The logic behind the extension of the Mookie Betts contract is very obvious to its directors. Betts exited arbitration due to winning $ 27 million this year, and with a 12-year, $ 365 million extension, the total price of his contract with the Dodgers reaches about $ 392 million in 13 years. That will make Betts, the 2018 AL MVP, horribly rich. “Keep a yacht in Saint-Tropez” rich. “Send your great-grandchildren to Harvard” wealthy. “Join a consortium to buy equipment after retiring” wealthy. The Dodgers, meanwhile, can employ Betts from now to the future to play teams from remote locations like Mars or Nashville. And doing so will cost just a hair over $ 30 million a year, a bargain for the second-best baseball player. Everyone goes home happy.
But fitting enough in a sport that often looks like a microeconomics case study occasionally interrupted by launch changes, this contract will have expansive effects far beyond its signatories. Betts has known this for a long time. For more than a decade, it has become standard practice for promising stars to sign below-market contract extensions with the team that wrote them. Betts is one of a group of elite players, with Gerrit Cole and JT Realmuto, who wanted to test the waters of free agents to re-establish the market and increase high-end wages throughout the game, a wish he made clear to the Red Sox traded him in February.
It turned out that it was no longer a sustainable course of action for Betts. The COVID-19 pandemic has already eliminated one season’s entry revenue and nearly two-thirds of one season’s television revenue, and MLB sponsors and media partners are also feeling the pressure. Sports economics is not what it was six months ago. So far, the extent of that damage is unclear, and likely will remain so: MLB and its franchise owners have frequently been obfuscated about their finances, and they have every incentive to voice their own concerns about economic insecurity to that they can reduce the wages of free agents. .
It is difficult to draw too many conclusions from the Betts extension because he is a unique player in a unique case. Not only did the Dodgers have incentives to stick with it after swapping a promising young regular (Alex Verdugo) and a top 100 prospect (Jeter Downs) to get the diminutive Tennessean, but whether the Dodgers had lost Betts in the Free agency, there is not a similar player that they could have taken out of the market just for money. Less talented and less successful players do not have that advantage when negotiating their own contracts. But it is the first major economic data point since the league’s transaction freeze was lifted four weeks ago, and it will likely be the most important contract signed in the coming years. So even though the tea leaves are imperfect, they should be consulted anyway.
The most notable thing about the Betts contract from the start is this: the total value starts with a 3 and not a 4, despite the deal lasting 12 years. Last spring Mike Trout signed a 12-year extension worth $ 426.5 million. Trout is a better player than Betts (perhaps the only better player than Betts), and he was the same age as Betts now, but he was also two years old from free agency to Betts.
The deal looks even worse for Betts compared to other recent free agents. (“Worse” is a relative term with nearly $ 400 million in guaranteed money, of course.) Gerrit Cole, who is two years older and a pitcher, signed for nine years and $ 324 million this offseason, about $ 5.6 million a year more than Betts In early 2019, Bryce Harper signed a 13-year, $ 330 million contract, while coming from a bad year in the most inhospitable free-agent climate in 30 years. Anthony Rendon, who is a great player but not close to Betts level, is making $ 4.6 million more per year than Betts, although it is worth mentioning that Rendon, who is two and a half years older than Betts, signed a long contract shorter (seven years) $ 147 million less overall.
Pulling out Betts’ $ 27 million salary this year, the additional 12 years will pay the Dodgers outfielder about $ 30.4 million a year, which is just the 12th highest average annual salary in MLB history, according to the Cot contracts. But while the season of losing revenue has clearly cost Betts a lot of money, things could have been much, much worse. Betts doesn’t make it to the eight-year, $ 260 million extension of Nolan Arenado on AAV, but it puts it at full value. Also clear is Christian Yelich’s nine-year, $ 215 million extension earlier this spring, and it should: Betts is one year younger and two years closer to free agency, and the gap between him and Yelich as a player is bigger than the gap between him and Trout.
This contract means that the high-level free agent market has been affected but has not completely collapsed, which has to be a relief for the main free agents of this low season: George Springer, Masahiro Tanaka, Marcuses Semien and Stroman, and Realmuto, whose extension talks have stalled despite Harper’s shouted exhortations. Given the owners’ rhetoric during negotiations over the resumption of the game, there was reason to fear that Betts would go into free agency and would not be facing better offers than the seven-year, $ 175 million deal that reportedly Manny Machado rejected the White Sox two years ago.
But it is now very clear that Trout’s extension has limited the market for the foreseeable future. While MLB has no salary cap or maximum individual salary, in the 21st century a long-term deal by the best player in baseball serves as the informal maximum salary. In December 2000, Alex Rodríguez accepted the terms of a $ 252 million, 10-year contract with the Texas Rangers, which made him the highest-paid player in baseball in terms of AAV and overall value. In 2007, he renegotiated his agreement to pay him $ 275 million for 10 more years.
It wasn’t until 2014 that Clayton Kershaw earned more than that per year in a multi-year deal, becoming the first $ 30 million player a year. A year later, Giancarlo Stanton expired A-Rod’s contract in full value, but in a 13-year deal that paid him less per season than A-Rod did in 2001. Trout’s extension, signed last year, really restored the market, but after taking inflation into account, he now makes $ 1 million a year less than A-Rod made in 2001.
And inflation hardly provides enough context for a 20-year career in which MLB’s annual income nearly tripled and franchise values increased in some cases by a factor of 10. Trout became the country’s first athlete. to sign a $ 400 million deal, but it would have been a bargain at twice the price.
With a full season of record earnings, and the gigantic paydays Cole, Rendon, and Stephen Strasburg collected last winter, there was reason to believe Betts could incite a bidding war and push superstar salaries to the $ range. 40 million a year for the first time. But with only the Dodgers to deal with and a terrifying and uncertain path to free agency, Betts could capture only about 85 percent of what Trout did.
That makes a certain degree of intuitive sense: Betts is almost as good as Trout, so you should be getting about the same payout. But in terms of age, track record and performance, there is no one to step off the line of free agents in the next three years that even reaches “almost.” Maybe if Cody Bellinger is still an MVP caliber player from now until he reaches free agency in 2023, he could run on Trout’s record-breaking contract, but until then, at least, individual free agent contracts will remain limited at $ 35 million a year and $ 400 million in total.
Probably lower, in fact, because if Betts is making just $ 30 million and changes per year, why should Springer expect to win more? Why should Francisco Lindor? And so the line repeats until Trout retreats or someone who is good enough to figure that figure out a little appears.
The baseball player compensation system is based on the premise that players who are paid less than the minimum wage for minors and a fraction of their value for the first half of their careers can earn a lot of money when they reach the free agency. That hasn’t been the case for quite some time, but Betts’ inability to reset the price of top talent, and the lukewarmness of the overall market in an ongoing economic crisis, have brought us to the point where it is impossible even pretend.
When the current CBA expires after next season, that must change. Money not spent on free agents is not recycled to younger players, international fan bonuses and spin spending have been limited, and the minimum wage has simply kept up with revenue growth since 2000 Whether that means pushing for a higher minimum wage or faster eligibility for free agency and arbitration, or some more aggressive and / or creative solution, is for the MLBPA to decide, but this system no longer works the way it was designed.
