Players are losing $$$?

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T15D23
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Players are losing $$$?

Postby T15D23 » Sat Apr 06, 2019 4:32 pm

In the screwy world of baseball economics, even as the players win (hello, $100 million!), they’re losing
Ken Rosenthal

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Mike​ Trout, that’s​ the​ comparison​ Freddie Freeman​ likes to make. Freeman’s​ Braves​ teammate, left fielder​ Ronald Acuña Jr.,​ probably will​​ not be another Trout, who already is one of the all-time greats. But the way Freeman sees it, Acuña’s physical tools are similar to Trout’s. He might be Trout, which is about the highest compliment a player can receive.

And yet, after signing an eight-year, $100 million contract with two club options on Tuesday, Acuña left himself with virtually no chance of getting paid like Trout, even if he proves to be the player Freeman envisions.

It is difficult to fault Acuña, 21, for agreeing to the deal. It is difficult to fault almost any player who accepts life-changing money, even if his extension is club-friendly. But in the screwy world of baseball economics, even as the players win, they’re losing.

Many want no part of free agency. Some grabbing extensions seemingly have no confidence that the union and Major League Baseball will negotiate a better economic system in their upcoming labor talks. And for all the players’ brave talk, after an offseason in which they received nearly $2 billion in free-agent salaries and more than $2 billion in extensions, it still seems unlikely that they would muster the collective will to strike for the first time in more than two decades when the current labor agreement expires on Dec. 1, 2021.

The clubs keep outfoxing the union, as if playing at a faster speed, applying clamps in each avenue of spending, like hitters closing up holes in their swings. Not in every case, obviously. The Trout and Nolan Arenado extensions are among the deals that were quite favorable for the players, indicating that the sport’s biggest stars will still get paid. And even in some of the less-admirable deals, the union is not solely to blame for all that is happening — not when some below-market extensions are negotiated by lesser player agents who fear losing their clients to more powerful representatives, not when family members of players apply pressure to grab enticing guarantees. Still, it is the union’s job to fix the problem.

Extensions often delay the free agencies of top young players into the age 30-to-32 range, the point at which clubs are less inclined to pay big money. The deals also restrict those players from establishing benchmarks in the one area in which the union continues to make steady gains, salary arbitration, limiting future growth.

“We view it as a positive that players have the opportunity to make the decisions they are making regarding their futures,” union executive director Tony Clark told The Athletic when asked about the wave of recent extensions.

“Regardless of where players are on the service-time spectrum, we work to make sure those same players are educated about the decisions they are making, and then use the information to make the best decisions they can. With that said, free agency needs to remain a meaningful option for those who earn it.”

The education process, though, does not always work as the union intends. Agents are obligated to consult with the union on offers to pre-arbitration and arbitration-eligible players, and union officials then will counsel players and agents. But many players have already made up their mind to accept offers before ever speaking with union officials, convinced by their agents that the union is concerned more with collective goals than the players’ individual needs.

The union, meanwhile, remains concerned that not enough clubs are competing to the fullest, that teams are squeezing every last dollar out of their dealings with players, and that the current economic system does not sufficiently reward players in their primes. Many in management share the latter view, citing it as motivation to sign pre-arbitration players to extensions. But whether the two sides can agree on the framework of a new economic system — and extend the CBA in the process — remains an open question.

In August, the union hired a new lead negotiator, but one with no previous experience in baseball, Bruce Meyer. In November, the players extended Clark’s contract through 2022. Still, many players and agents remain skeptical Clark and Co. will secure better terms, considering that they negotiated the collective-bargaining agreement that helped create this troubled landscape.

Acuña might have taken his $100 million under any economic system. But in this system, there was no talking him out of it.

Acuña’s agent, Peter Greenberg of Gatemore Sports and Entertainment Worldwide (GSE), said talks with the Braves on an extension began about 18 months ago, well before Acuña made his major-league debut on April 25, 2018.

The Acuña camp kept rejecting the Braves’ overtures, but general manager Alex Anthopoulos, true to his relentless nature, kept making new proposals. The two sides re-engaged in spring training. The Braves continued to increase their offers.

