Baseball's richest teams used to dominate free agency by simply throwing ungodly sums of money at the best available players.
Sure, teams can still go that route — see the Angels and the Dodgers — but rich clubs have discovered a subtler way to win the offseason scrum, thanks to new free agency rules implemented last year. By exploiting MLB's newly created "qualifying offer," such teams can guarantee that they either re-sign their star players, or, failing that, scoop up valuable extra draft picks to remain competitive well into the future.
Teams can extend a qualifying offer — a one-year deal worth the average of baseball's top 125 contracts from the previous season — only to free agents who spent the entire previous year with them. This year, that amounts to a $14.1 million commitment. If a player declines a qualifying offer and then signs elsewhere, his original team receives a compensation pick at the end of the first round in the next year's draft, while the team that signs him loses it's highest non-protected pick.
The tweak was supposed to make it easier for poorer teams to lock up their expiring talent, or to at least pick up compensation should those players walk. They were also supposed to punish the rich guys for poaching other teams' best players.
In practice, though, cash-flush teams over the last two seasons have shown how easily they can bend the rule to their advantage.
Of the 13 players who received qualifying offers this year, almost half (six) played for the deep-pocketed Yankees and Red Sox, while only one came from a club with a losing record, the Mariners. Likewise, of the nine players who received such offers last season only one came from a small-market team (the Rays) while three played for New York.
Cash-flush teams end up with more top-tier free agents because they have the money to lock up such players in the first place. Yet they're also more liable to extend qualifying offers once their players hit free agency because they can absorb those deals should the players accept — unlike teams on tight budgets.
Boston can afford to offer Stephen Drew $14.1 million for one year of work. The A's, on the other hand, paid nobody eight figures in 2013, while the Astros' biggest contract topped out at $1.2 million.
Remember, the qualifying offer gives teams a better shot to re-sign their free agents, since the threat of losing draft picks spooks other suitors into being less aggressive. SB Nation's Matt Sullivan last year estimated the average monetary cost in lost draft compensation at $7.73 million to a team that signs away a competitor's qualifying offer-protected free agent.
In effect, the added cost drives down the value of and competition for such free agents, with teams pricing the cost of lost draft picks into their contract math. It's why Michael Bourn didn't get the $100 million deal he wanted last year, and why many people expect Curtis Granderson won't be in high demand outside New York this offseason.
Already, then, rich teams have a built-in advantage: They can more freely afford to extend qualifying offers, and can then re-sign their players at a market-depressed cost.
When protected players walk, though, rich teams still come out ahead. In total, 22 players have received qualifying offers in the past two seasons; all 22 have turned them down.
Last year, six players who turned down qualifying offers signed with new teams, resulting in six compensation picks for their former clubs. All but one of those picks went to teams that made the playoffs in 2012; the other went to the Rays, who made it to the postseason this year.
The same pattern is likely to repeat this offseason, too. Of the 13 possible compensation picks, seven would go to teams that just made the playoffs — including three that could go to the reigning World Series champion Red Sox — while another three could go to baseball's richest team, the Yankees.
Notably, Boston will pick up compensation if Jacoby Ellsbury, as expected, signs elsewhere. The Red Sox can let him walk, too, because they already have a farm system replacement in Jackie Bradley Jr. — whom they drafted in 2011 with a compensation pick after Adrian Beltre signed with Texas, fresh off a one-year stay in Boston.
In short, the Red Sox could play a compensation pick in place of a departing free agent who will return them yet another compensation pick. It's the circle of life, with baseball's richest teams, as usual, at the top of the food chain.
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