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      • Mr. Obvious says:

        Yeah, regarding caps on draft spending and international spending – doesn’t it seem unfair that these players are not represented by the body (MLBPA) that negotiated these deals?

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  9. Edgar4Evar says:

    Both changes make a lot of sense for the game, but I would tweak the standing offer so that it expired about halfway through the offseason, say January first. It would be pretty rough for a team to get into February with a position they basically can’t fill until the player makes up his mind. They can’t sign or trade for a player to fill that position until the player makes a decision. Fielder didn’t sign with the Tigers until January 24th and he certainly would have received a QO from the Brewers. Even though they could with near certainty assume he wouldn’t take the offer, they don’t have the money to pay two expensive first basemen, with no DH spot for either of them. It could slow the whole market down. Two months is enough time to find out what the market is for a player and for them to commit one way or the other.

    I think all the same incentives would be there for the team not to make an offer to a bubble player. The M’s, for example, probably don’t make an offer to Morales since he’s very likely going to make them wait until January then take the offer. They accurately predicted that going on the market right away to replace him would net them a cheaper alternative.

    Assuming nothing changes I expect we’ll start to see some of these bubble guys take the money. Especially guys in their decline phase who can expect not to get a long deal anyway. This rule is still pretty much in its infancy and I think the behavior of the participants is still shifting in response.

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  10. badenjr says:

    Doesn’t seem like removing the expiration date is the right answer. If you do that, the player can wait to sign the contract and keep the (small-market) team in limbo. All that is really needed is some amount of time where the player is both on the free agent market AND eligible to accept the QO. He just needs to be able to get a read on his value before making the decision to decline the QO. That way you aren’t tying the team’s hands when it comes to seeking out upgrades with limited resources.

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  11. How about a system where the offer determined the level of compensation attached? Like, if the QO was $15M+, a first round compensation is attached, $10M+ attaches a 2nd rounder, $5M+ offer attaches a 3rd round pick, and so on. It kind of forces the Type A / Type B shtick at the team’s discretion. If the team wants to offer less, they get less when he leaves. Also like the idea of revoking the offer.

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    • The more I think about this, the more I wonder if there is just too much compensation involved as it is. Unless it is a Robinson Cano type, why not just completely protect the first round and move the compensation attached to the second round? For the worst 10 (or 15, whatever), protect their second rounders. Maybe the problem is that the actual draft pick attached to Kendrys Morales is worth more than the value of whatever contract he ends up signing.

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  12. Brian says:

    seems unfair to starting pitchers, though. It’s a lot easier to keep open a rotation slot than a position slot.

    I’d prefer them to just make it a one time thing. You can offer it once to a guy. If he takes it, you can’t offer again next year. Or make it 20% more salary each year you offer it.

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  13. clint h says:

    the signing tteam has to lose something, or else 2 teams could “swap” stars and both profit, and thus hurt all of their rivals. this was an issue with type b FA’s before.

    the issue with traded players having compensation is more complex, but it would make teams less likely to keep their players, which is unfair to season ticket holders, aand it favors teams who can risk liberally making qo’s, which are the teams with big revenues.

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    • Jerry says:

      Just eliminate the draft pick penalty for the signing team, and give teams cumulative comp picks for lost/signed free agents.

      For instance:

      Team A loses two players that got the QO, signs one free agent with a QO from another team = one extra pick.

      In the situation you mentioned, the two teams wouldn’t get any additional picks, but also wouldn’t be penalized. Its really simple. No need for complicated rules or time frames or other BS.

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      • RC says:

        Agree. The entire problem with the system is that it penalizes the signing team. Get rid of that, and suddenly guys get the offers they should, and everything fixes itself.

        You want to penalize teams for signing big FAs? Then actually do that. Tie compensation to the total value of the contract. You sign an FA to 10 years 250M deal? It costs you a lot more than signing a guy to a 3/36 deal.

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  14. Evan says:

    I think part of the motivation for the short window is that the risk of injury during one week, especially at that time of year, is relatively low. If you force the teams to make an open-ended offer you end up transferring the risk of injury during the offseason from unsigned players to the teams, which I can’t see the teams accepting.

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  15. Matthew Murphy says:

    A couple thoughts:

    There’s only one thing that will help “fix” the qualifying offer system before the current CBA ends is if a player accepts it. As long as players and their agents are too stubborn to accept a qualifying offer, teams don’t have to worry about extending the offer.

