Maybe “Super Teams” Are Ruining the Offseason

It’s January, and the story of the offseason is that it’s actually lived up to its monicker. Outside of Giancarlo Stanton and Shohei Otani‘s respective moves to new teams essentially on the same day, MLB clubs have been in hibernation this winter. And so instead of evaluating trades or free-agent contracts, we’re left instead to ponder what is causing the inaction.

The potential culprits are numerous. If you’re inclined to see owners as evil profiteers, it’s easy to talk yourself into a collusion theory. Or this is the consequence of the Players Association accepting a luxury tax that might be acting as a de facto salary cap. Or maybe it’s just that every team has figured out that prices go down as spring training draws closer, so now everyone is trying the same wait-it-out game plan. Or maybe these particular free agents just aren’t that good. Or maybe it’s that next year’s free agents are too good.

Each of those theories seem to have some validity, and I think there’s probably a bit of most of that going on. But I think there’s also an explanation that makes everyone’s passivity perfectly rational: a lack of sufficient divisional competition to create the sort of pressure that justifies high-risk free-agent signings.

If you look at our current forecasts, there are only two divisions that don’t look like runaways right now. The AL East, which features both the Red Sox and Yankees with 91-win projections, and the NL Central, which has the 92-win Cubs four games ahead of the 88-win Cardinals, are two divisions that don’t have a decisive favorite at the moment. And not coincidentally, those are the divisions where we’re seeing some activity.

The Yankees have already made the offseason’s biggest move, taking most of Giancarlo Stanton’s contract in a trade with the Marlins. It wasn’t technically a free-agent signing, but given what they sent back, it acted as one, as they got a star player for not much more than a big chunk of cash. The Red Sox, meanwhile, are believed to have a five-year standing offer to J.D. Martinez, who is holding out for six years, but is very likely to end up in Boston for something like $30 million a year. The two behemoths of the AL East are loading up on sluggers, because right now, each needs to be afraid of the other.

In the NL Central, the Cubs haven’t yet made their big move, but they have spent pretty aggressively on depth pieces, signing Tyler Chatwood, Steve Cishek, Brandon Morrow, and Drew Smyly. The Rockies are the only other team to have signed four big-league free agents thus far this winter. And the Cubs almost certainly aren’t done, as they continue to be linked to the top free-agent starters on the market, including Yu Darvish. On Chicago’s north side, this hasn’t really been a slow offseason.

And that’s because the Cardinals aren’t surrendering the division just yet. St. Louis has only signed Luke Gregerson and Miles Mikolas to free-agent deals, but they made the winter’s second-biggest trade so far, landing Marcell Ozuna from the Marlins to bolster their outfield. They’ve also been linked to Josh Donaldson, Manny Machado, and basically any reliever who could pitch the ninth inning, so they probably have another few moves coming. Like the Cubs, they haven’t really been slow playing this winter, and they aren’t done yet.

If everyone had behaved to this point like the Red Sox, Yankees, Cubs, and Cardinals, we probably wouldn’t be talking about a slow-moving offseason. It’s really the other 26 teams — and particularly the 20 teams in the other four divisions — that have taken a wait-and-see approach, because no one is around to apply any real pressure.

In the AL Central, we have the Indians with an 11-game advantage over the Twins right now. Normally, a mid-revenue club that lost a guy like Carlos Santana, had Andrew Miller and Cody Allen on expiring contracts, and knows it can’t count on Corey Kluber and Carlos Carrasco forever would be heavily incentivized to push their chips to the middle of the table and take advantage of a championship-caliber club while they had the chance. But without a strong challenger for the division title, the Indians don’t really need to spend big this winter. They can head into camp with something like their current roster, evaluate their team in the first half, and then make the necessary adjustments in July or August if need be.

Remember, it wasn’t that long ago that J.D. Martinez was traded for a package of nothing prospects, and the Indians grabbed Jay Bruce for nothing more than salary in a waiver trade. If a team just recently experienced almost-free midseason upgrades and thinks those conditions might exist again and they have the benefit of a huge lead in their division heading into the season, why take on the risk of a long-term contract?

The same perfectly rational inertia could be applied to the Nationals (also projected at 11 games better than the Mets, their next-closest competitor), the Dodgers (+10 wins over Arizona), and the Astros (+9 wins over Anaheim), who would need a lot of things to go wrong to miss the playoffs in 2018. There’s some desire to upgrade now simply to stay ahead of the other “super teams” currently floating around, but again, if you think the prices at the deadline are going to be anything like last year’s prices, then there’s no real need to build your October roster over the winter. Just put a good regular-season team on the field and adjust accordingly when the sellers start dumping free agents to be.

