The Myth of the Qualifying Offer

The qualifying-offer system has created considerable discussion this offseason. After Dexter Fowler took smaller deal than expected and Ian Desmond ended up receiving only about half the qualifying-offer amount, there has been talk about changing the system in the next Collective Bargaining Agreement. Dave Cameron discussed a sensible solution that could help the system. The issue has been around in the past, but the CBA discussions combined with the sheer number of qualifying offers extended have increased the exposure this year. While it’s pretty well acknowledged that the QO system is designed to dampen free-agent prices, it’s important to recognize what the system is not: a reward for drafting and developing young talent.

A record 20 players were extended qualifying offers this offseason — this after, 34 offers total were made over the first three years of the system. If nothing else, the sheer quantity of offers led to three acceptances — by Colby Rasmus, Matt Wieters, and Brett Anderson — the first year in which any player had accepted an offer.

In a dreamy view of Major League Baseball, the qualifying offer helps those teams which have experienced success both drafting and developing players, but which also lack the requisite funds to prevent homegrown players from departing by way of free agency. A benevolent qualifying-offer system gifts those teams with draft picks so that they can further develop talent to help their club.

Looking at the 54 players to whom qualifying offers have been made over the last four seasons, however, fails to reinforce the illusion above. By asking a series of questions, we can break through any myths about what the qualifying offer system is or is not.

Teams to Benefit from the Qualifying Offer
Teams Offers Extended
Cardinals, Dodgers, Red Sox, and Yankees 19
Bottom Half of Forbes list 15
Everyone Else 20

Of the 54 qualifying offers made over the past four years, only 15 came from teams in the bottom half of Forbes’ franchise value list. If the idea is to reward smaller markets and less valuable franchises, then the qualifying offer has failed to do so, as four of the top-six most valuable franchises account for more than one-third of the qualifying offers extended since the system was implemented.

So it doesn’t seem that small-market teams are benefiting. But that’s not the only way the qualifying-offer system could help. It could also allow clubs simply to receive some sort of compensation for losing players who’ve been developed in their system. Is the QO helping in this way, at all?

Players with Original Teams Receiving Qualifying Offer
Number %
With Original Team 13 24.1%
With Different Team 41 75.6%

Of the 54 players receiving qualifying offer, just 13 players were with the team that acquired the player originally. Even moving the date forward, to the team with which the player made his major-league debut, doesn’t change the numbers at all.

While players might not be with their original team, it’s possible that they have played for the same team for quite some time, leaving an organizational hole if the player left.

Years With the Team for Players Receiving Qualifying Offers
Years Number %
1 19 35.2%
2 11 20.4%
3+ 24 44.4%

Doesn’t appear to be the case. More than one-third of the players receiving the qualifying offer were with their current team for just one year. One-half of the players had been with their current team for two seasons or less. An argument could be made that the previous teams extracted some value out of the qualifying offer if they traded the player with just one year. Certainly, the acquiring team has factored in the ability to make a qualifying offer when considering the value of the trade. That said, of those 19 one-year players, just seven achieved free agency at six years, meaning that the teams had already extracted extra value on the rest of the players by receiving some years of free agency or that they had already been free agents previously. Of those seven players, five had already moved at least twice before free agency, leading to the next question.

How Many Organizations for Players Receiving Qualifying Offers
Orgs Number %
1 13 24.1%
2 13 24.1%
3 18 33.3%
4+ 10 18.5%

More than half of the players receiving qualifying offers had been been employed by at least three organizations prior to hitting free agency — i.e. twice the number of players who who’d played for just one team before hitting free agency. If these players have been in multiple organizations, it is possible these players are not even that young to begin with.

Service Time for Players Receiving Qualifying Offers
Years Number %
6 21 38.9%
7-8 17 31.5%
9+ 12 22.2%
Asian FA 4 7.4%

Not even 50% of the players receiving qualifying offers were even taking their first crack at free agency — or at least not without having received some sort of contract extension from their own team, which is a considerable benefit to the team already. We have 21 players who are six-year free agents and 13 players employed by the organization that developed them and gave them a shot in the majors. How often did those paths intersect for the ideal player for compensation?

