Free agency bidding changes for 2015

[Ben (Rays GM)]

These changes were all proposed before, but I only heard from five people in that thread. I really would prefer to hear from more people if I'm going to make changes like these, but honestly at this point unless people are really opposed to them I'm just gonna make them, so now's your last chance to dissent. I know it's long but I tried to shorten them somewhat to make them easier on the eyes. Please take the time to read and reply, even if it's just a "sounds good!"

First proposed change:

The rule that allows teams to sign international free agents for crazy high one-year deals and then cost control them from their second year will be changed for this offseason. Jose Abreu was signed for $48 million last season. Masahiro Tanaka was signed for $37 million. Both will cost $0.5 million in 2015 and will be under team control through 2019 at least. These are arguably now the two most valuable commodities in the game, and all it cost their teams was a year of patience. But it cost the league more than that - it's not good for the league when teams aren't as competitive as they should be. The A's haven't won a game this year, and the Phillies are only a game above .500 although they might have had a chance to win the NL East if they'd spread the cash around. I don't blame Craig or Jay at all for these contracts - they were both brilliant pieces of business and if I had been in their shoes I'd have done the exact same thing - instead, I blame the system. Given that other GMs will likely learn from their example and follow in their footsteps, making the problem even worse, that system needs to be changed.

I propose that instead of being able to cost-control a player like this after his contract runs out, you retain the option to keep the player through their sixth year but at the same annual salary that you paid for the other year(s) of his contract. Sign Abreu for one year, $15 million and you get an option for years 2 through 6 at the same salary. Still a very valuable contract, since you have the flexibility any year to decide to non-tender him. Or you could sign him for four years at around $12 million (discounts, baby!) and get him for a little less money but with less flexibility, as he'd be guaranteed through his fourth year and then you'd only get two options on him. This would apply to any free agent, not just international.

The rule would read thus: "If you sign a player who hasn't reached his sixth year, upon completion of the guaranteed portion of the contract you can choose each year up through his sixth year of service whether to keep the player at the annual price you signed him for or to non-tender him." Simple.

Second proposed change:

The $12 million hard maximum for one year contracts creates an unrealistic and unfair system in which teams end up playing a game of chicken for certain players. There are always certain guys that have no business getting signed to multi-year deals but whom lots of people want for one year. What ends up happening for these players is pretty predictable: team A bids $5 million, team B bids $6 million, team A bids $7 million, team B recognizes what's going to happen and jumps to $12 million and team A is out of luck. This happened last year with J.J. Hardy and Nelson Cruz, for example.

I propose that instead of having a hard cap at $12 million we have a flexible cap at $10 million. Once the bidding reaches one year, $10 million, you can still bid more, but realize you'll be paying a 50% penalty on every dollar above $10 million.

So, using a random example:

Babe Ruth reaches one year, $10 million. Fine. But somebody wants him for four years, $14 million. Now if I'm the original bidder, I can go to one year, $15 million, but it's gonna cost me extra - 50% of $5 million is $2.5 million, so he'll cost me $17.5 million. But I can still be outbid by a four year, $15 million offer (which, keep in mind, ends up being $12.7 per year after discounts), and would have to go to $16 million, which ends up becoming $19 million, after that.

The maximum salary for a two year contract would also be removed and replaced with a similar system (I propose 50% of every dollar spent above $20 million).

Third proposed change:

This one came about when somebody mentioned in the Chatango that it's kind of unrealistic that a guy like Marco Scutaro would take one-year, $7 million instead of three years, $6 million. Yes, the three-year offer would be discounted, but the point stands. I'm starting to question whether our discounts are enough. I propose a 10% discount for offering a second year, followed by 5% additional discount for offering the third year and 5% more for offering the fourth year. So a two year deal gets a 10% discount, a three year deal gets a 15% discount, and a four year deal gets a 20% discount.

[Jon (Astros GM)]

I'm fine with it. I think it improves our game a lot and doesn't allow a team with a bunch of space to blow it on one guy and then tank for the top pick the next season.

The middle option i don't have a problem with the change.

Third was something I felt strongly about. No one in their right mind would turn down a long term deal over a short term one for the same money. Increased discounts would help someone go more years knowing it would be somewhat cheaper.

[Chris (Former Cubs GM)]

I really like the first rule. Wasn't a fan of the bidding process.

I'll be honest. I read the 2nd rule twice and I got lost both times. I'll try again later.

Love the 3rd rule. The more discounts the better

[Ben (Rays GM)]

Second rule:

The way it is now: if the bidding reaches one year, $12 million, a one year deal is no longer an option. Kind of sucks to be the other guy bidding when your opponent just bids one year $12 million and freezes you out of the bidding.