    Another way to make sure that only the elite free agents were the ones receiving qualifying offers would be to make it a multi-year offer (2-3 years) at the same AAV. I don’t think there’s any chance that the Mariners offer Morales 2/28 or 3/42, because he’s going to accept that without thinking twice. Guys like Cruz or Beltran would probably also take the 3-year deal.

    One last tweak would be to change the penalty system. It’s pretty clear that biggest effect the qualifying offer has is penalizing the free agents who receive them. This could be improved by protecting some extra picks (top-15 or top-20). Also, a two-tier system could make sense. If a team extends a 3-year contract (same AAV) that gets turned down, they get a compensation pick at the end of round 1, signing team loses their highest pick, but top-15 picks are protected. If a team extends a 1-year contract (same AAV) that gets turned down, their compensation pick would be at the end of round 2, and they lose their highest draft pick outside of the first half of the second round.

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  16. LONNIE says:

    All it would take to improve the situation would be if players like Morales and Cruz accepted the qualifying offer. Teams make the offers to those players knowing that they aren’t worth that money but won’t accept the deal either. Maybe if some teams had their bluffs called and got stuck with a player they didn’t want for 15 million then other teams would think twice before making the offer. The players have noone but themselves to blame.

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  17. John W. says:

    Commissioner Dave strikes again!! I’ll make the signs and we’ll march on the MLB offices! Commissioner Dave! Commissioner Dave! Commissioner Dave!!!!!

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  18. LHPSU says:

    An alternative, I think, would be to allow other teams to match the qualifying offer without giving up a draft pick. So for example, the Mariners can sign Nelson Cruz to a 1-year, $14 million deal, without having to give up a pick.

    It won’t really affect their ability or lack thereof to negotiate a long term contract, but it would at least provide a safety net, because right now teams won’t want to sign these players to a 1-year deal, even for $1, when they will have to give up a 1st round pick.

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    • Atreyu Jones says:

      Tons of teams would sign all these QO players for $1 (or the league minimum). How much do you think teams are valuing these picks?

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      • Matthew Murphy says:

        I did some research on the community blog and found that the picks near the end of the first round are probably worth around $10M. Picks in the low teens might be closer to $20-25M, while second round picks might still be worth $7-8M. So, to be fair, suggesting that a team wouldn’t sign Morales for $1 is a little bit ridiculous, but the cost of giving up a draft pick, especially to a smaller market team who relies on cost-controlled players (like the Pirates), is very significant.

        http://www.fangraphs.com/community/the-draft-pick-compensation-paradox/

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    • LaLoosh says:

      That’s a good suggestion. I still find it funny that people are doing all sorts of mental contortions in order to protect these poor millionaire players from their $14M salary pittances.

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      • The point isn’t whether they are poor millionaires or not. You don’t see an issue that Matt Garza can sign earlier and for more money, just because he got traded mid season?

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        • LaLoosh says:

          There has always been a value on the draft pick compensation whenever it has come into play. This is nothing new. The new rule that a team acquiring a player during the year isn’t eligible to extend a QO was intended to put an end to teams picking up players during the year for the sole (or primary) purpose of trying to add a pick later. Now a player moved during the year is just about the player.

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        • I agree with what you are saying, but I don’t understand your point. Wasn’t that with the old Type A, Type B system anyways? Torrealba was a specific case, right? If Colorado wants to save some money and lose a pick, so be it, no? It isn’t just about the player now either, because teams are more hesitant to make deadline deals knowng that they won’t receive a pick at the end of the year (Greinke, Garza). I’m not trying to come across rude or anything, genuinely curious what you meant.

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      • Jerry says:

        Its more about protecting the billionaire owners from having to share the rapidly increasing revenues from the sport with the players.

        Its all a moot point anyhow, because I don’t think the QOs really keep down salaries. Keep in mind: we are talking about 5 players.

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        • Atreyu Jones says:

          No, I think there were 13 players who were offered the QO, not 5.

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        • Matthew Murphy says:

          Think he’s just talking about the guys who were offered QOs but haven’t signed (Cruz, Morales, Santana, Jimenez, and Drew)

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        • Atreyu Jones says:

          I know, but the already-signed guys had their new contracts depressed by the compensation.

