Buy Now or Pay Later

At some point today, Major League Baseball is expected to announce the details of the new Collective Bargaining Agreement that was negotiated with the player’s association. While there are some pretty major changes to several areas of the game, perhaps the most influential move is the addition of a second wild card team in each league. While qualifying to participate in a one-game play-in isn’t quite the same as being awarded a spot in the Division Series round, the new rule does essentially give two extra opportunities to play in October, and while it may not seem like a drastic change, I do think we’re going to see significant repercussions in how and when teams acquire talent.

An additional playoff spot has the obvious effect of increasing every team’s chances of making the playoffs, and as a byproduct of that result, the value of short-term wins just increased. Under the old system, a team needed to win at least 90 games to have a legitimate chance at winning the Wild Card. Of the 32 teams to get into the playoffs via the extra playoff spot since 1997, only three had finished with 89 wins or fewer – in fact, in the American League, the 91-win 2011 Rays had the lowest win total of any AL Wild Card team since the 2000 Seattle Mariners. The average wild card team has won 93.3 games per season, so the non-division-winning playoff team has still been quite excellent in most years.

The new system lowers the barrier to entry by a significant amount, however. Back in April, our own Wendy Thurm looked at how interleague play would have affected a hypothetical second wild card team for the National League had it been in place since 1998. As you can see, more often than not, the runner up in the NL Wild Card race finished with a win total in the 80s, and the average win total was just 89.2 wins. There has historically been a pretty significant drop-off in quality between the wild card team and the runner-up, but now that runner up will also get a chance to continue their quest for the World Series.

The result will be a shift in the curve that measures the value of a win. Right now, the value of a win is fairly linear up until about win #85, at which point each additional win (up until about win #98) becomes significantly more valuable, as those wins have the greatest impact on a team’s odds of making the playoffs. The new wild card is going to dramatically increase the value of wins starting at around #82, while also flattening the win curve a bit sooner, as the second wild card will all but ensure that a team with 95+ wins will make the playoffs, and the value of each additional win beyond that will diminish slightly.

This shift in the win curve is going to be reflected in how willing teams are to buy and sell wins. Right now, most teams that think they’ll finish below .500 in the following year will generally act as sellers, moving present talent for future talent. However, with a lower bar to clear to make the playoffs, it is now going to be far more valuable to put together a team that can at least hold their own and have a chance at sneaking into the mid-80s in wins. Even if a team doesn’t end up capturing the second wild card, they’re now going to be in a significantly better position to give their fans a pennant race in September, and the number of teams that will be playing meaningful baseball down the stretch just increased.

As such, I believe we’re going to see a dramatic decrease in the number of teams that are willing to act as sellers in July. For instance, look at the standings from July 30th, 2011 – if a second wild card and had been in place and teams only needed to believe they could win 89 games to get into the playoffs, which teams do you believe would have been willing to trade talent away?

In the AL, the Angels would have been in possession of the final playoff spot with a 59-49 record on the day before the trade deadline. I think you could have safely assume that Toronto, with their 54-53 record and only trailing the Angels by 4 1/2 games at that point, would not have been so willing to move present value for future value. The same is likely true of the White Sox, whose record stood at 52-53. In fact, only five American League teams would have been far enough behind the Angels to convince themselves that they really didn’t have much of a chance last summer.

In the NL, the story is the same. The Diamondbacks would have held the lead for the final playoff spot with a 58-49 record, but seven teams would have been within 7 1/2 games on the day before the deadline, leaving only the Dodgers, Padres, Cubs, and Astros as obvious sellers. Perhaps Washington and Colorado would have still decided to move present talent for future talent due to their below .500 records, but the decision wouldn’t have been as easy, nor would the price have been the same – teams wanting to buy talent from those rosters would have had to compensate for the fact that the bubble teams were essentially punting better chances of making the playoffs, so the cost of downgrading the roster in July is greater.

Realistically, under the new system, there probably would have been no more than 10 or 11 teams willing to move talent in July. While not all of the other 19 or 20 teams would have acted as buyers, there would have been increased motivation to hang onto talent already on-hand, and that alone would have decreased the supply of talent available mid-season.

