Extensions: The Braves Take a Play from the Rays

Among the so-called Big Four sports in the United States — football, baseball, basketball, and hockey — the national pastime is unique in the wide payroll disparities between its franchises.  The NFL and NHL  have both a hard salary cap and a hard salary floor in place; there are fixed parameters in which each team’s payroll must fall.  The NBA lacks a hard cap, but it’s soft cap means that there are only a few exceptions that allow teams to exceed the cap, most of them designed to keep star players in their original cities.  By contrast, the MLB lacks any kind of salary cap, hard or soft.  While the MLB does have a luxury tax if a team exceeds a certain annual payroll (set at $189 million for the next three years), teams with excess resources (like the Yankees or the Dodgers) have no problem paying the tax and continuing to spend.  Thus in baseball, you can end up with two teams, one (the Yankees) with a payroll over $228 million, and another (the Astros) with a payroll that barely exceeds $22 million.  It would appear that baseball, with its wide payroll gaps, would stand no chance of achieving the on-field parity of a league like the NFL.

And yet, that really hasn’t proven to be the case.  As ESPN’s Jayson Stark argues every year, by almost every objective measure of parity — number of teams to make playoff appearances, number of World Series winners — baseball comes out on top.  How can teams like the Rays, with payrolls less than half the size of their division-rival Yankees and Red Sox, still manage to compete?  They have to be very smart.  If you are one of the teams with limited financial resources — limited by a small market or bad TV contract — it becomes a necessity to figure out which players can provide value while, due to their age or skill set, can be had cheaply.

The Atlanta Braves, thanks to one of the worst television deals in baseball, are one of those teams.  Their TV deal, a 20-year contract signed in 2007, pays them less than $20 million a season, and is said to be worth between $200 million and $400 million over the life of the deal.  By contrast, the Dodgers recently agreed to a 20-year TV contract with Time Warner Cable that will pay them $300 million dollars.  Not over the life of the contract.  Per year.  The Braves’ market, the 15th-largest in baseball, isn’t nearly big enough to overcome a TV deal that poor.  The Braves’ payroll has stagnated; it was roughly the same in 2013 ($90 million) as in 2000 ($86 million).  And with revenues elsewhere on the rise — the Braves’ payroll ranked 3rd in 2000, but slipped to 16th in 2013 — the Braves, who have enjoyed extraordinary success over the past two decades, will need to take cues from other successful small-market teams to continue competing.

So how have the Rays done it?  Of course, it has started with brilliant drafting, and a keen eye for talent.   The key pieces of the Rays’ 7 year run of success — Evan Longoria, Ben Zobrist, David Price, Matt Moore, James Shields, etc. — were either drafted by the Rays or acquired (in Zobrist’s case) before they had made an impact on the major league level.  But where the Rays’ real brilliance shows is in the way they make sure that their homegrown talent stays in Tampa at below-market rates.  With the exception of Price, all the players mentioned above signed extensions that have proven to be team-friendly (Longoria has done it twice, signing a 6 year, $17.5 million contract in 2008, then a 6 year, $100 million extension on top of that in 2012).  The players don’t sign these extensions out of the kindness of their heart; the Rays approach them early on in their careers, before the game has made them rich, and get them to trade the opportunity to break the bank later in their career for the certainty of financial security today.  Shields signed his deal (which gave the Rays three more years of team control) with less than two years of service time.  Moore’s deal, which gave the Rays two more years of team control, was signed after Moore had played less than a month in the MLB.  And Longoria signed his first extension with six days of major league experience under his belt.

This offseason, the Braves have gone on an extension binge, to some extent aping the strategy of the Rays.  Freddie Freeman, in his first year of arbitration eligibility, got an 8 year deal said to be worth $135 million.  Otherworldly closer Craig Kimbrel, also in his first year of arbitration, signed a 4-year deal, with a club option for a fifth year that could make the deal worth as much as $58.5 million.  And young starter Julio Teheran, with just one year of service time, signed a 6 year, $32.4 million deal with a $12 million option that could keep him in Atlanta through the 2020 season.

The Teheran extension is far and away the most team-friendly, with the Braves paying only $6 million a season until 2020 for someone who has the potential to be a top-flight major league starter.  But both the Kimbrel and Freeman deal have the potential to greatly benefit the team.  The Kimbrel deal is far and away the biggest given to a reliever who wasn’t a free agent.  But Kimbrel, with his incredible save and strikeout numbers, was due to make a killing in arbitration — his incredible statistics actually broke Matt Swartz’s arbitration model.  The deal gives the Braves’ cost certainty as well as two more years of team control at a rate that, if Kimbrel keeps producing the way he has been, will be far below market-value.

The Freeman deal has a far greater amount of guaranteed money, so it might be harder to see as a good deal for the team.  But Freeman broke out this year, posting a career-high 5.4 bWAR and finishing fifth in the MVP vote, and at the age of 23, seems to be a better candidate to improve than regress.  Assuming the cost of a marginal win is $5 million, Freeman needs only to average 3.4 bWAR over the life of the contract to be worthy of the money, and he has the potential to be worth far more than that.

By extending players who were multiple years away from free agency, the Braves have almost admitted their own constraints, recognizing they have to act more like a small-market team than one with unlimited resources.  But as the Rays have shown, those constraints do not have to adversely affect the product a team puts on the field.  As unlikely as it seems, in baseball, anything is possible.

Further Reading: The Raysification of the Atlanta Braves by Grant Brisbee

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