Being a sports fan can come with a lot of emotional highs and lows. For some baseball lovers, a recent contract announcement may well have triggered the five stages of grief.
Ozzie Albies has signed what some fans – as well as players and executives – are calling the worst contract extension ever. The Atlanta Braves’ second baseman, who made the All-Star team last year in his first full season, agreed to a seven-year deal that will earn him $35 million from this season through 2025, working out to an average of $5 million per season. He also agreed to two years of club options, at $7 million each, which if exercised will keep him out of the free agent market until after age 30. Commentators and fans alike are baffled about the contract’s dollar amount in light of Albies’ skill and potential. Jon Taylor of Sports Illustrated said it bluntly: “Ozzie Albies got scammed.”
Based on how I took the news, the order of the classical five stages may have been scrambled a bit in observers’ reaction to Albies’ deal. First came depression over potential reasons that Albies might have sold himself short. Maybe he is sick or injured, though if so, neither is public knowledge. More dishearteningly, maybe Albies simply does not believe in his own potential, thinking that he’s been lucky up to this point but not trusting that his skill will carry him through. None of these possibilities give fans much to be cheerful about.
Bargaining might take the form of looking for a conspiracy. Observers could think it’s possible to justify the deal by assuming something shady is happening behind the scenes – perhaps Albies is receiving more money under the table, or other forms of compensation. Albies is originally from Curacao, and given the current state of our immigration system, the team promising work visas or other assistance to his family could be a tempting explanation of his accepting a lowball offer for those looking for something shady. There is, however, no evidence to suggest this. On the contrary, since the Braves have been involved in a major Justice Department probe about baseball’s international signing practices, they have every reason to toe the line.
Then comes anger, which seems to animate a lot of the responses to this deal. It is hard to imagine that Albies’ agent, David Meter, will have much of a career to look forward to after this deal and its high-profile criticism. Sports journalist Jeff Passan tweeted, “It’s typical that agents criticize competitors’ deals. But I’ve now heard from executives, players, analytics people, development side and scouts who are saying the same thing: The Ozzie Albies extension might be the worst contract ever for a player. And this is not hyperbole.”
Some observers may then circle back to denial. This may take the form of suggesting that MLB should step in somehow, perhaps to void the contract. But this will never happen. The commissioner essentially represents the team owners. Albies’ contract is an agreement between consenting parties, even if it is an objectively bad deal. As such, it is likely to stand, no matter how terrible people think it is.
Finally, some fans and insiders may make it all the way to acceptance. But this is hardly the peace indicated by the stages of grief; in this case, I think the acceptance is of the fact that the market for professional baseball players’ labor has become truly distorted. At this point, I have to assume a strike is coming once the most recent collective bargaining agreement for the sport expires in 2021.
To understand why Albies’ bad deal is an indicator of a coming strike, first it’s important to consider just how bad it is. One projection of Albies’ potential career suggests he may be forgoing more than $200 million over the life of his contract extension. It is also important to remember that not all of the $35 million will go into Albies’ pocket. Let’s assume that approximately 45% will come out off the top for taxes and his agent’s commission: $35 million becomes $19.25 million over seven years, or $2.75 million per year.
The “wins above replacement” (WAR) metric, which teams often use to project a player’s worth, makes the situation clearer. Essentially, WAR attempts to quantify an answer to the question: If a given player was injured and had to be replaced, how much value would the team lose? The metric is expressed in terms of wins the team could expect with the player as opposed to a generic minor leaguer. While it is not precise, WAR is often used in determining player compensation because it is a measure of overall value, combing offensive and defensive skill.
A WAR raised by 1 has typically been viewed as worth an additional $8 million to $10 million, though it can be worth even more in larger markets. Giancarlo Stanton, whose record-breaking 2014 contract I have written about in the past, posted a 4.0 WAR last year in his first year with the New York Yankees (though it was 7.9 the year previous in Miami). Albies’ WAR last year was 3.8. Stanton is making $26 million this year, as part of a $325 million deal over 13 years; call his annual payday $13 million, after taxes and commissions. So Stanton makes in about one and a half years what Albies will make over the next seven, even though their WAR value last year was nearly the same.
Mike Trout of the Los Angeles Angels, widely considered to be the best overall player in baseball, had a WAR of 10 last year. He recently signed a 12-year contract for $426.5 million, about $35 million per year. Trout will make slightly more this season than Albies will make over the next seven years combined. Is he two or three times as good as Albies, as their relative WAR metrics suggest? Probably. Is he seven times better than Albies, as their contracts suggest? No.
No one has anything good to say about Albies’ deal, as far as I have seen, at least in terms of its value. Some fans have defended his loyalty, framing the extension in terms of a deliberate sacrifice Albies made for the sake of the Braves as an organization. But even if Albies were making such a sacrifice, the commitment is not reciprocal. As far as I can tell, the contract he signed did not include a “no trade” clause. In fact, the better Albies plays, the more he will be worth to other teams, because of his cheap contract. He may have signed out of loyalty, but I would guess there’s a better than 50-50 chance the Braves will trade him before his contract ends.