These big divisional gaps have a depressing effect on the challengers’ motivation to upgrade, as well. The market relies on having enough second-tier clubs who are trying to climb the ladder to bid up players with short-term value, but we don’t have a single team projected for 85, 86, or 87 wins. After the Cardinals and Angels, it’s a big drop down to the Diamondbacks (84 wins), Blue Jays (83 wins), and Twins (82 wins), each of which is incentivized to stay in the Wild Card race, but probably not enough to throw $30 million a year at a risk-heavy free agent on a long-term contract.

Arizona, Colorado, Pittsburgh, and Toronto all have one of their best players headed for free agency at the end of the season as it is, so signing a big acquisition to an expensive contract might preclude them from keeping their own better player — or at least render it more difficult to make a pivot to building for the future this summer if they fall out of the race in the first half. For these clubs with low-80s win projections, a midseason sell-off is a real possibility if things go south, and you don’t necessarily want to be dumping talent right after spending $100-plus million on a guy who probably isn’t going to provide that much long-term value.

Instead, in that situation, everyone has decided to try to keep their options open. The Rockies have spent a bunch of money signing relievers, but if things go badly in the first half, they probably are thinking they might be able to trade guys like Wade Davis, Jake McGee, and Bryan Shaw, so these might not really be long-term commitments. The Blue Jays are picking up depth guys like Yangervis Solarte who can help raise their floor for the time being but also serve as a big-league third baseman for the second half if they end up having to trade Donaldson.

Instead of passivity, perhaps the spending on relievers and useful role players suggests that many teams are willing to make deals, but only deals that don’t force them down a certain path in 2018. Like an unattached swiper chatting with 15 potential hookups on Tinder, these sorta-contenders seem to want options, not commitment.

The unsigned guys? They’re the commitment types. They’re the ones to whom you give no-trade clauses, or enough money that the contract they sign effectively becomes a no-trade clause in itself. The best teams don’t really need to take these risks right now: in four of the six divisions, we don’t have a real contender for the throne. And the teams hanging around the fringes of the Wild Card race don’t see moving the needle a bit on getting to a one-game play-in contest as a big enough reward to take on the risk of one of these free agents with warts.

The CBT, the impending free agency of some of the game’s best players, and the recent bargains we saw at the trade deadline are likely real variables in this outcome as well. But mostly, I think this may just be about a legitimate lack of competition. MLB has six highly valuable division titles, and four of them are already all but spoken four. Right now, it looks pretty easy to handicap nine of the 10 potential playoff teams, or at least the heavy favorites for those spots heading into the season.

The lack of in-season competition may also be driving the lack of offseason competition. The good news for MLB is that this is very likely cyclical, and a few of these “super teams” will be getting worse in the future, while big-market up-and-comers will present a more serious threat to the dominant division reigns we’re seeing now. While long-lasting league parity remains a problem, this looks like it could be a one-year issue, as we’re going to have some intense bidding wars for talent next year.

And if enough of these bubble teams decide to just take the risk and push in, it might cause a chain reaction that makes this whole story go away anyway. For instance, if the Twins get Yu Darvish, then maybe the Blue Jays get Lorenzo Cain and Alex Cobb, which pressures the Red Sox to cave and give J.D. Martinez that sixth year, which gives the Astros enough incentive to trade for both Gerrit Cole and Andrew McCutchen, and then we have ourselves a real offseason.

Right now, a bunch of teams are comfortable. Too comfortable. It only takes a couple of dominos to fall to change that, and I wouldn’t be surprised if just a few moves caused a winter’s worth of transactions to happen real fast.

We hoped you liked reading Maybe “Super Teams” Are Ruining the Offseason by Dave Cameron!

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Dave is the Managing Editor of FanGraphs.

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snapper
Member
snapper

One additional factor. With the rise of huge, long-term, cable deals, and MLBAM, team revenue is less linked to on field success then ever before.

tz
Member
Member

And adding to this disconnect:

1. The disparity among cable deals across teams.
2. The legitimate concerns that teams would have about expiring cable deals not being able to be renewed at increasingly more lucrative terms.

Les Vegetables
Member
Les Vegetables

Don’t both of these deals have to tie back to viewership in some way though? And viewership is probably tied toward team success, which is driven by on field performance?