“Once they got to the magic number of $100 million, it caught Ronald’s attention,” Greenberg said. “At that point, Ronald gave us the instruction to go ahead and get it done.”

Greenberg wanted a shorter term and no club options. Anthopoulos wanted as much long-term control as possible. There was talk in the Acuña camp of waiting another year, when Acuña, at one-plus years of service, could better justify asking for a deal closer to Trout’s first extension with the Angels as a two-plus player – six years, $144.5 million, in 2014. But even though Acuña was pushing back his free agency from his age 27 to age 31 season, he wanted the deal.

“We educated Ronald to what he conceivably was giving up, being able to become a very young free agent,” Greenberg said. “We did some projections of what his numbers could be if he followed this trajectory. Obviously, you can’t account for injuries and bad years. The way we figured it, as long as he stayed healthy, the risk of a bad year was not a big risk. But you never know. Players go into slumps. And the injury risk for every player is real.”

Acuña learned that firsthand last May 27 when he hurt his left knee completing his sprint to first on an infield single. The injury, initially feared to be season-ending, proved to be only a mild ACL sprain. Still, it sidelined Acuña for more than a month — and in Greenberg’s words, “showed Ronald his mortality.”

Other factors also weighed into Acuña’s decision. He was not some hotshot international free agent coming out of La Sabana, Venezuela, in 2014 — the Braves signed him for the relatively small sum of $100,000. His father, Ronald Sr., also had been an outfielder with major-league aspirations, but never advanced beyond Double A.

Still, Acuña Jr. was in position to say no to the long extension.

Earlier in his career, according to sources, he had received a loan, believed to be approaching $10 million, from RockFence Capital, a company that provides financial products to players that hedge against long-term performance risk.

If a player reaches the majors, he pays back the loan at a high-interest rate. If not, he owes the company nothing. The RockFence arrangement is strictly a loan, as opposed to other deals with companies that advance players money in exchange for a percentage of future earnings.

The extension will enable Acuña to pay back the loan faster, and perhaps on more favorable terms. Some players, however, use such third-party money as an alternative to club-friendly extensions, a buffer that enables them to explore arbitration and free agency. The amount they lose paying back the loan might be smaller than the amount they sacrifice in a below-market deal.

But there are also other layers to these decisions.

Many on the players’ side believe some teams circumvent the player and his agent and communicate directly with parents and other family members, particularly in the cases of Latin American players from humble backgrounds. The extent to which family pressure might have influenced Acuña is not known. But the effect of such pressure in some instances cannot be discounted – particularly when a team dangles a $100 million guarantee.

Under his new contract, Acuña will earn an average of $13.5 million in what would have been his four arbitration years, as opposed to the $13.3 million and $10.8 million Bryce Harper and Manny Machado earned, respectively, in three years of that process.

Such figures, however, are misleading.

The way Acuña’s deal is structured, he will earn the same $17 million salary in each of his final six years, covering what would have been his final two years of arbitration and first four years of free agency, including the two club options. The better comparison for what he might have achieved in arbitration is Arenado, who as the same type of Super Two player earned $60.5 million over four years — and that was after starting at $5 million, a relatively low number as a first-time eligible.

Arbitration salaries over the last decade have grown at a comparable rate to industry revenues, while free-agent salaries have not, according to the union. And Acuña, through the step-ladder nature of the process, could have piggy-backed off recent benchmarks — $10.85 million for Kris Bryant as a first-time eligible, $20 million for Mookie Betts as a second-time eligible — to surpass Arenado.

Not every pre-arbitration extension represents a step back. Alex Bregman (five years, $100 million) and Blake Snell (five years, $50 million) both negotiated their new deals without club options, a significant breakthrough in the view of those on the players’ side. And, like all players who agree to extensions, including Acuña, they might continue to excel and re-negotiate their current deals before they expire, following the paths of Trout and other stars.

The problem from the players’ perspective is that when young stars agree to extensions, they lose the opportunity to push the market for others in arbitration. Snell, in particular, cannot be faulted; he gave up only one free-agent year, and will earn a total of $7 million in what would have been his first year of arbitration, not far under Dallas Keuchel’s record $7.25 million for a first-time eligible.