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        • stan says:

          I find it funny when fans bring this up. First, not all owners are billionaires. In fact, most aren’t. That’s why most teams are owned by a set of “mere” millionaires because the capital costs are so high. Second, the owners aren’t raking in much of a profit for their investments. These guys own teams just for the love of the game and the prestige. Am I the only one who remembers when the Marlins were desperate to sell and baseball had to buy the Expos/ Nationals just to keep them afloat?

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        • Matthew Murphy says:

          Re Atreyu: So far, it doesn’t seem like it has, QO guys have made more money than expected given their projected performance. The next set of guys may suffer though.

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        • RC says:

          “Second, the owners aren’t raking in much of a profit for their investment”

          IF you own an MLB franchise, and you’re not raking in cash, its because you’re doing it wrong.

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        • 99% says:

          “I find it funny when fans bring this up. First, not all owners are billionaires. In fact, most aren’t. That’s why most teams are owned by a set of “mere” millionaires because the capital costs are so high. Second, the owners aren’t raking in much of a profit for their investments. These guys own teams just for the love of the game and the prestige.”

          Jeffrey Loria, is that you? What garbage.

          http://espn.go.com/mlb/story/_/id/9104778/forbes-mlb-teams-see-historic-23-percent-surge-average-values

          MLB teams average valuation went up 23% last year. Even Loria’s craptastic Marlins surged 16% in value, post fire-sale! Go ahead, try and find me another (legal) investment that consistently pays >10% interest per year on 100s of millions of dollars. And yes, I recognize that the Forbes valuations are aggressive, and I don’t care–it’s still upwards of 10% increase in value, year after year like clockwork, an absolutely ridiculous return if you can afford the buy in. So, sure, maybe owners are really buying teams cause they’re so prestigious and they just love the game and other warm-fuzzy stuff, but they are also being richly remunerated for their ownership.

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        • Jason B says:

          Atreyu said: “the already-signed guys had their new contracts depressed by the compensation.”

          I don’t think that’s true. Guys like Cano are going to get theirs, regardless.

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        • Atreyu Jones says:

          Jerry: Cano’s contract was less than it would have been without draft pick attachment … unless Seattle valued its draft pick at zero dollars.

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        • Atreyu Jones says:

          that last post was supposed to be directed to Jason B, not Jerry.

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  19. Bob says:

    Silly question. What happens to the player at the end of the next season if he accepts the qualifying offer? Is he still in a position to be given another qualifying offer for the next year?

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    • walt526 says:

      Yes and the CBA expressly forbids the inclusion of a promise for a team not to make a QO to a free agent. IMHO, that’s really more of an issue than the duration of the QO. Players don’t want to get stuck in a year-to-year contract churn until they become too injured, old, or otherwise ineffective to secure a multiyear contract.

      I wonder if there should be different QO levels for first time FAs versus veterans by setting different rules for players with something like more than 6-7 years of MLB service or something. For example, have the $14M threshold for players with 6-7 years of MLB playing time but something like $20M for players with 7+.

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      • Bob says:

        If that is the case then, to me, the best solution is to keep the system the way it is with a couple of alterations. If a player then accepts the qualifying offer he is immune from receiving one on his next contract. The team in turn will get a compensation pick that is equivalent in value to the competitive balance picks. The team basically gets the player for another year at a decent rate – by no means a bargain – and some compensation the following year.

        The $14 million threshold for the coming year should be enough disincentive for those teams that are really not keen on keeping the player. The player in turn is likely to get fair compensation for one more year of his time and free to sign wherever he likes the following year.

        The $14 million for a single year might be an overpay for certain players but the will make some of that investment back when they get their pick the following year.

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  20. sgolder06 says:

    When does the draft pick compensation expire on the players that received a QO?

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  21. jim says:

    They could allow teams to keep either the slot money or the pick? The loss of the two in conjunction seems to be the prohibitive aspect

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  22. Jerry says:

    If the system is really in place to keep salaries lower, is there any evidence that this is actually working?

    A telling test of this will be the remaining free agent starters who declined QOs . Ricky Nolasco and Matt Garza are comparable pitchers, and both signed for ~4/50 million. Thats set the market for what a good veteran #3 starter type is worth. Both are comparable to Santana and Jimenez. If those two sign for a lot less, it’ll be interesting. But I don’t think that its likely their salaries will be significantly lower. Like you said about Lohse, all it really seems to do is delay signings, which doesn’t benefit anyone.