One-Team Players Heading to Free Agency
Year Player Team
2015 Pablo Sandoval Giants
2016 Daniel Murphy Mets
2016 Jordan Zimmermann Nationals
2016 Ian Desmond Nationals
2016 Matt Wieters Orioles
2013 B.J. Upton Rays
2014 Jacoby Ellsbury Red Sox
2015 David Robertson Yankees

Out of 54 players, just eight were originally acquired by the team that extended the qualifying offer without an extension at some point beforehand. Of these players, Matt Wieters actually accepted the qualifying offer, Ian Desmond should have and neither Murphy’s not Robertson’s contracts were too onerous for their teams to re-sign them. Not making this list, Alex Gordon, Brian McCann, and Robinson Cano headed to free agency after eight years with the Royals, Braves, and Yankees, respectively, and the Braves traded Jason Heyward one year from free agency. If we add in the stipulation that the team should be from a small market, we end up with just a single contract that meets the dream scenario of the qualifying offer system.

Just once has the situation worked out so that a small-market team received compensation for a player it developed. Melvin Upton Jr. was drafted by the Rays and spent the first six years of his career with them before leaving in free agency. If the qualifying-offer system had been designed to compensate small-market teams for drafting and developing players who they wanted to keep but could not due to free agency, then the system has been an absolute disaster, successful just once out 54 uses. Of course, if the qualifying-offer system has been designed to lessen free-agent prices, then it has been quite successful.



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Craig Edwards can be found on twitter @craigjedwards. His writing also appears regularly at VivaElBirdos.com where he is an Editor.


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vbjd1111
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vbjd1111
2 months 18 days ago

“In a dreamy view of Major League Baseball, the qualifying offer helps those teams which have experienced success both drafting and developing players, but which also lack the requisite funds to prevent homegrown players from departing by way of free agency. A benevolent qualifying-offer system gifts those teams with draft picks so that they can further develop talent to help their club.”

Is this “dreamy view” something that MLB actually promoted as the reason for the QO? Or is it just a straw man created so the article can knock it down? Where did the so-called “myth” originate? Where was it propogated?

jdblue
Member
jdblue
2 months 13 days ago

Interesting read, and it even earned props from Tom Tango (http://tangotiger.com/index.php/site/article/qualifying-offer-system-was-meant-only-for-melvin-upton-jr).

But I’m not sure it matters who drafted the player or if the player was traded before the QO.
You wrote, “If the qualifying-offer system had been designed to compensate small-market teams for drafting and developing players who they wanted to keep but could not due to free agency…” Why would the QO be designed to compensate or reward teams for drafting and developing players? Drafting and developing players is its own reward because teams get to pay those players far less than they would be worth on the market.
I think the more appropriate claim is that the QO was supposedly designed to reward small-market teams for *losing* players they wanted to keep, regardless of who developed or drafted them. This change probably does not alter the results much, given that small-market teams gave only 15 of 54 QOs.

Nate
Member
Nate
2 months 18 days ago

So the QO system basically rewards teams that trade for rental players, ensuring they at least get a draft pick if the rental player leaves them. I was thinking if you required it be their first time as FA to extend a QO it might help, but I think that might still feed into my first point and not fix anything…

jianadaren
Member
jianadaren
2 months 18 days ago

Rentals are exempt.

A team can only make a QO if that player was with the team on opening day that year.

jfree
Member
jfree
2 months 18 days ago

Oh ok – so not hotel room rentals – but one-year-lease-with-security-deposit rentals.

GoNYGoNYGoGo
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GoNYGoNYGoGo
2 months 18 days ago

An interesting series of filters Craig. However, by dismissing players traded from your final analysis you miss a lot of the value of the QO. Because the draft choice has a value that the teams acquiring the player will receive, the team acquiring the player must “pay” for that value. As a result, teams receive more back trading a player who can be offered a QO than the same value player who cannot receive a QO. The teams that draft/develop the players receive that value when they trade the player, (think Rays) and it is therefore irrelevant who actually gets the comp pick.

Nate
Member
Nate
2 months 18 days ago

Interesting counterpoint to what I just said. Is there any way of confirming this? I am starting to spiral into a hole of hopeless confusion of how I feel about the QO system.

Richie
Member
Richie
2 months 18 days ago

Yup. This. Thisthisthisthisthisthisthis.

AutomatedTeller
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AutomatedTeller
2 months 18 days ago

How does the QO system compare against the system it replaced? I don’t think any analysis of the system is really fair until you see what it replaced.

In my mind, just because a fairly small set of players radically misjudged their market doesn’t mean that there’s an actual problem. It seems to me that, overall, salaries are still going up. I mean, it sucks for Ian Desmond, but then,he could have taken the QO and worked to rebuild his value.

heyfling
Member
heyfling
2 months 18 days ago

The old system was flawed. Any FA player who was in the top 25%(I believe) of players(similar to super 2 status) but it didn’t matter how long a player was on the team for. So teams could make waiver claims and trades for players who fit into this category. The Jays did this several times when they were out of contention before the waiver deadline. There wer no draft picks taken away and the players would then be divided into Compensation A(after first round and Compensation B(after second round).

j.gordon
Member
j.gordon
2 months 18 days ago

I don’t believe that’s true.