The way it would be after this change: there's no maximum one year contract. Instead, you pay a premium whenever you sign a one year contract over $10 million. So if my opponent bids $10 million, I can bid $11 million but I'd end up paying $11.5 million (50% on every dollar over $10 million = 50% of $1 million = $0.5 million penalty). My opponent could then bid $12 million but would end up paying $13 million. I could bid $20 million, but would end up paying $25 million ($5 million penalty; 50% of $10 million). Of course, somebody else can jump in and bid four years $20 million, get a 20% discount (as per the third rule change), and only end up paying $16 million. It makes high value one-year contracts still difficult but no longer impossible.

[Jon (Astros GM)]

And would be less likely for someone to jump to 4 years for the discount. He still has to pay it when it's obvious he was only after a 1 year deal

[Nick (Orioles GM)]

1. I'm fine with this. Honestly, I am fine with the old way too. Either works for me.

2. I'm on board with this one.

3. I like this conceptually but my main concern is that I think the discounts on the very top end seem awfully high. If the World Series winner wants to keep his own potentially departing 6th year player then he would be able to offer a 4 year deal with a 40% discount. To me, that feels too high. Perhaps the playoff discounts could be reduced. I would be curious to hear why those playoff discounts exist at all.

[Deleted]

1. you mean Abreu isn't a free agent during the offseason...and the original team gets them for .5M next year...crap...I think the option plan at the signed cost is better.

2. I think that makes sense

3. 5% difference is only 1 mil for a 20 mil contract. having not gone thru free agency, I'm not sure how much that effects things, but it doesn't seem like much looking at the numbers.

[Ben (Rays GM)]

Aug 4, 2014 22:51:23 GMT -5 Nick (Orioles GM) said:

3. I like this conceptually but my main concern is that I think the discounts on the very top end seem awfully high. If the World Series winner wants to keep his own potentially departing 6th year player then he would be able to offer a 4 year deal with a 40% discount. To me, that feels too high. Perhaps the playoff discounts could be reduced. I would be curious to hear why those playoff discounts exist at all.

Playoff discounts exist because they're honestly the only real incentive (besides bragging rights) that we have for doing well in this league, which is free and has no prize money. Bragging rights might be enough but they're subjective in that they mean more to some people than others. It's nice to have something to play for. Playoff discounts are realistic in that they simulate both the financial reward of doing well (revenue generated) and free agents' preference to play for contenders.

As far as the issue of discounts piling up, yes, this is true, but don't forget that other teams would be able to get a 20% discount on that same player if they wanted to. A 40% discount vs. a 20% discount is the same difference as a 35% discount vs. a 15% discount.

[Max (Tigers GM)]

Now that I'm awake and can understand them, I'm good with these changes...

[angels]

I am okay with all the changes made

[Kevin (Guardians GM)]

Sounds good.

[Brian (Blue Jays GM)]

Question about the combination of proposals 1 and 2:

If you sign a guy for 1 year 15 mil, pay the 2.5mil penalty, and choose to renew the deal for another year, does the penalty apply for each year you renew the 1 year deal? Basically I'm trying to figure out if you're actually paying 17.5mil every year or 17.5mil in the first year and 15mil in each subsequent year you choose to renew.

[Ben (Rays GM)]

Aug 5, 2014 12:49:05 GMT -5 Brian (Blue Jays GM) said:

Question about the combination of proposals 1 and 2:

If you sign a guy for 1 year 15 mil, pay the 2.5mil penalty, and choose to renew the deal for another year, does the penalty apply for each year you renew the 1 year deal? Basically I'm trying to figure out if you're actually paying 17.5mil every year or 17.5mil in the first year and 15mil in each subsequent year you choose to renew.

Good question. I guess I'm sort of thinking of the penalty as the typical premium that it costs to sign a player to a one year deal, in which case you could argue that it should apply. However, we'd probably see very few one year deals on international free agents if we did it that way. Perhaps that's okay though.

[Billy (Cardinals GM)]

All these sound great to me. I'm on board.

[Ben (Rays GM)]

We will definitely be implementing numbers two and three. There's some dissent regarding number one. The rule for those IFAs will definitely be changed somehow, but the exact way we change it may be discussed further first.

[Zack (Mariners GM)]

I'm good with these. It might take a real-life example for me to fully grasp #2 but I think they are all good changes.

[Micah (White Sox GM)]

I am fine with the changes but here are my comments.

