Eugenio Suarez had dutifully followed baseball’s reserve clause. He’d earned the minimum salary for parts of four major league seasons. 2018 would be his first chance to negotiate with a club and exercise his right to arbitration. Suarez and the Reds couldn’t reach agreement so they proceeded to a third-party hearing in February. The Reds infielder asked for $4.2m (remember that number), the Reds countered with $3.75m. The arbitrator sided with the Reds.

The Uncertain Labor Market

The financial future of Major League Baseball is bright with one exception. The 2018 class of free agents is struggling to get its share. For a variety of reasons and for the first time in decades, players may not take home a 50-50 split in league revenues.

Free agent contracts have been signed later than usual, for lower amounts than usual and cover shorter periods of time. That’s been true even for big-name players, like Yu Darvish, JD Martinez and Jake Arrieta.

What caused the free agency system to crack up? Take your pick. Owners are colluding. The union didn’t pay enough attention to salaries in the 2016 CBA. A third of the teams are tanking. Big stack teams are taking a breather, saving their money for Bryce Harper and Manny Machado. The $197 luxury tax cap is working. It’s one of those explanations, or all of them.

But sometimes a market adjustment is just a market adjustment.

Players, no longer turbocharged on steroids and amphetamines, are slamming into rapid decline in their early- to mid-30s. Old-school owners and GMs didn’t get the battleship turned around fast enough. They continued to pursue extravagant, headline-grabbing deals with famous veterans. Trophy signings were so burdensome to competitiveness the overall correlation between payroll spending and wins vanished.

Now, a new generation of younger general managers, armed with – and beholden to – data, know better. People making personnel decisions in baseball’s front offices grasp the poor average return from free agent contracts. Toss in a pinch of this or that from the exotics list above and labor market weakening turns into collapse.

We blinked at the headlines and now the reserve/arbitration/free agency model feels obsolete. The MLBPA will search for ways to capture more league revenue to restore the 50-50 split. If free agents can’t make what they used to, the union will advocate shifting money to players earlier in their careers. Shorten the reserve period. Start arbitration sooner. Abolish the reserve clause altogether. The next CBA will be negotiated in 2021. Look for big, uncomfortable change.

Until then, the free agent market will remain unsettled. That’s why the eight-year contract Eugenio Suarez signed last week was so noteworthy.

Suarez Comes To Cincinnati

After a disappointing 2014 season, the Detroit Tigers traded pitcher Rick Porcello to the Red Sox for Yoenis Cespedes. With the pending return of their slick-fielding shortstop Jose Iglesias, Eugenio Suarez was projected to fill a utility role for the Tigers. A return to AAA-Toledo loomed in his future. Eager to replace Porcello in the rotation, in December 2014 the Tigers traded Suarez and Jonathon Crawford, a right-handed pitching prospect, to the Reds for 33-year-old Alfredo Simon.

Rick Porcello went on to win a Cy Young for his new team. Alfredo Simon did not. And Eugenio Suarez joined Anthony DeSclafani that day as the first players acquired in the Cincinnati Reds rebuild.

Suarez began 2015 at AAA-Louisville. But in June, Zack Cozart suffered a season-ending knee injury, tearing both his ACL and LCL with an awkward lunge running to first base. Suarez made his first appearance for the Reds the next day, June 11. He played shortstop for 97 games, the remainder of 2015. In 2016, Suarez switched to third base where he’s lined up the last two seasons.

Breakout 2017

After fits and starts his first two years with the Reds, Eugenio Suarez’s performance hit lightspeed during the 2017 season. He made concrete, repeatable improvements in the batter’s box and at third base. (Read posts by Matt Habel and Ashley Davis reviewing Suarez’s 2017 season, and Chad’s on-the-nose prognostication more than a year ago.)

Suarez (and infield-mate Zack Cozart) turned greater plate discipline into more run creation. Suarez increased his walk rate from 4.3% (2015), to 8.1% (2016) to 13.3% (2017). That was 17th best in the major leagues.

Suarez also showed improvement in swings at pitches outside the strike zone. Suarez’s O-Swing% fell from 28.1% (2016) to 25.3% (2017). The latter was 28th best in the majors and second best on the Reds. His overall swing rate fell from 45% to 42%.

In contrast to his earned reputation in Detroit, Eugenio Suarez has become one of the most patient hitters in the league. The result was a surge in his run creation from 94 (6 percent below league average 100) to 117. Waiting for better pitches to hit helped Suarez’s isolated power jump from .163 to .200, well above the league average of .171.