    Even if it does effect a handful of these marginal cases, how many are we talking about? Five players? Thats a tiny percentage of players. If the leagues motive for this system is suppressing salaries, it isn’t a very effective method. I think that perhaps we are underestimating the part about teams wanting compensation for letting players leave.

    So why not eliminate the penalty for the signing team, while maintaining the comp pick structure? Instead of a more complicated system or tweaking the details, just eliminate the penalty. To limit teams ability to manipulate the system to hoard picks, you could make it cumulative: if a team loses 2 free agents with QOs, and signs one, they only get one extra pick.

    The NFL does this, although given the disproportionate value of draft picks in that sport, the comp picks are late round picks.

    MLB should just keep things simple (and far less damaging to the Kendrys Moraleses out there) by just adding picks to the back of the first round, similar to how a Type B free agent worked in the old system. Teams benefit from extra picks for losing players, and increased flexibility in who they decide extend the QOs. Those ‘tweener’ free agents don’t get hosed. Teams would still have an incentive to not resign their own free agents, but it wouldn’t leave that small minority in limbo. It would result in higher salaries for guys like Drew, Santana, and Morales, but, again, this is a tiny group of players. The strategies of teams are switching towards increasing investment in younger players anyhow, so I think that trend will offset any bloating in mid-level free agent salaries. But it would still help compensate teams who lose players in free agency.

    Easy.

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    • Atreyu Jones says:

      If teams are acting rationally, it affects the contracts of players like Ellsbury and Cano as well as Morales and Drew. It’s just that no one mentions it for the star players because the affect on their contracts is proportionately lower. But the raw loss amounts by the players is roughly the same (depending on how individual teams value their pick) if we assume a certain amount of rational thinking by the teams.

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      • Jerry says:

        This is just speculation on your part. How could you know what the Yankees were willing to pay?

        The real test will be in comparing what Nolasco, Garza, Jimenez, and Santana sign for. All are pretty comparable pitchers, so that should provide some basis for assessing how draft picks actually impacted their markets.

        Regardless, I think that we can all agree that this shouldn’t have an impact on what certain players get. If you are right, is it fair that Nolasco and Garza should benefit from being traded? Seems unfair and arbitrary.

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        • Atreyu Jones says:

          What value do you think the Yankees put on the pick they lost?

          Unless you think it was zero, the compensation either diminished the amount they were willing to pay Ellsbury or they voluntarily gave something away for free.

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    • Bob says:

      The compensation is more about helping teams that can’t afford to bid against teams like the Yankees and Dodgers than it is about suppressing salaries. Again all the boo hooing over a handful of players is a head scratcher for me when there are larger issues to deal with first.

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    • Matthew Murphy says:

      Actually, when I looked at the contracts that had been signed so far this offseason, and plugged them into a free-agent calculator to determine how they compared to the rest of the free agent market, the QO guys actually got paid a lot more than expected given their projected production. While teams don’t seem to care too much about giving up a draft pick to sign an “elite” guy, my guess would be that it does end up affecting the guys who are closer to league-average who haven’t signed yet.

      http://www.fangraphs.com/community/the-draft-pick-compensation-paradox/

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      • Atreyu Jones says:

        Isn’t that likely an indication that elite guys, in general, get paid a lot more than expected given their projected production? There was no alternate Cano who was unattached to compensation to compare to.

        Don’t you think the Cano or Ellsbury contracts would have been slightly higher without the draft pick? If not, you would be claiming that the Yankees/Mariners valued their pick at zero dollars.

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      • Atreyu Jones says:

        I saw your posts above, thanks. It seems some of the calculations estimate the picks’ value at $10-$25 million, and then the “paradox” article indicates that the contracts aren’t lower than would be predicted.

        I would think that the teams’ actual internal value of the picks would be somewhere in between the $10-25m and zero.

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  23. stan says:

    “most of them will probably end up with multi-year contracts for more than the $14 million in guaranteed money that they turned down in November.”

    I just about spat out my drink when I saw this. The chances of any of these guys but Drew getting that money on a multi-year deal is and was nil, regardless of the draft pick compensation. Morales was given a gift by the M’s when they offered him a QO at all since he was never going to get that much over 2 years, and Cruz, Santana and Jimenez were never going to get that in AAV.