1grm
Member
1grm

TV deals are long enough in term that forecasting success (and therefore ad revenue) during middle and end stages of the deal would be difficult

SaltyWorley
Member
SaltyWorley

I suspect a major factor in the recent wave of cable deals is the ability of cable companies to distribute the cost over their entire subscriber base. Even if they sign a bad deal, they can charge every subscriber a few dollars a month to cover the difference. The real reckoning is going to come years down the road when the notion of a cable company is obsolete and all programming is a la carte. Then, it’ll only be the people who actually watch the RSN who pay for it, and then the cost per month goes up dramatically. It’s a completely unsustainable business model. Worked when folks had limited choice due to being locked in to cable providers. Breaks down completely when that model ceases to be relevant.

Travis L
Member
Member
Travis L

Doesn’t MLB.tv show us the way for the a la carte future, at least as it’s relevant to our interests (baseball)?

I agree the cable providers’ model breaks down, but I don’t think the future looks that different.

I wonder how the subscriptions for MLB.tv look in 10 years. I think the base sub money gets equally distributed. I wonder if the “watch your local area team” experiment they did, if that money goes directly to the team or distributed to all teams.

MLB may be under the impression that in 30 years, all the “TV” money will flow into them through MLB.tv, and they can equally distribute it to the teams.

rosen380
Member

Using the data in the links, I’d get something like 12-14% of cable/sat subscribers would have to pick up MLB.TV [at double the price to get in market games as well], for the teams to roughly break-even.

I’m not sure that is very likely given that few teams get more than like a 5-8 share for their games.

https://www.statista.com/statistics/742184/mlbtv-subscription-adults-usa/

https://www.fangraphs.com/blogs/estimated-tv-revenues-for-all-30-mlb-teams/

Jetsy Extrano
Member
Jetsy Extrano

Once all the money is direct to MLB, it will be fascinating to see how it goes. Should Miami get the same cut as the Yankees? F the Yankees always, but *that* hardly seems fair.

And if team revenue becomes even less sensitive to team performance than it is does, what does that do to the financial motivation to win?

Dave T
Member
Member
Dave T

As of a bit less than 2 years ago, just over half of teams (16) had some ownership of their respective RSN’s, so that’s a direct tie to viewership and advertising revenue. https://www.fangraphs.com/blogs/estimated-tv-revenues-for-all-30-mlb-teams/

Some other teams without RSN ownership have TV contracts up for renewal over the next few years, so that’s an incentive to keep viewership strong going into renewal negotiations. I’m not sure of the current status of extensions, but as of that April 2016 Fangraphs article it looks like another seven teams without RSN ownership (Tigers, Pirates, Brewers, Royals, Marlins, Rockies, and Rays) are due for local TV contract renewals no later than 2020.

Carriage revenue (monthly per subscriber from cable and satellite) is almost certainly more important to RSN’s than advertising, but the ads still matter. I haven’t seen a breakdown for RSN’s, but the estimate for ESPN as of three years ago was approximately a 65/35 split between carriage revenue and advertising revenue. And each incremental dollar of ad revenue drops essentially straight to the bottom line, though even a team with partial RSN ownership gets less than 100% of each incremental dollar of income, as its share should be in-line with its percent RSN ownership. And whether or not to think of carriage revenue as also partially “at risk” if there’s low viewership is complicated and specific to each RSN depending on the timing of contract renewals with major cable operators.

My TLDR summary: something like over 2/3 of teams have at least some revenue variability in their local TV deals, between RSN ownership and/or contract renewals upcoming over the next 2-3 years. That said, I do agree with the idea that these big, long-term local TV deals have a nice revenue floor in them for teams that are well-established in sizable markets, especially if the RSN’s are also well-established.

The Phillies are a great example of that dynamic: long-term local TV contract (reportedly through 2040) with NBC Sports Philadelphia, which also holds rights to the 76ers and Flyers and is therefore the clearly dominant RSN for that broadcast area. The Phillies have some revenue upside (and risk) because they own 25% of the RSN, but the variability should be far less than ticket revenue (Phillies’ attendance dropped to 1.9 million in 2017 from 3.6 million in 2012 after the team fully committed to a teardown/rebuild).

Hughes
Member
Member
Hughes

In the case of Toronto, the cable company owns the team so as a corporation they realize all the positives and negatives in the shortest time frame. TV advertising, cable subscriptions, tickets, beer/hotdogs. There’s been a pretty good boom the last few years for them.