The trend at the top of the MLB’s free agent class

The Aaron Hicks extension in early 2019 really was a sign of something new in baseball. Seven years and $70MM seemed a little on the long end for a player who had put up 6.9 fWAR in the previous two seasons, but had always carried injury concerns. It felt like you really wouldn’t want to give him more than five years guaranteed ... unless you wanted to reduce the total value of the contract on an AAV basis. Doing so would offer a little more flexibility year-to-year.

Five days after Hicks’ deal was official, the Phillies followed a similar model with Bryce Harper, at the time a free agent. His $330MM deal was a record at the time, smashing the previous mark made that offseason by Manny Machado. Yet Harper, year-to-year, makes less than the Padres’ third baseman by about $5 million, again because the signing team tacked on a couple years to the end of the contract.

We’ve seen a couple similar contracts over the succeeding seasons — DJ LeMahieu and Hyun-Jin Ryu come to mind — but this winter has really shown that teams have decided to suck up an extra year or two in order to keep that sweet, sweet AAV down a few million bucks for the purpose of peak luxury tax avoidance. Let’s look at the top-ranked free agents, from FanGraphs and MLB Trade Rumors, who have signed at time of writing:

Other than Clayton Kershaw and Justin Verlander, the other eight at the top of the class (so far) have all received more years than expected. This trend becomes particularly apparent when we look at a guy like Trea Turner — he was always going to land somewhere between $250-$300 million, and indeed, there’s not much difference between the $288MM FanGraphs projected and the $300MM he eventually agreed to.

On an AAV basis, which is what matters for competitive balance purposes, the projected MLBTR and FG deals come out at $33.5 and $32 million respectively, compared to the $27.27MM amount tat Turner will actually be charging the Phillies on the CBT front. That $5-$6 million a year matters, especially for teams like the Phillies that can be expected to hover around the first and second tax thresholds.

Even if you don’t necessarily care about the tax penalties, this kind of yearly flexibility becomes important when it’s time for marginal upgrades. If Turner was making $6MM more, or Jacob deGrom $10MM more, or Willson Contreras $3MM more, maybe that means their teams get gun-shy around the trade deadline, and it’s suddenly harder for management to justify that relief pickup the team really needs for the home stretch.

It’s almost a repudiation of what a lot of fans have been thinking about over the past several seasons — the high-AAV, short-term contract of the type that Trevor Bauer signed with the Dodgers. Although Los Angeles themselves seems like the type of organization to favor that approach, the rest of baseball seems content to eat a bad year or two, far discounted in the future, than take on too much risk in any single year.

That’s not to say that this is a perfect system, especially when it comes to loopholes. There was reporting that the Padres offered Aaron Judge more than $400MM but stretched over 14 years, in a move that would have triggered disciplinary action from the league. Other leagues have seen this kind of manipulation before, with perhaps the most famous example being the New Jersey Devils’ attempt in 2010 to ink Ilya Kovalchuk to a 17-year, $102MM contract extension — one that was quashed by the NHL.

I’m generally in favor of this trend. I can’t imagine that MLB players actually like the free agency process, and one signal that you’ve made it as a star involves teams willing to commit extra years. Making a mockery of the process, like a 20-year, $650 million contract to Shohei Ohtani, would turn me off this practice pretty quickly, though. As teams continue to focus on AAV and the related CBT penalties, the onus is on the league to regulate contracts better, allowing teams to walk the fine line between taking advantage of loopholes and outright disdain for the spirit of the market’s rules.