    Are Jimenez and Santana more valuable than Arroyo, who just got less than that? Than Garza? Heck no they aren’t given how up and down their careers are. They each had a well above-average year for their careers last year and as a result each was offered a one year deal by their former team for an AAV that is more than they would have gotten elsewhere.

    Cruz was less valuable last year than McLouth and Byrd, who both got far less than 14M AAV on their new deals without having to worry about a QO. Cruz has only one year better than McLouth and Byrd’s 2013 and he clearly is in decline.

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    • Matthew Murphy says:

      The article says “$14 million in guaranteed money”. That’s total guaranteed money, not AAV. For guys like Morales and Cruz who have some injury history and are starting to get old, they might actually prefer to sign for 2/$25 than 1/$14. Granted, they’ve already made millions in arbitration, but the security of a multi-year contract (even if it’s at a reduced AAV) is probably important to them.

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  24. Dan Ugglas Forearm says:

    It could get interesting for teams close to the tax threshold. What if that $14MM puts them over the tax? Would there be some sort of clause creating a cushion in regards to the tax? Hypothetically, if the Yankees had gotten under the tax by a couple million, then Cano decided to come back after they’ve rebuilt their roster, could you still hold them to the same tax guidelines?

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  25. back_seat_driver says:

    Just make it draft-pick compensation without coming at another teams’ expense.

    It would be similar to the old system, but it would only have the ‘Type B’ free agent.

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    • Aron says:

      Thats another method that makes a lot of sense to me. Only the top players will be worth draft pick comp. Not sure why they didnt make it like that in the first place and made teams forfeit their picks for players, that could never be seen as conducive to FA. Only worry is too many players receiving QOs and not signing with their teams adding an extra 10-15 or so picks in the first round, which is what the MLB was trying to avoid.

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  26. twac00 says:

    What about a system where the top 5 or so players at a position, total not just FAs, would net teams a pick if they leave via FA, but the team they sign with doesn’t have to give up the pick?

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  27. Hank says:

    What is the purpose of the system?

    Originally wasn’t it to make sure teams who had spent years developing a player but couldn’t afford them come FA (or got outbid) got some compensation in return?

    Look at the players we are worrying about on this list:
    Morales – 1 year with his club
    Drew – 1 year with his club
    Santana – 1 year with his club
    Jiminez -2 years
    Cruz – 8 years

    With the exception of Cruz these aren’t exactly cornerstone players or players who a club has spent years developing and suddenly suffers a major loss losing them in FA. They were assets bought and intended to be flipped for prospects or let walk for a pick.

    Are these really the type of players the QO system is designed for? The issue is teams trying to game the system for the pick – it was much worse under the old system, but it still happens today.

    One of two solutions would work rather easily
    - Make the minimum time with a club longer. (don’t eliminate it!) A 3 or 4 year minimum – so the player was actually a core component of the team (Ellsbury, Cano, McCann types). The players who are ‘protected’ shouldn’t be hired mercernaries or rentals – teams doing that shouldn’t get rewarded by netting a pick after it as well.

    - Raise the threshold. The players “worthy” (for lack of a better word) of a QO will still get them, the fringe guys teams clearly want to walk (and hope to game a pick out of) or hope to re-sign on the cheap by deflating their value to others, will be far less likely to get an offer. I think they use an average of top 125 contracts right now? Cut that # down and the QO will rise.

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    • Kicker31 says:

      The problem here is that sometimes teams give up valuable prospects in return for these players.

      Look at Shields next year. They gave up WIL MYERS, Odorizzi, Leonard, and Montgomery for him (and Davis). So, just because Shields will have been there for only 2 years, doesn’t mean that they didn’t make an investment in him. So being able to recoup value off of him would be important

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      • Aron says:

        Shields isn’t the best example as him and Scherzer will be the best FA pitchers and he’ll have no problem getting signed even with draft pick comp attached to him but I do see your point.

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  28. The Tone says:

    Apologies if this has already been floated way up the comment stream, but why not fix the QO system this way incorporating Dave’s idea as well as a twist of my own:

    As Dave articulated, qualifying offers would remain on the table for the entire offseason. Teams looking to sign a player tied to a QO would lose their highest draft pick (regardless of draft position i.e. get rid of protection for top ten picks as well as comp picks for unsigned early rounders) only if they signed said player to a contract with an AAV greater than the value of the QO. Obviously clubs could try to find loopholes like giving out contracts with easy vesting options years to keep AAV below the QO threshold, but that’s something that MLB lawyers can figure out guarding against.