#1. I think this would be an improvement. Were there any other options considered for changing the way international free agents are handled? Make them a part of the draft? Just like any other free agent? I can't think of anything else so this proposal might be the best option.

#2. I understand why the change is necessary but I'm not sure why the cap was there for 1 year deals in the first place. Especially now that multi-year deals are discounted even more, isn't that the "penalty" for only offering a 1 year deal?

#3. A good change, I think this is closer to realistic. A definite incentive to taking on more risk and offering more years of a contract.

[Kevin (Rangers GM)]

I am good with either rules #1 0r #3. Number 3 looks like an good thought,but I like number one better! Those mine thoughts .

Cheers

[Tucker (Padres GM)]

So i think i'm the lone voice of disagreement to rule change #1. I think something needs to be changed, but i don't like the idea of taking a small influx of cost controlled talent that generally goes to rebuilding teams and making it more accessible to contenders.

Obviously its affecting a teams ability to compete, but with the advantages that playoff teams already have in FA I'm not a fan of changing the contract structures.

Just my two cents

[Chris (Former Cubs GM)]

That's a really good point by tucker.

[Deleted]

"This one came about when somebody mentioned in the Chatango that it's kind of unrealistic that a guy like Marco Scutaro would take one-year, $7 million instead of three years, $6 million. Yes, the three-year offer would be discounted, but the point stands. I'm starting to question whether our discounts are enough. I propose a 10% discount for offering a second year, followed by 5% additional discount for offering the third year and 5% more for offering the fourth year. So a two year deal gets a 10% discount, a three year deal gets a 15% discount, and a four year deal gets a 20% discount."

in my other league we just do it by multiplication
3 years at 4m beats 2 years at 5M
the discounts seem to make it unnecessarily complicated

[Micah (White Sox GM)]

Re: change #1 - I saw in the other thread someone suggested a middle ground on international free agents- in following years being able to offer 50% (or another percentage) of the original one year contract. So Abreu's first year at 48 million becomes an option at 24 million for each of the following 5 cost-controlled years. Is this an option?

[Zack (Mariners GM)]

I kind of like Sanders idea for rule change #3. Seems a little bit simpler. In the event of a tie (3 years/4M vs. 4 years/3M), would the player go to the team with the higher salary or more years?

[Nick (Orioles GM)]

On the extreme end, that idea would mean 2 yr/6.1m would beat 1yr/12m though right? So that could be an issue if I understand correctly

[Tucker (Padres GM)]

Sanders idea gives too much weight to 4 year deals

Even further to the extreme, I highly doubt anyone would take 4x$10 over 2 x$19,

[Ben (Rays GM)]

Aug 7, 2014 6:32:38 GMT -5 Micah (White Sox GM) said:

Re: change #1 - I saw in the other thread someone suggested a middle ground on international free agents- in following years being able to offer 50% (or another percentage) of the original one year contract. So Abreu's first year at 48 million becomes an option at 24 million for each of the following 5 cost-controlled years. Is this an option?

I really like this option, personally. I think it de-incentivizes paying extreme amounts for these players. Nobody's going to offer $48 million for an unknown commodity if the only reward for doing so is getting them on a still-absurd $24 million per year.
But it still rewards teams for taking risks on these players, something non-contending teams will be more willing to do than contending teams, since contending teams have other needs and can't afford to blow budget on unproven players.

Aug 7, 2014 12:21:48 GMT -5 Zack (Mariners GM) said:

I kind of like Sanders idea for rule change #3. Seems a little bit simpler. In the event of a tie (3 years/4M vs. 4 years/3M), would the player go to the team with the higher salary or more years?

It's a lot simpler, but creates a number of problems, which I think Nick and Tucker hit on - unrealistic (if someone in any job has the choice of earning $40 million for one year of work or a dollar more over four years, they're going to choose the one year option) and too much weight for four year deals (as a GM you're spending the same amount of money, so in most cases you're going to want to get the most years for your buck - and lessen the cap hit in the process). I don't think that our current system of discounts is a problem, I think it's been working well for us and not as complicated once you see it in action. I just think there are a couple of minor tweaks that could make it even better.

[Brian (Blue Jays GM)]

Aug 7, 2014 14:22:21 GMT -5 Ben (Rays GM) said:

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Aug 7, 2014 12:21:48 GMT -5 Zack (Mariners GM) said:

I kind of like Sanders idea for rule change #3. Seems a little bit simpler. In the event of a tie (3 years/4M vs. 4 years/3M), would the player go to the team with the higher salary or more years?