Even with all of this context, it is hard to blame Albies in particular for wanting to secure his future in the sport’s current climate, even if it means selling himself short. And while his deal seems especially bad, he is not the only young player accepting less than he could potentially command on the free market.
In Palisades Hudson’s Sentinel newsletter, my colleagues Eric Meermann and Max Klein recently considered how an individual ballplayer might weigh a contract extension against holding out for free agency in terms of risk and reward. In those terms, Albies may well have signed for enough money to live comfortably. In fact, by that logic, he could have signed for even less and still set up his family financially for generations to come. But this calculation ignores what a player’s skill is actually worth.
All of this raises the question of why teams are generally offering stingier contracts to promising young players these days. Some analysts have made the argument that it’s a reflection of the way the game is changing. Maybe wins used to be worth $10 million each, but there was no fundamental reason for that number. The value of wins would go up each year, because growing revenues meant there was more money for everyone; wins were worth what teams would spend to get them. Today, teams have learned they don’t need to win in order to be profitable, given the lucrative nature of TV contracts and streaming rights deals. In turn, owners don’t have to pay players as much as they used to. If the goal is to maximize profits, rather than to win the championship each year, then team owners have little incentive to spend large amounts of money on players. While many teams have been offering smaller deals and contract extensions than in years past, Albies’ was a shot across the bow. It was an outlier, but it may not stay that way.
For another example of how things have changed in professional baseball, we can compare the Yankees’ revenue to its payroll over time. In 2004, the Yankees took in an estimated $264 million and spent 84.3% of it on payroll. That figure tapered off to 59.3% by 2008, when revenue grew to about $375 million. Shortly after, George Steinbrenner transferred day-to-day control of the team to his son, Hal, prior to George’s death in 2010. (For what it’s worth, George Steinbrenner seemed to care more about winning than profits; the Yankees’ last World Series win was in 2009.) The new Yankee Stadium opened in 2009, and revenues have continued to climb while payrolls have flatlined. In 2017, the most recent year of data available, the Yankees took in an estimated $619 million and spent 36.2% of that on player salaries.
I suspect Albies is the canary in the coal mine where the state of labor in baseball is concerned. At this point, I have to believe a strike will be the ultimate result. Unless players plan to roll over and accept lower offers indefinitely, they will need to fight to preserve their piece of the pie.
Posted by Paul Jacobs, CFP®, EA
Ozzie Albies. Photo by Wikimedia Commons user Thomson200.
Being a sports fan can come with a lot of emotional highs and lows. For some baseball lovers, a recent contract announcement may well have triggered the five stages of grief.
Ozzie Albies has signed what some fans – as well as players and executives – are calling the worst contract extension ever. The Atlanta Braves’ second baseman, who made the All-Star team last year in his first full season, agreed to a seven-year deal that will earn him $35 million from this season through 2025, working out to an average of $5 million per season. He also agreed to two years of club options, at $7 million each, which if exercised will keep him out of the free agent market until after age 30. Commentators and fans alike are baffled about the contract’s dollar amount in light of Albies’ skill and potential. Jon Taylor of Sports Illustrated said it bluntly: “Ozzie Albies got scammed.”
Based on how I took the news, the order of the classical five stages may have been scrambled a bit in observers’ reaction to Albies’ deal. First came depression over potential reasons that Albies might have sold himself short. Maybe he is sick or injured, though if so, neither is public knowledge. More dishearteningly, maybe Albies simply does not believe in his own potential, thinking that he’s been lucky up to this point but not trusting that his skill will carry him through. None of these possibilities give fans much to be cheerful about.
Bargaining might take the form of looking for a conspiracy. Observers could think it’s possible to justify the deal by assuming something shady is happening behind the scenes – perhaps Albies is receiving more money under the table, or other forms of compensation. Albies is originally from Curacao, and given the current state of our immigration system, the team promising work visas or other assistance to his family could be a tempting explanation of his accepting a lowball offer for those looking for something shady. There is, however, no evidence to suggest this. On the contrary, since the Braves have been involved in a major Justice Department probe about baseball’s international signing practices, they have every reason to toe the line.
Then comes anger, which seems to animate a lot of the responses to this deal. It is hard to imagine that Albies’ agent, David Meter, will have much of a career to look forward to after this deal and its high-profile criticism. Sports journalist Jeff Passan tweeted, “It’s typical that agents criticize competitors’ deals. But I’ve now heard from executives, players, analytics people, development side and scouts who are saying the same thing: The Ozzie Albies extension might be the worst contract ever for a player. And this is not hyperbole.”
Some observers may then circle back to denial. This may take the form of suggesting that MLB should step in somehow, perhaps to void the contract. But this will never happen. The commissioner essentially represents the team owners. Albies’ contract is an agreement between consenting parties, even if it is an objectively bad deal. As such, it is likely to stand, no matter how terrible people think it is.