    Under this system players like Morales who are decently valuable (but not star caliber valuable) should see much less of a dent in their market as teams that are particularly averse to sacrificing their draft picks should be willing to bid up to one dollar in AAV below the QO. Combined with Dave’s idea this system will make QO’s rarer as they will be given out only to true star players. And while it would help mid tier free agents who did happen to receive a QO get fairer deals, it would also potentially punish teams for overpaying these same types of players by taking away their highest draft pick regardless of position. I think overall this will do a good job in sense of both controlling runaway costs for mid tier free agents, and simultaneously help those same players get a fair shake at establishing a market in free agency.

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    • Kicker31 says:

      I don’t think this would work because it’d create an artificial ceiling on these players’ AAV. You might think that Cruz is worth 1 year, $18M. And maybe you think your pick is worth $3M. So you end up thinking that you’d buy Cruz for $15M. But, if you only pay Cruz $13.999M, you get to keep your pick and have Cruz. This sets a hard barrier on the top of the earnings potential of solid-average players. Nobody but the Cano’s and McCanns would get paid above that barrier, especially by any team with a pick in the top 10.

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      • The Tone says:

        I don’t think that it is necessarily a bad thing that there will be a ceiling on what a player like Cruz would make in free agency. The amount of the qualifying offer is intended to represent average compensation for the upper echelon of players in the game, so based on that I see nothing wrong with a player like Nelson Cruz being shut out from that kind of money (barring some dumb team paying him 15 mill a year and absorbing sharp penalties). I DO however see something wrong with serviceable players having their markets absolutely wrecked by the current system, to the point where they are looking for work when spring training rolls around. The current system kills these players’ markets before they even have a chance to get going, and I think my proposal would keep more teams in the conversation from the get go knowing that the magnitude of their offer will determine whether or not they lose a draft pick.

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    • Aron says:

      Ahaha I just posted an almost identical post. So I gotta say I agree. Its almost uncanny how similar they are, and you even took some ideas from my head I didnt bother writing, such as using both systems.

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  29. pft says:

    The simplest thing would be to avoid the penalty on teams signing a player that refused the QO.

    Another solution is to make the QO a 3 year commitment, say at 80% of the current rate for 1 year.

    Teams would never agree to leave QO on the table for the offseason since that affects their ability to sign a replacement. Perhaps they could extend the 7 days to 30 days.

    Again, the simplest solution is the best one, just eliminate the penalty.

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  30. Aron says:

    Great article as usual. Not sure if someone else has mentioned this and I wasn’t the first to think of this idea, but another way to help a player from not being dragged down by the QO would be to only give compensation to the team if the player signing the contract receives an AAV of the equivalent to the QO or higher. So a guy like Nelson Cruz who clearly isnt worth 14 mil 1 year can still go to a team and get 3/30 even if he’s been extended a QO. I know it can get difficult and teams can try and circumvent the rule by giving the player an extra year they wouldnt have otherwise at a lower value to drag down the AAV but I still think this idea holds some good merit and can be tweaked as your idea was to strengthen it.

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  31. Bookbook says:

    This is a great attempt at a fix of a system that oughtn’t exist in the first place. The biggest problem with the QO is that it distorts the market, causing a handful of playesr to lose much of their value, but leaving most players untouched. Ax the QO and teams won’t necessarily spend more on players, they’ll allocate the spending more rationally. If you want to suppress spending, charge a 20% tax on every FA contract and divide the proceeds among your division rivals. That’d burn.

    Also, the extra compensation picks make a mess of the draft. When I look back and see someone was a 4th round pick, I’d like to know he was chosen between picks 91 and 120. Under the current system, it was probably somewhere in the 145-175 range one year, and a completely different range the next. Makes it hard to compare.

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  32. TexasGusCC says:

    What happens when a player turns down the QO and then the team needs to fill his spot so they trade for another player or sign a different free agent? What are they supposed to do if, say, a Kendrys Morales now wants to come back for $14MM?

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  33. GilaMonster says:

    I don’t know if anyone mentioned this, but their is one problem wit this system is that it takes the leverage way from a team.

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