Even casual fans could see that Suarez became a much better third baseman in 2017. Fancy defensive metrics (UZR, DRS, etc.) back that up across the board.

Eugenio Suarez Gets Paid

The contract extension agreed to by the Reds and Eugenio Suarez last week spans eight years. It covers his three arbitration seasons (2018-20) and a surprising four years (2021-24) of free agency. The deal includes a team option for an eighth year in 2025. Suarez is 26. He’ll finish 2024 at age 33.

For the next three seasons, Suarez will earn about what he would have made in arbitration, assuming he’d stayed healthy. He’ll make $4.5m this year, including a $2m signing bonus (I said to remember that number); $7.3m in 2019; and $9.5m in 2020. Players make less in arbitration than they do in free agency because arbitrators base awards on salaries of players with comparable service time, not mainly performance. Since players have less negotiating leverage in arbitration compared to free agency, salaries are lower.

From 2021-2024, Suarez will make $10.8m, $11.3m, $11.3m and $11.3m. He sold his free agency years for about $11m each. When you add his $2m buyout at the end, the total guaranteed amount is $66m. The 2025 club option year is for $15m, net $13m considering the buyout. (Read posts by Jordan Barhorst and our panel of obsessed experts about signing Suarez to an extension.)

The Smart of the Deal

To analyze the equities of the Suarez extension, we first need to estimate how much value Eugenio Suarez provides the Reds. This includes his contribution in batting, base running and defense, translated into the common unit of runs, both created and prevented.

Whether you call the statistic WAR or PEACE (player evaluation across categories, eh), the task of devising a single, all-inclusive number is unavoidable.

What’s the alternative? Holding your hands out to both sides to see which is heavier is no longer considered an acceptable front office procedure.

So what level WAR player is Eugenio Suarez? If you average calculations for his 2017 season – FanGraphs (3.7), Baseball-Reference (4.1) and Baseball Prospectus (3.7) you get about 3.8 WAR. That represented a jump from 1.8 WAR in 2016 and 0.8 WAR in 2015.

What will Suarez produce in 2018 and beyond? You could make a case that at age 26+ he’s still got room to grow. After all, Joey Votto has had three great seasons after he turned 30. Zack Cozart became a 5 WAR player at age 32. His best before had been half that.

On the other hand, players can regress or get hit by injuries. Devin Mesoraco was a 4.5 WAR player in 2014 and hasn’t been above 0.5 WAR since. Todd Frazier, the Reds third baseman before Suarez, posted a 4.5 WAR season in 2015 and dropped to 2.5 WAR in 2016.

Where do those conflicting examples leave us in projecting Eugenio Suarez?

With averages. Data indicates that players – on average – decline by 10 percent per year up to age 30 and then 15 percent per year from ages 31-35.

Recent research by Matt Swartz puts the dollar-cost of one WAR in the 2017 free agent market at $10.5m. That dollar amount has been growing by 8% per year. That seems implausible, but when we analyzed contracts in 2015, the number was 7% and that turned out to be conservative.

Steady growth in free agent salaries, that is, until this year. We don’t have final numbers for the 2018 class, but there is good reason to believe that trend may not continue. Luckily, we have a chart that breaks down the Suarez extension with various possible WAR costs.

The chart runs the Suarez value experiment under three different scenarios about the cost of WAR: (a) that the collapse in free agency causes it to fall to $9.5m, (b) that a stagnating free agency market remains steady at $10.5m and (c) that the free agent market rebounds and continues to grow at an 8% inflation rate.

Interests Align

The chart shows just how team favorable these deals are. Keep in mind that the massive value Suarez generates in the first three years (2018-20) is not a net gain for the new extension. He’d have been paid and produced those amounts under arbitration.

The bought-out free agent years are what matter. Suarez will be paid about $45m in his four free agent years (2021-24) and production averages say he’ll produce about $89m in value. That’s a gain of $50m relative to the Reds shopping for that production in the free agent market. Of course, it might also end up $40m more expensive than if the Reds could find that from a young player. After all, there was a chart like this for Devin Mesoraco.

The Reds signed a similar deal with Johnny Cueto except for a shorter duration. Cueto played three years for league minimum (2008-10) then signed a 4-year contract with a club fifth-year option. The extension with the option took on two of Cueto’s free agency years. The Reds paid Cueto $10m in 2014 and the pitcher produced about $50m in value.