Finally, some fans and insiders may make it all the way to acceptance. But this is hardly the peace indicated by the stages of grief; in this case, I think the acceptance is of the fact that the market for professional baseball players’ labor has become truly distorted. At this point, I have to assume a strike is coming once the most recent collective bargaining agreement for the sport expires in 2021.
To understand why Albies’ bad deal is an indicator of a coming strike, first it’s important to consider just how bad it is. One projection of Albies’ potential career suggests he may be forgoing more than $200 million over the life of his contract extension. It is also important to remember that not all of the $35 million will go into Albies’ pocket. Let’s assume that approximately 45% will come out off the top for taxes and his agent’s commission: $35 million becomes $19.25 million over seven years, or $2.75 million per year.
The “wins above replacement” (WAR) metric, which teams often use to project a player’s worth, makes the situation clearer. Essentially, WAR attempts to quantify an answer to the question: If a given player was injured and had to be replaced, how much value would the team lose? The metric is expressed in terms of wins the team could expect with the player as opposed to a generic minor leaguer. While it is not precise, WAR is often used in determining player compensation because it is a measure of overall value, combing offensive and defensive skill.
A WAR raised by 1 has typically been viewed as worth an additional $8 million to $10 million, though it can be worth even more in larger markets. Giancarlo Stanton, whose record-breaking 2014 contract I have written about in the past, posted a 4.0 WAR last year in his first year with the New York Yankees (though it was 7.9 the year previous in Miami). Albies’ WAR last year was 3.8. Stanton is making $26 million this year, as part of a $325 million deal over 13 years; call his annual payday $13 million, after taxes and commissions. So Stanton makes in about one and a half years what Albies will make over the next seven, even though their WAR value last year was nearly the same.
Mike Trout of the Los Angeles Angels, widely considered to be the best overall player in baseball, had a WAR of 10 last year. He recently signed a 12-year contract for $426.5 million, about $35 million per year. Trout will make slightly more this season than Albies will make over the next seven years combined. Is he two or three times as good as Albies, as their relative WAR metrics suggest? Probably. Is he seven times better than Albies, as their contracts suggest? No.
No one has anything good to say about Albies’ deal, as far as I have seen, at least in terms of its value. Some fans have defended his loyalty, framing the extension in terms of a deliberate sacrifice Albies made for the sake of the Braves as an organization. But even if Albies were making such a sacrifice, the commitment is not reciprocal. As far as I can tell, the contract he signed did not include a “no trade” clause. In fact, the better Albies plays, the more he will be worth to other teams, because of his cheap contract. He may have signed out of loyalty, but I would guess there’s a better than 50-50 chance the Braves will trade him before his contract ends.
Even with all of this context, it is hard to blame Albies in particular for wanting to secure his future in the sport’s current climate, even if it means selling himself short. And while his deal seems especially bad, he is not the only young player accepting less than he could potentially command on the free market.
In Palisades Hudson’s Sentinel newsletter, my colleagues Eric Meermann and Max Klein recently considered how an individual ballplayer might weigh a contract extension against holding out for free agency in terms of risk and reward. In those terms, Albies may well have signed for enough money to live comfortably. In fact, by that logic, he could have signed for even less and still set up his family financially for generations to come. But this calculation ignores what a player’s skill is actually worth.
All of this raises the question of why teams are generally offering stingier contracts to promising young players these days. Some analysts have made the argument that it’s a reflection of the way the game is changing. Maybe wins used to be worth $10 million each, but there was no fundamental reason for that number. The value of wins would go up each year, because growing revenues meant there was more money for everyone; wins were worth what teams would spend to get them. Today, teams have learned they don’t need to win in order to be profitable, given the lucrative nature of TV contracts and streaming rights deals. In turn, owners don’t have to pay players as much as they used to. If the goal is to maximize profits, rather than to win the championship each year, then team owners have little incentive to spend large amounts of money on players. While many teams have been offering smaller deals and contract extensions than in years past, Albies’ was a shot across the bow. It was an outlier, but it may not stay that way.
For another example of how things have changed in professional baseball, we can compare the Yankees’ revenue to its payroll over time. In 2004, the Yankees took in an estimated $264 million and spent 84.3% of it on payroll. That figure tapered off to 59.3% by 2008, when revenue grew to about $375 million. Shortly after, George Steinbrenner transferred day-to-day control of the team to his son, Hal, prior to George’s death in 2010. (For what it’s worth, George Steinbrenner seemed to care more about winning than profits; the Yankees’ last World Series win was in 2009.) The new Yankee Stadium opened in 2009, and revenues have continued to climb while payrolls have flatlined. In 2017, the most recent year of data available, the Yankees took in an estimated $619 million and spent 36.2% of that on player salaries.
I suspect Albies is the canary in the coal mine where the state of labor in baseball is concerned. At this point, I have to believe a strike will be the ultimate result. Unless players plan to roll over and accept lower offers indefinitely, they will need to fight to preserve their piece of the pie.
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