If you signed a Class A free agent you had to give up your first round pick to the team that lost the free agent.

This was later modified, so that the signing team lost their first round pick, but the losing team got a first round pick at the end of the first round.

heyfling
Member
heyfling
2 months 18 days ago

My bad, there was no loss for Class B players but either way, several teams still abused the system and that is why they changed to the QO system.

Chickensoup
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Member
Chickensoup
2 months 17 days ago

Much to Brewers fan’s dismay the old system was seemingly arbitrary. Mark Teixeira was considered a better player than CC Sabbathia so the Brewers got a later pick than the Angels after the Yankees signed both. That pick? Mike Trout. The destiny of my Milwaukee nine was potentially changed forever because of that (provided of course the Brewers picked him). The Brewers instead got Kentrail Davis……..

The new system isn’t any better. If you sign one guy it incentivizes more guys that year instead of spreading it out just like the international signing period. The QO rewards/hurts teams in a similar fashion as above based purely on sequencing of leaving players signing. An extreme example from this offseason could have been a single team signing Rasmus, then Kennedy, then Heyward in that order. One guy obviously better than the others but gives up a third round or comp pick which would be a disaster for the team he is leaving.

This is one reason the give up a pick to the other team part just has potential to be abused or is just kinda crappy. The other is obviously the significantly lower value of the players which theoretically helps small market teams but has the opposite effect.

Small market teams can really only offer 1 QO at a time, 2 if it’s guaranteed the player rejects. Teams like the Brewers and A’s absolutely cannot QO Rasmus or Kennedy (or both) while rich teams can freely. That kind of 1 year offer represents sometimes 20% of a budget, which if accepted can be a disaster. 2 is out of the question for small teams.

Then there is the getting FA parts. Sure they have lower values because of draft compensation, but small teams really have a hard time taking that chance unless you’re in the middle of a competitive window like the Royals. Teams who haven’t had recent success should basically never sign QO guys unless they are true superstars. It actually pushes quality players from small markets towards big markets who can afford to not draft. For Lohse the Brewers gave up the ability to draft JP Crawford or Aaron Judge for instance.

Something needs to change with QO because it really has the opposite effects than intended. Maybe it’s as simple as the old rating system giving a list of players even able to receive a QO, or tiered QO, or something else I haven’t thought of. All I do know is that it really hasn’t done much for the small teams and big market teams are taking advantage of it’s flaws

heyfling
Member
heyfling
2 months 18 days ago

I always thought the changing compensation picks to the qualifying offer system was to stop teams from abusing the old system. As a fan of the Blue Jays, I remember them abusing the old system so much that they would have 6-8 compensation picks almost every year. Pittsburgh was also a huge offender of the old system.

One of the main reason the QO system effects the bigger market teams is because they hold onto their premier talent for as long as possible, whereas teams like the Marlins, Rays and A’s will trade there big names if they are out of contention and/or long before their available for free agency, getting them more prospects then the QO would allow them to receive.

I do not believe you can say the QO system benefits bigger market teams unless you include the draft picks each team has given up due to signing a QO’d player and how many they actually gained. Remember, Ortiz got QO’d by Boston but then they signed him after he turned down the QO. Without those parts of the equation, it makes it looks like those 4 teams have gained 19 draft picks, but that is not necessarily the case.

niffoc4
Member
Member
niffoc4
2 months 18 days ago

Why not use an NFL-style system with compensation picks for teams that lose players that are subsequently signed to large contracts? Basing it on contract size allows the market to determine which teams lost significant players.

TKDC
Member
Member
TKDC
2 months 17 days ago

Because that would not suppress salaries.

Mike NMN
Member
Mike NMN
2 months 18 days ago

Good piece. Perhaps the answer is to do a variation on a 5/10 plan–you can offer a QO to a player who has either been developed in your system (which would mean a minimum of 5 years), or been with your team for at least three whole ones. This provides some additional freedom to the player, permits the lower market teams to offer if they choose on home grown players, and keeps teams from making last year of contract pre-season trades for merely an offer to make a QO

heyfling
Member
heyfling
2 months 18 days ago

I don’t think that is right either. Colby Rasmus for example got a QO because he was so valuable for Houston last year but he signed with them for only one season because he was trying to rebuild his value after a terrible season in Toronto during 2014. I am sure Colby still signs with Houston this offseason without a QO but the QO was mutually beneficial to both parties.