It’s plain to see why front offices are attracted to these contracts. But why do players sign such team-friendly deals?

That’s easy: Guaranteed multi-generational wealth for their families. $66m should be enough for Suarez. It would be for most of us. Sure, $90-100m would be better, but having that eight-figure guarantee makes a life-changing difference. Players in his situation happily trade maximizing return for massive economic security and well-being.

Club and player interests fall neatly in lockstep. Front offices get budget certainty and save money on the free agent years. They end up with familiar players in their productive 20s instead of trolling free agent pools for unknown thirtysomethings. The challenge for clubs is selecting good players and avoiding injuries.

Eugenio Suarez’s contract could be a boon or bust for the Reds, depending on his health and productivity. We won’t know for several years. To judge it now, all we can do is look at averages and likely outcomes.

Fast-Forward the Rebuild?

To some, Eugenio Suarez selling his lucrative free agent seasons for $11m is pennies-on-the-dollar ridiculous. Giving up 4-5 years of free agency is indeed, a hefty stretch.

Did current events play a role? Possibly.

In a heartbeat, free agency has gone from “can’t wait to get there” to scary. Jeff Sullivan analyzed the Suarez contract from the perspective of a player staring into the abyss of the current free agent market. Sullivan rightly notes that avoiding the uncertainty of free agency looks considerably more attractive than it did six months ago.

Suarez saw 3B Mike Moustakas (2 WAR player) sign for one year and $6.5m. He saw 3B Todd Frazier (3 WAR player) sign for $17m for two years. He sees Yunel Escobar, Jhonny Peralta, Jose Bautista, Jayson Werth, Melky Cabrera and Andre Ethier sitting unemployed. Maybe that’s why Eugenio Suarez signed such a long deal.

That’s the player’s view. What about the team’s perspective of this market?

In theory, stagnation of the free agent pool should lure in teams like the Reds to bargain hunt. If a player finds the prospect of making a deal in free agency unnerving, shouldn’t a general manager be more confident striding in?

Not necessarily. The current situation is win-win for major league front offices. Just as a falling tide lowers all boats, a weaker labor market makes players cheaper at every interface. It drives Eugenio Suarez to sign a cheaper extension and it compels free agent Todd Frazier to accept less money and fewer years.

Win-win for the employer.

Here’s a bit of first-class hindsight. Suppose the Reds had known a year ago that the 2018 free agent market would crater. Would they (could they) have pushed fast-forward on the rebuild? Imagine them being in the right place to make the aggressive moves the Brewers pulled off this winter. Putting together a better offer for Christian Yelich, signing Lorenzo Cain to play centerfield, trading for or signing a front line starting pitcher … the mind of a fan boggles.

Of course, that’s rank counterfactual. The weak labor market dawned on this and all the other front offices too late for them to meaningfully change plans this offseason.

But hey, they did sign Eugenio Suarez to a breathtaking contract extension, lasting through 2025. How big of a deal?

That Joey Votto guy, he’s signed through 2024.

22 Responses

  1. big5ed

    The biggest thing in my view was that the owners/GMs/analytics staffs finally (finally) figured out that giving high-dollar long-term contracts to 28-32 year-old guys is usually a terrible bet. Jacoby Ellsbury, Shin-Soo Choo, Pablo Sandoval (fatter than he was old), Alex Gordon, Matt Kemp, Chris Davis, Troy Tulowitzki, David Wright, and Exhibit A, Albert Pujols. And that doesn’t even include the pitchers, whose injury potential is much higher.

    Another factor with Suarez had to have been the situation in Venezuela. Getting the guaranteed $66 million probably looked a lot better to him than hoping to get $115 million down the road. A Bryce Harper or Carlos Correa can take that risk, but Suarez probably made a wise move for his family.

    • vicferrari

      not sure I get the point, without looking up I thought a lot of the players specifically exhibit A had great seasons as 28-32 yo. Did you mean beyond 29-32?

  2. Jason Linden

    The next round of labor negotiations could really be a mess. Regardless of how “smart” the owners are being here (and I’m skeptical on that point, too many players who could really, really help teams went too long unsigned, which makes it feel an awful lot like collusion), this free agent market, which occurs at a time when the game is making more money than ever is going to leave a mark for the players.