Under the new system, having twice as many July buyers as sellers is likely to become the norm, and as such, I’d expect the cost of acquiring talent in-season to increase dramatically. We’re going to see supply decrease at the same time that demand increases, and the sheer lack of quantity of talent available to fill all the needs that will pop up after the season starts means that we’re likely to see shortage-driven buying.

We’ll likely see inflation in pricing for talent in the off-season as well, since present wins are now going to be relatively more valuable than they were previously, but I’d expect that the biggest change will be the price of talent mid-season. However, if MLB teams also come to expect that the price of wins is going to increase dramatically during the year, they may adjust their strategies by being more aggressive in upgrading their roster during the off-season, which could lead to further inflation in the price of acquiring talent during the winter.

I don’t think there’s any question that the second wild card is going to directly lead to teams paying higher prices than we’re previously used to seeing in terms of free agent signings and trade acquisitions. The structural change to the sport shifted some value from prospects to players with the ability to produce sooner than later, while also decreasing the number of teams who are going to be interested in selling off talent in lieu of making a run at a playoff spot.

When analyzing contracts handed out this winter, we’re going to have to keep these changes in mind. There is now extra incentive for teams to build good teams in November and December so that they won’t have to pay significant mark-ups to try and improve their talent base during the summer.



Print This Post



Dave is the Managing Editor of FanGraphs.


Sort by:   newest | oldest | most voted
juan pierres mustache
Guest
juan pierres mustache
4 years 7 months ago

Wouldn’t the value of wins from the amount needed for the WC to the amount needed to win a division also increase? it seems like the overall effect on the win value curve would be to increase the value in the low-mid 80s and high 90s-low 100s as there are now basically 2 separate levels of qualifying for the playoffs with different barriers to entry and different values as far as probable length of playoff run/chance of winning the championship.

Jono411
Member
Jono411
4 years 7 months ago

definitely agree with this. being one of the wild card teams gives you a 50% chance of making the real playoffs, whereas winning a division gives you a 100% chance of making the real playoffs. so being a division winner has almost twice as much extra value as being a wild card team.

Detroit Michael
Guest
Detroit Michael
4 years 7 months ago

Fine article.

It is possible too that the financial value of making the playoffs decreases. Half of these wild card teams will only have a one game playoff perhaps not even at home, really not any different from teams that have played and lost a 163rd regular season game. This might be a factor that partially reduces the effect that you anticipate.

Yirmiyahu
Member
Yirmiyahu
4 years 7 months ago

This is what I was thinking about (see me comment below), but I don’t think teams will be thinking in those terms. Even though, in practice, this is basically just a tiebreaking 163rd game, it’s being advertised as a postseason game. And there’s a huge emotional allure to just making the postseason. As it already is, teams are reluctant to be ‘sellers’ if they have any hope (however slim) of making the postseason. I don’t think teams are going to act with cold logic in this situation.

Yirmiyahu
Member
Yirmiyahu
4 years 7 months ago

I agree with your market analysis, Dave. But while more teams will be ‘buyers’ at the deadline, I’m not sure that’s a smart idea. The benefits of winning a wildcard berth are lessened. A one-game playoff is a flip of the coin, and a single game isn’t going to represent significant added revenue. Basically, the number of guaranteed playoff spots is actually being reduced from 8 to 6.

There are going to be a lot more teams that will overpay at the deadline in order to make a playoff push, and then come to regret it at the end of the season.

Theo
Guest
Theo
4 years 7 months ago

It’s not just a single game that’s adding revenue.

Those teams battling for the wildcard spots would have a significant increase in attendance over the last few months of the season. Instead of drawing 25,000 for a bunch of meaningless games, they’ll be selling out with crowds of 40,000+ for the remaining games . That’s adds up to about 500,000 more gate attendance or about $15 Million more in revenue.

TMW
Guest
TMW
4 years 7 months ago

Do we know yet if the ban on a division series within a division is going to be lifted?

If it has, the #1 seed in the playoffs just got a major advantage. In a single elimination game the wild card candidates are now forced use their best pitcher, ensuring that he’ll only be used once in the division series. The worst division winner would then have the benefit of not having to play #1 seed. (great news for AL Central champs)

If the ban is still intact, that advantage will in many cases benefit the #2 seed, particularly given the lobsided balance of divisional strength in the AL. Not so much for the NL though.