Mike NMN
Member
Mike NMN
2 months 18 days ago

I understand your point but wonder if we can design any system that will be fair to everyone. personally, I think greater injustices are probably done to older players, who really want a multi-year deal as possible, their last significant earnings, but are hobbled by the the QO because their team is willing to overpay for one year,so long as they don’t have a longer term commitment. If it were me, i’d dump the punitive aspect of the system. Give a compensatory pick, but don’t penalize the signing team.

Paul22
Member
Paul22
2 months 18 days ago

Outstanding piece.

The solution to the QO problem is SIMPLE. Just end the penalty to teams who sign a player who received a QO. Keep the compensation pick, even though as this article shows the team losing the player usually does not deserve it.

Dr.Rockzo
Member
Dr.Rockzo
2 months 18 days ago

That is kind of entirely the opposite of the point? This is saying that the compensation pick for losing the player is often going to teams who either didn’t develop or have not issue affording players in general. Leaving the compensation but removing the penalty simply does more to compound the idea that teams who did not develop the player are gaining more than those that did.

Comparing the teams that “made” the QO with the teams that are “penalized” by it can give a better understanding overall than simply looking at those QOs that are made. If the Yankees/redSox/Dodgers/Cardinals are making the most QOs, but also signing the most players who have them, then is the effect really this large?

SeaWolf
Member
SeaWolf
2 months 17 days ago

I don’t think the system needs to be revised because an extremely small fraction of players made horrible business decisions. As an example, Ian Desmond was offered (reportedly) $100M by the Nats. Every time a player turns down a QO they are making a business decision, a conscious choice, to take on the risk that the contact at the end of the rainbow may not be what was expected. The player, in concert with his professional advisors, are responsible for that choice and the choice to accept or reject offers while they are free agents. Maybe we should have some articles bemoaning the idiocy and greed of this small fraction of players rather than articles calling for changes to the system.

What about articles lauding the players who actually accepted QO’s this year? This was the first year in the QO history that offers were actually accepted. Perhaps we should be analyzing those decisions and congratulating those who realized that the fictional pot of gold at the end of the rainbow wasn’t worth the risk considering the guaranteed $15.8M they were holding.

Lastly, why the rise in QO’s? Perhaps its because management recognizes that SOME players and their advisors are risk takers and will choose to forego the QO $$ for a chance, no matter how rationally slim, at a bigger prize.

Yes, management may be recognizing the greed of SOME players and using that to their own advantage. Good for them!

TKDC
Member
Member
TKDC
2 months 17 days ago

There is a chance Brett Anderson is kicking himself right now considering (A) he hurt himself again and may not be that marketable in 2017, and (B) the Ian Kennedy deal.

abgb123
Member
abgb123
2 months 17 days ago

Yes how dare those players attempt to market themselves, how dare they turn down a generic binding agreement from a billionaire in an attempt to gain long term security.
Ian Desmond had a bad year after turning down his extension, but #1 we don’t know if that number is accurate, #2 we don’t how much may or may not have been deferred, #3 we also don’t if Ian really wanted to play for DC any longer, we are not privy to all the details therefore calling the decision horrible is short sighted and we also don’t know if it was a business decision or a personal one.

Bryon
Member
Bryon
2 months 17 days ago

As mentioned above, this system actually hurts small market teams and non-superstar free agents. The marginal benefit of a first round draft pick to a small market team is higher than large market teams as they cannot as easily buy talent. So the potential loss of a pick is prohibitive to small market teams, let alone the cost of a free agent. Then you have the players who are at the levels of Fowler or Gallardo who lose a relatively large share of salary due to the loss of a pick by the team signing them where players like Grienke or Heyward will not experience the same relative loss

Don Coffin
Member
Member
Don Coffin
2 months 16 days ago

I think you have done a splendid job of discovering exactly what the outcome of the qualifying offer system has been. I applaud that.

But: “In a dreamy view of Major League Baseball, the qualifying offer helps those teams which have experienced success both drafting and developing players, but which also lack the requisite funds to prevent homegrown players from departing by way of free agency. A benevolent qualifying-offer system gifts those teams with draft picks so that they can further develop talent to help their club.”

That was MLB’s PR position. The qualifying offer system–just like the reserve clause, like the amateur draft, like the various free-agent “compensation” (for teams losing free agents) systems–has one purpose: To reduce the compensation of players. And it has worked admirably–so far. Tinkering with it around the edges might–or might not–lead to improvements. But the fundamental point won’t change–it allows owners to keep more, and forces players to accept less, of the revenues being generated within MLB.

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