    I’d expect big changes and/or a lengthy strike when the next CBA comes up and it will have it’s roots in what happened this off season.

    One of the big problems is that because of revenue sharing and the various MLB ventures that benefit all teams, winning isn’t as heavily incentivized as it once was. Instead of 30 owners competing with each other, it’s now more like 30 share holders working together to maximize their profits. Good for the bottom line, sure, but bad for baseball because there are many teams now who aren’t fielding the best team they could afford to field because it improves their profit margins to field a lesser team. That’s not good for the game at all.

    • Dave Roemerman

      I agree that the owners or, more accurately, the GMs, aren’t necessarily smarter (though evidence says many are). However, collusion is unlikely. From a legal perspective, collusion requires intent, an actual agreement between two or more parties and, according to Black’s and the Latin/French origins, must be a secretive agreement.

      If 30 teams simply decide it’s a bad idea to sign any and all free agents, that’s bad for the players and the market and fans and yada yada yada – it’s NOT collusion. They would have to work together (collude) to avoid the signings or substantially reduce them.

      If I’m a GM and I see that no one else is signing guys and I decide to wait it out, I’m not colluding. I’m participating in a depressed market and maybe taking the chance I miss out on a guy that a rival signs.

      On the flip side, tanking to move up in the draft is not a very good idea, at least in baseball. Doug Gray wrote a really nice article on it that was cited on here somewhere the other day (Steve?). It was on his site but basically showed that drafting at the top of a round isn’t really that big an advantage – the #27 pick is maybe less likely than the #1 overall to be a future star but, all things considered, there are hits and misses all over the place and a good draft strategy and player development both greatly outweigh picking higher. So, in short, I think teams are just looking to spend wisely and hope their homegrown talent works out because it’s very, very, very hard to “buy a ring” these days.

      • Dave Roemerman

        Plenty have made the argument for tanking, noticeably saying how the Astros and Cubs rebuilt through the draft. It’s been widely attributed as a reason (too many teams tanking) for the chilled free agent market. Doug’s article highlighted how that’s not a good strategy and that the Astros/Cubs/et al. were built through more than high draft picks. Further, picking higher didn’t aid them that much (Kris Bryant and Carlos Correa working out with high picks did, but see Chris Gruler as a bad example).

        The point to the post was the there’s likely little or no actual collusion, a secret pact between owners to depress prices. It looks collusive and, arguably, is market manipulation (not banned in baseball – this isn’t the NYSE), but it’s not collusive.

  3. Dave Roemerman

    Really great article Steve; thanks for the read. I may steal your PEACE stat, too, haha. And, while there was indeed a similar chart for Mesoraco (and probably Bailey), this one looks awfully good. Throw in Suarez’s improvements in pitch selection and he may be one of the few guys who doesn’t just decline (new regression curve) but, instead, peaks at 27 or so (old one). Good news and good way to read the details on it.

    • Dave Roemerman

      I’m okay with that – it’s part of what makes the Athletic great and if you took your sweet time to write more pieces like this, I doubt anyone would complain about the word count. I can only speak for myself but, judging by the comments, plenty of people who read this agree with me.

  4. Alex

    Reds can thank the Mike Moustakas disaster authored by Scott Boras for getting Suarez cheap.

    • big5ed

      Moustakas is 29, and has a career .305 OBP, career OPS of .730, and a career OPS+ of 96. It was inane to believe a modern analytics-inclined team, which they now all are, would give him the contract for which he and Boras were asking. I can’t believe the Royals made the qualifying offer, but it worked out for them.

      I do expect the “qualifying offer” clause to be re-negotiated if not scrapped in the next CBA, because it handcuffs veteran free agents.

      • big5ed

        I think the qualifying offer did have an effect this off-season, because losing a top draft pick is a high price to pay. The latest starting pitchers to sign were all guys with QOs. I don’t think Zach Cozart would have gotten as big a deal as he did, if he had come with a QO penalty.

        As I said in the first comment, though, the big issue is that teams finally, finally figured out that giving big contracts to older guys was a bad, bad bet. As fewer teams sign bad long-term deals with older players, there will be fewer future teams in the position of needing to “tank” for financial reasons. The Astros, for example, about 7 years ago had a bunch of awful contracts, and tanking made sense, but that should occur less and less now. (On a similar note, I understand why the Marlins dumped Giancarlo Stanton’s contract, but I never understood why they entered into it in the first place.)