Anon
Guest
Anon
4 years 7 months ago

How would this affect something like the NL in 2001 (Astros and Cardinals tied for division with the other getting wild card)?

Yirmiyahu
Member
Yirmiyahu
4 years 7 months ago

Also happened in 2006 with SD/LAD and 2005 with Bos/NYY. In those situations, the divisional race is really close on paper in September, but it doesn’t really matter which team finishes with which playoff spot, and they just end up playing out the string.

Under the new system, there will be a ton of incentive for teams in that situation to actually play for the division title, which will make late-season games much more interesting for those teams.

As far as the win curve, this means that, at the border between a Wild Card team and a divisional champion (92-95 wins), wins will be worth a lot more.

nick
Guest
nick
4 years 7 months ago

Yeah, nice piece. I’m not sure this was a good financial decision by the owners. You would expect the increased price of wins to sap some (or all?) of the money generated by more pennant races by increasing the price of free agents.

Jackson
Guest
Jackson
4 years 7 months ago

Wow, great article. I had not even thought of this before, but it makes sense. However, as noted above, I don’t think the win curve will flatten out much quicker (if at all) on the high end of 90+ wins …. being a division winner is much more valuable than a coin flip wild card.

Really enjoy these types of articles that think-ahead, instead of mulling over the past.

Brad Johnson
Guest
4 years 7 months ago

You draw a conclusion that may only be partially true.

More buyers and fewer sellers does not necessarily mean higher prices. It could just mean more options to choose from. For instance, the Astros might have received three offers similar to the Phillies package for Pence. They could then pick the group of players who best fits their particular needs. The value of all the packages would probably have been very comparable to the Phillies offer, they just would have had more suitors willing to pay that price.

Certainly we will see scenarios where a player is traded for more than he would have been otherwise, especially in scenarios where a team is trying to block a rival, but I don’t think we can assume universally higher trade costs. Expect a greater variety of offers, not larger offers.

Kevin S.
Guest
Kevin S.
4 years 7 months ago

I was opposed to the second wild card, but if Bud pushing it unintentionally leads to salary inflation, I will laugh my fucking ass off.

Bill
Guest
Bill
4 years 7 months ago

This CBA will absolutely lead to salary inflation. With restrictions on overslot payments and international spending, the only way to acquire more talent is to buy it on the free agent market. Either Selig went into this with the desire to increase free agent spending, or he’s a fool. It’s difficult to see a middle ground. Sometimes, I think Selig is the Obama of commissioners. He sometimes seems completely over matched for his position.

kp
Guest
kp
4 years 7 months ago

One thing working to depress the return on midseason trades: “Only players who have been with their clubs for the entire season will be subject to compensation” (per mlbtraderumors). So that Type A/B veteran that team X is looking for will not come with an extra pick(s) anymore.

Old value equation: Veteran + future pick = Prospect A + Prospect B…

Without that future pick, you should theoretically see a smaller prospect return than we have been seeing for a good portion of midseason trade candidates.

This effect should be smaller than the supply/demand-oriented argument from Mr. Cameron, but it won’t be insignificant.

Someanalyst
Guest
Someanalyst
4 years 7 months ago

It could actually be quite significant because the “bubble-teams” Dave speculates will join the buyer pool are buying lower probabilities of revenue increases than “traditional” buyers. Consequently, these are the buyers for whom the perceived benefit of draft pick compensation would be highest.

Jordan
Guest
Jordan
4 years 7 months ago

This issue could be averted by moving the trade deadline back a bit.

Mr Punch
Guest
Mr Punch
4 years 7 months ago

This is not “adding a second wild-card” — it’s adding a play-in for the wild card slot, while at the same time diminishing the value of the wild card. Seems to me the effect will be to make teams less willing to sell, as you suggest, but without making them much more willing to buy. Overall, it’ll just make the trade deadline less important.

The change in free agent compensation, which will force low-budget teams to try harder to retain their players, will have far more effect, making it harder to “build good teams in November and December.” The two together, and some other CBA provisions, are significant parity moves.

wpDiscuz