It's a lot simpler, but creates a number of problems, which I think Nick and Tucker hit on - unrealistic (if someone in any job has the choice of earning $40 million for one year of work or a dollar more over four years, they're going to choose the one year option) and too much weight for four year deals (as a GM you're spending the same amount of money, so in most cases you're going to want to get the most years for your buck - and lessen the cap hit in the process). I don't think that our current system of discounts is a problem, I think it's been working well for us and not as complicated once you see it in action. I just think there are a couple of minor tweaks that could make it even better.

I've seen another version of what Sanders proposed that is additive instead of multiplicative so an extra year is essentially equivalent in value to an extra million dollars in salary (so in this system 2 years 2 million and 1 year 3 million are equivalent offers), it cuts down the massive value that a 4 year contract holds in Sanders' system. I'm not necessarily advocating for the change, just throwing another option up for discussion.

[Ben (Rays GM)]

Aug 7, 2014 14:29:19 GMT -5 Brian (Blue Jays GM) said:

I've seen another version of what Sanders proposed that is additive instead of multiplicative so an extra year is essentially equivalent in value to an extra million dollars in salary (so in this system 2 years 2 million and 1 year 3 million are equivalent offers), it cuts down the massive value that a 4 year contract holds in Sanders' system. I'm not necessarily advocating for the change, just throwing another option up for discussion.

The problem is it skews contracts so that the lower the contract value, the more beneficial it is to offer longer years:
Four years, $4 million and two years, $6 million would be the same, saving you 33% per year if you go with the longer option.
Four years, $11 million and two years, $13 million would be the same, saving you about 15% (about the same as our discounts system would)
Four years, $30 million and two years, $32 million are the same, saving you just 6% for going with the longer option. Long contracts for high value players would lose most of their appeal.

I really believe the only way for this to work is through a percent system, like the one we have.

If we really needed to change (which I don't think we do), Chris shared with me a way another league that he's in does it, which I liked a lot:

Aug 4, 2014 18:58:26 GMT -5 Chris (Former Cubs GM) said:

Contract years add value based on the following: $1M = 1 point
1 Yr = 1X multiplier ---- 1 Yr @ 5 mil = 5 X 1 = 5 pts
2 Yr = 1.20X multiplier ---- 2 Yrs @ 5 mil = 5 X 1.20 = 6 pts
3 Yr = 1.40X mulitplier ---- 3 Yrs @ 5 mil = 5 X 1.40 = 7 pts
4 Yr = 1.60X multiplier ---- 4 Yrs @ 5 mil = 5 X 1.6= 8 pts
More Examples:
---- 1 yr @ 1 mil = 1 x 1 = 1 pt
---- 3 yrs @ 1 mil = 1 X 1.4= 1.4 pts
---- 1 yr @ 1.4 mil = 1.4 X 1 = 1.4 pts
---- 3 yrs @ 1.3 mil = 1.3 X 1.4 = 2.2pts
---- 1 yr @ 1.8 mil = 1.8 X 1 = 1.8 pts

This is a formula used in a few different pro board leagues I'm in. Not sure it would work here but just wanted you to have a look. It's a bit of math but seems fair.

Ultimately it achieves the same thing that our system does. A multiplier and a discount are essentially two versions of the same concept. The only difference is in his system the amount you bid is exactly what you pay, and the math only comes into play in order to determine who wins. In our system, the amount you bid determines who wins, and the math comes into play to determine what you actually pay. Benefit of his system: you know exactly what you're paying and there are no ugly surprises. Benefit of our system: you only need to worry about the math at the end of the bidding, you don't necessarily have to recalculate every time (and ugly surprises always make the contracts cheaper, so are they really that ugly?). Six of one, I say. I think if we'd been doing it his way from the start I might prefer it, but seeing as it would require a major rewriting of a bunch of rules, I don't see a need to change it.

[Chris (Former Cubs GM)]

The system that we've used in the few other leagues I'm in has run pretty smooth. Realistically though we haven't really had any problems with our system. I'm sure there are other examples than Scutaro but really Scutaro isn't killing anyone. I'm sure the team that offered the 3 year deal is pretty happy he didn't land him

[Ben (Rays GM)]

Aug 7, 2014 16:02:18 GMT -5 Chris (Former Cubs GM) said:

The system that we've used in the few other leagues I'm in has run pretty smooth. Realistically though we haven't really had any problems with our system. I'm sure there are other examples than Scutaro but really Scutaro isn't killing anyone. I'm sure the team that offered the 3 year deal is pretty happy he didn't land him

Scutaro would be laughing all the way to the bank.