Lindor trade confirms how hard it is to move big salaries in this market
When the Cubs traded Yu Darvish to the Padres, it was notable not just because the Cubs were shedding salary and the Padres were aggressively trying to build a championship team. It was, in our view, even more significant in what it might be telling us about the market: big contracts are almost impossible to move.
The trade of Francisco Lindor and Carlos Carrasco to the Mets has confirmed it, in our eyes. Our model sees it as a fair trade — with $41.6M going to New York with $40.1M going to Cleveland — but in a normal trade market, we might have expected a stronger return for Cleveland.
This is not a normal trade market.
In Darvish’s case, a frontline starter coming off a great year, who had finished 2nd in the Cy Young Award voting, with three years of control, would command a premium. His contract was large-ish, but not that large — he was owed $62M at the time of the trade over those three years. Virtually every team in baseball could use a frontline starter.
However, to move him, the Cubs had to a) accept an underpay; b) agree to take on a chunk of salary coming back (in the form of Zach Davies’ $10.6M); and c) agree to pay down $3M of Darvish’s salary (which is what he earned in 2020 performance incentives). Again, in a normal year, none of these three conditions would be necessary.
But this is not a normal year.
Every team except one (the Mets, because they have a new owner) lost significant money in 2020, and it appears they are going to lose more in 2021. Based on Evan Drellich’s report in The Athletic, it’s likely we’ll see a full season of baseball (that’s good!) but likely few, if any, fans in the stands until most of the population has been vaccinated (that’s bad). Teams now have to prepare for another year of lost gate revenue.
And that means most of them are cutting payroll. This is not news, we know — the relatively easy decisions were made earlier in the offseason when contract options were declined and many veterans were non-tendered.
But now we’re at the hard part. Teams with veteran players on fixed contracts would desperately love to get rid of those contracts — but there are few takers, because almost every other team is in the same boat. It’s especially hard for teams that depend highly on gate revenue as their primary source of income, and even more so for those that do not own their own regional sports network (RSN), since they receive a smaller portion of that TV revenue.
Yes, we know owners are billionaires, and the long-term franchise value of their teams tends to increase over time regardless of short-term blips. But it’s also clear that these owners can’t stand to lose money, and have therefore directed their front offices to cut costs as much as they reasonably can.
So what does this mean going forward for the trade market?
It means that large contracts — especially those that are underwater — are probably impossible to move. The Mets and Blue Jays (who lost less than most teams and have relatively little committed money) are the main two teams who have the financial wiggle room to take on money, which was proven by the Mets assuming roughly $33M in salary for Lindor and Carrasco for 2021.
Aside from those two teams, there are a few with limited resources — the Yankees, Dodgers, White Sox, and Angels come to mind — that can also play a bit in the free agent market. But since they only have so much money to spread around, they have to be careful how they do it — splurging on one player seems less likely for these teams.
Which players are most likely affected? Let’s break it down into categories.
Easy to trade: Good players, with positive value, making less than $10M
Examples include: Joe Musgrove, Luis Castillo
These guys have high surplus values because they’re significantly underpaid and so won’t have much impact on a team’s budget. (Of course they’ll cost a lot in prospect capital, though.)
Moderately tradeable: Good players, with positive value, making between $10M and $20M per year
Examples include: Sonny Gray, Javier Baez; Blake Snell and Carlos Carrasco were also in this group
These types of players are tradeable, because they don’t force the acquiring team too much into a budgetary corner. However, the return may be lighter than normal, and the trading team might have to take back some money.
Moderately difficult to trade: Good players, with positive value, making over $20M per year
Examples include: Kris Bryant (who’s right on the cusp here); Francisco Lindor was also in this category (which is why the return might seem light).
These still have a likelihood of being traded, but as we saw with Darvish, the return will likely be lighter than in a normal market, and the trading team might have to take back some money in return.
Difficult to trade: Good players, with negative value, making anything above $10M per year
Examples include: Nolan Arenado, Kevin Kiermaier, Mike Moustakas, Nicholas Castellanos, J.D. Martinez, Avisail Garcia
The trading team will have to kick in cash and/or positive player capital to offset the difference, and the return will probably be lighter than you’d otherwise expect.
Probably impossible to trade: Any negative-value player with low field value and a large contract
Examples include: Rougned Odor, Elvis Andrus, Khris Davis, Chris Davis
This is true even in a normal year, but especially true now.
Secondary effect No. 1: We may see a few package deals
Teams that have higher-salaried players that are either difficult or impossible to trade may find that the only way they can get them off the books is to attach them to a positive-value player. This is why the Reds have floated the idea of trading Luis Castillo, an extremely high-value frontline starter. They’d insist that if you want Castillo, you also take Moustakas or Castellanos. It will lessen the return, but accomplish their primary goal of cutting payroll.
The Rays may have to do this as well to move Kiermaier (if they’re desperate to do so — they may not be).
Secondary effect No. 2: Younger players are even more valuable
Say you manage a team that intends to compete in 2021. You’ve been told to cut costs (or at the very least, hold the line on budget), so you can’t play much, if at all, in the free agent market or in the trade market for these bigger contracts. What can you do? Your only option is to try to trade for a player who is productive — that is, one who will improve your team — but is cheap in salary terms. That type of player is young and either in his first arb year, his pre-arb years, or is a prospect expected to make an impact in the big leagues.
The problem is, there are a lot of other teams in this same boat — and especially if playoffs are expanded again, it increases the chances for about 20 MLB teams to compete. Because so many want the same players, anyone who fits this category could command an overpay. This is another reason why the Reds are floating Castillo — because they’d be selling at the peak of his value, and multiple teams covet him.
The market has been skewing younger for years. Prospects and pre-arb players were already being valued highly. But due to the unforeseen circumstances caused by the pandemic, this trend is likely to accelerate even more.
In other words: if you’re a GM trying to move a big contract, your options are very limited. Your best bet is to couple it with a younger, more attractive asset, and even then it’s a buyer’s market, so you won’t get back as much as you’d like. If you’re trading a younger player, it’s a seller’s market — have at it.