Aaron Nola, Luis Severino and German Márquez, on the other hand, sacrificed chances to move the stagnant market for non-Cy Young first-time eligibles. Each agreed to one option in their four-year extensions, with Nola and Márquez giving up two would-be free-agent years, Severino one. The net values of the Nola and Márquez option years, once buyouts are subtracted, are $11.75 million and $12.25 million (the amount of Márquez’s option is not yet known). Ricky Nolasco, a much lesser pitcher, received a $12 million AAV as a free agent from 2014 to ’17.

The position-player market generally is more lucrative than the pitching market, but those on the players’ side view club options as a blight on both. Acuña’s deal includes two such options, extending the Braves’ control through 2028.

Assuming the Braves exercise both options, Acuña will hit the open market entering his age-31 season and coming off a $17 million salary. Harper — entering his age 26 season and coming off a $21.625 million salary — had a much better platform to free agency, and received $330 million.

Acuña, in the view of many on the players’ side, ended up placing a massive bet against himself. He was not a pitcher with a greater risk of injury. He was not Eloy Jiménez, who had yet to play in the majors when he signed his $43 million extension.

Acuña’s 1.028 OPS after the All-Star break last season was the fifth-best in the majors. In less than a full season, he established himself not just as the NL Rookie of the Year, but as one of the top players in the game.

Funny thing about the new deals: Not one of them includes provisions addressing the possibility that the players and owners might agree to reduce the wait for free agency eligibility from six years to five as part of a new economic landscape.

The clubs have refused to negotiate opt-outs or other such mechanisms into the contracts, perhaps because they want as much financial certainty — and as many players off the market — as possible before change takes place.

The players keep agreeing to extensions anyway. For those 30 or older – Chris Sale, Jacob deGrom, Paul Goldschmidt, Justin Verlander – the deals make complete sense, considering the high AAVs they are receiving and their lesser concerns about what might happen after 2021. But for younger players, and the union that represents them, the question is again one of anticipation, envisioning obstacles that might lie ahead.

The issue of teams engaged in a “race to the bottom” – Clark’s phrase – did not merely surface after the current CBA was agreed upon in December 2016. Some on the players’ side argue, not unreasonably, that the problem has expanded under the current deal. But the union, by not making competitive integrity a priority in the last round of collective bargaining, failed to protect its flank.

Some of the players’ other problems are also of their own making. Many on both sides believe the top remaining free agents, left-hander Dallas Keuchel and reliever Craig Kimbrel, are unsigned not because of a flaw in the system, but because their agents over-estimated their values. And when agents push to secure commissions from below-market extensions before rivals poach their clients, that’s an internal issue for the players, not the fault of the clubs. The union implemented agent regulations in the 1980s, but the Wild West culture of client stealing will persist unless the players and agents push for tougher rules.

The Acuña deal was not a product of such circumstances; Greenberg, whose past clients include Johan Santana and José Reyes, is not a small-time agent. His original company was purchased by The Legacy Agency, which subsequently was purchased by GSE after several of its agents left to start their own groups or join others. The breakup of Legacy has produced a flurry of lawsuits and counter-suits, but the discussion in Acuña’s camp about waiting another year to do a long-term deal indicates Greenberg was not under extra pressure to lock down commissions, which generally range from 1 to 5 percent.

Acuña had 100 million reasons to accept the Braves’ offer, even if $10 million of his guarantee was tied up in a buyout. But his deal also reflects the players’ lack of faith that the current system will adequately reward them.

Clark succeeded last month in forging an agreement on rules changes, getting baseball to back off its plan to implement a pitch clock while agreeing to discuss larger economic issues. Baseball, though, is not necessarily motivated to make major adjustments to a collectively bargained deal that is not even one-half complete.

The clubs can argue that the approximately $4 billion they just spent on free-agent deals and extensions is proof the system is not broken, an over-simplification, but one that many fans — and perhaps even some players — will fail to grasp. The players’ only real leverage is a strike, but one agent who spoke to The Athletic is not alone in his assessment that the union is “a house very much out of order,” one which has struggled to articulate a clear, coordinated vision of how to fix this system.

The education of Acuña about his importance in moving the market needed to happen long before the Braves offered him $100 million. But given the current state of affairs, Acuña might have made the same decision anyway.
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