        I agree that we can expect a higher minimum salary, and maybe a 5-year free-agent rule (or expanded super-2 arbitration). I would also expect the players’ union to grieve a Kris Bryant-style service-time manipulation. (Bryant did, but the grievance has sat idle forever.) Or at least make it much harder to do.

  5. Chad Dotson

    Great stuff, Steve. It’s difficult to fathom that the Reds will exist post-Votto. But here is the proof; they have at least one player signed for that team.

  6. jazzmanbbfan

    One thing that I noticed with Suarez was that he started choking up on the bat with two strikes. Wonder if Votto had any influence on that..??

  7. Streamer88

    I love articles like this (i.e. articles based in data).

    I also find it encouraging that a guy like Suarez not only accepted a discount, but also accepted it from our team. Same with Joey. I want very badly that this team be one that others want to play for, and I find it a good sign of the teams current locker room that Eugenio wanted to be a Red.

    • Sliotar

      To Steamer88’s point, whether he loves the Reds or does not, Suarez had little choice but to accept the discounted offer from the team.

      The current CBA is so badly skewed against players,now that teams are not paying aging guys as often, that Suarez either:

      -accepts arbitration awards, which are not guaranteed
      waits for free agency and a potential greater payday, offers which may not even come

      -takes team’s offer

  8. Sliotar

    Steve: “$66m should be enough for Suarez.”

    This is the same point that MLB, its owners and compliant media (vast majority) push as the system “working” and that radical change should not be implemented.

    Suarez is the type of player this current system hurts the most. Not a Bryce Harper, who will get paid, and not a cup of coffee/2-year guy happy to make the majors, but a better-than-average player who will never receive market value for his services.

    This piece suggests that if the NBA’s salary floor model were used in MLB, each team would have to spend a minimum of $134 million on its players.

    MLB has chosen to be adversarial with its players in sharing revenues and developing CBAs jointly, unlike the NBA.

    Perhaps not a surprise then that the NBA has the stronger national brand, more national superstars, and overshadows MLB’s regular season in July with its free agency/where is LeBron going.

    Imagine LeBron being sent to the D-League for “control” purposes.

    MLB’s financial future as an entity may be bright, but the state of the game is rotten.

  9. big5ed

    The general consensus is younger players are squeezed by the present system. It is in the player’s interest to get to the major leagues fast, and in the team’s interest to wait to promote the player only when it is fairly confident that the player is completely ready to contribute. The days of letting a guy develop at the MLB level are waning. Homer Bailey would not be rushed now.

    How this plays out with Hunter Greene will be interesting.

  10. abado

    Great article and thorough analysis, Steve! A critical point for Suarez: he gets security both in his first 4 free agency years AND in his arbitration years. The Reds commit to paying him through arbitration as if he continues to produce at his current level. He basically can’t outperform what he’s set to make in the next 2 years (unless he goes off and nets 5+ WAR per season) because even if he does over-produce, arbitration would “only” award him with a few million more per season at the most.
    Also important: only 9 players signed contracts for more than $45M total this offseason and only 7 signed for 4 or more years at more than $11M per season. He could very easily outperform this contract, but the security of having a 4 yr/$45M contract waiting for him 3 years down the line is immense.

  11. sultanofswaff

    I hope everyone had a chance to read Dick William’s AMA on Reddit the other day.
    Check it out!
    Excellent insight that reassures me he gets it, but the final test will be what he does about the manager.

  12. Tom Mitsoff

    You’d have to take Quackenbush over Worley based on both performance and potential. I am also concerned about Peralta. Lorenzen’s short-term absence will open up a spot for someone.

  13. JB WV

    Great analysis, Steve. Appreciate the time and effort. As someone mentioned above, collusion is a non-factor here, and the powers that be are finally wising up to these ridiculous long term contracts to players whose best years are behind them. I assume (never a good thing) that before contracts are awarded that the financial experts on each club are using basic financial analytical methods such as NPV (net present value) to determine a players worth, factoring in age, prior production, injury history, projected production over the term of the contract, etc., within the projected financial frame of baseball. If the Reds had used a similar model for Votto’s contract it would never have been offered and he would probably be playing elsewhere today. But there’s the human side. It’s comforting for me to know that unless a team with no financial scruples trades for Joey he will retire a Red. He’ll join Bench, Larkin, and Concepcion as greats that never played for another team. Is that warm fuzzy feeling worth it? I’m not paying his salary, so for me it is.