In football, teams have the ability to mark one of their players with the “Franchise” tag. One use of the franchise tag is to delay a player’s free agency for one season by paying him the average of the top five salaries at his position. Teams cannot apply the tag to the same player two seasons in a row.
Under the new CBA in baseball, teams have the ability to extend a “Qualifying Offer” to a free agent. The amount of the offer must be greater than or equal to the average of the top 125 contracts for the previous season. In 2012, that was $13.3 million. As you’re likely aware, if the player signs with another team, the original team receives a supplemental first-round pick in the draft. The signing team loses their first-round pick and the spending allocation associated with it.
The new system has left a few free agents out in the cold. For example, Kyle Lohse has reportedly received no offers.
So why mention football’s franchise tag? Because it has one feature that MLB could implement immediately with very little pain (except to this season’s batch of qualified free agents): it cannot be applied to the same player two seasons in a row. This makes a couple subtle, but important, changes to the incentive structure around qualifying offers.
First, it encourages all but the best players to accept the qualifying offer. Let’s say the average value of the surrendered draft pick plus spending allocation is $5 million. Teams should be willing to sign players for what they are worth minus that $5 million. In Lohse’s case, if teams believe he is worth a three-year, $40 million contract, they should be willing to offer $35 million over those three seasons. That’s less per season than the qualifying offer, so he might be inclined to accept, assuming he has an accurate understanding of his own value and is comfortable with the risk.
At the same time, it also encourages teams to use the qualifying offer only on elite talents and players they want to retain on a lucrative, yet cost-controlled, one-year contract. Using the example above, the Cardinals were able to comfortably offer the $13.3 million to Lohse because he announced he was looking for a four-year contract exceeding $50 million. The Cardinals would have struggled to find the budget to keep Lohse, so if the odds of him accepting the offer were higher, they probably would not have made it.
There is one glaring drawback to this rule proposal. Low-budget teams like the Rays and A’s are rarely willing to pay any player the average of the top 125 contracts. Similarly, teams like the Yankees and Dodgers can extend offers much more freely than the average team. If they accidentally end up with too much depth, that’s a good problem. However, this is a structural problem related to league inequality that already exists under the current rules.
With this proposal on the table for discussion, what are some other simple ideas the MLB and MLBPA should find easy to stomach?