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Manny Machado’s Record Contract Is How MLB Free Agency Is Supposed to Work

After building from within, the Padres spent big for a player they couldn’t develop themselves. That’s the point. Unfortunately for fans and dozens of other free agents who took suboptimal deals or remain unsigned, many teams seem to have forgotten this.

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Every team in baseball keeps a close eye on its payroll. This offseason, even big-market teams with the playoffs in mind, like the Dodgers, Phillies, and Yankees, made trades engineered to offload salary or otherwise keep costs down. Though there’s no hard salary cap in baseball, clubs are increasingly treating the $206 million competitive balance tax threshold as a de facto cap, and so it took until mid-February for the San Diego Padres to sign the best player in this year’s free-agent class, Manny Machado, to a deal befitting a player of his talent. Other star players in this class—Bryce Harper, Craig Kimbrel, Dallas Keuchel—and useful contributors with recent playoff success—Marwin González, Gio González—remain unsigned.

One of the more complicated legacies of modern baseball is tying performance analysis to economics. Teams want their players to perform well, but the hope is that the player is not only good in absolute terms, but good relative to his contract.

Chicago White Sox executive vice president Kenny Williams, after losing out on Machado, said his club couldn’t pay Machado $30 million a year because doing so would prevent it from filling out a competitive roster. To take Williams’s argument to the extreme, it’d probably be tough for an MLB team to afford a 25-man roster if each player made $30 million a year. But the broader point he was making is that all MLB rosters are built within certain budgetary restraints, either natural or self-imposed, which is reasonable enough. An overwhelming majority of clubs, either by choice or by financial necessity, have shown themselves to be unwilling to spend the $8.25 million per roster spot it’d take to hit the luxury tax threshold, regardless of whether they’re strictly able to spend more. Machado’s $30 million-per-year deal is the going rate for a player of that caliber on the open market, and ownership, generally speaking, doesn’t like paying sticker price. It’s why Machado went unsigned so long and Harper is unsigned still, and why the league’s 30 teams have put so much effort into finding ways to build rosters whose talent outweighs their cost.

So all executives must operate within a budget, and executives have spent the 2000s dreaming up ingenious ways to keep costs down. There’s service time manipulation to extend a club’s control over a star prospect like Kris Bryant or Ronald Acuña for another year. There’s the pre-free-agency extension that allows clubs to lock in MVP-level players like José Altuve and Mike Trout to below-market deals. And there’s good old-fashioned Seeking Market Inefficiencies, which is the art of finding players who don’t know how good they are and exploiting that gap in information. This goes back at least as far as the Moneyball A’s getting Scott Hatteberg because he could get on base, or the Rays and Cubs valuing positional flexibility, or Washington believing that Daniel Murphy’s revamped mechanics would turn him from an average player to the 2016 MVP runner-up.

The point, supposedly, of a team locking in its cheap young core is to provide the financial leeway to sign a Machado or a Harper to a $30 million-a-year contract or pay sticker price on solid veterans to take on roles that could not be filled internally. There is no foolproof way to build a winning ballclub, but this is as close as it gets. Last year’s Red Sox built through the farm with Mookie Betts, Andrew Benintendi, Xander Bogaerts, and others, but they took on David Price and J.D. Martinez as free agents and signed Rick Porcello to a $20 million-a-year extension one year after trading for him. The 2017 Astros supplemented their young core with solid free agents like Yuli Gurriel and Josh Reddick and used their financial flexibility (a euphemism for having money lying around) to take on Justin Verlander via trade. The 2016 Cubs hit on several first-round picks but had to sign Jon Lester and Ben Zobrist and overpay for Aroldis Chapman in a trade to get over the top. The list goes on and on—build what you can and buy what you can’t build.

Yet the past two offseasons have been characterized by teams refusing to take that last step, leading to widespread frustration among fans and a level of hostility between players and management the likes of which MLB hasn’t seen in a generation. Machado is just the second player this offseason, after Patrick Corbin of the Nationals, to sign a contract for more than four guaranteed years or more than $70 million in total guaranteed value.

So far, most of the purported heavy hitters have chosen to sit out free agency. Defending champion Boston brought back starter Nathan Eovaldi but is apparently letting closer Craig Kimbrel walk. The Yankees met with Corbin, but reportedly declined to extend the same courtesy to Harper and never made an offer to Machado. The Dodgers offloaded fan favorite Yasiel Puig to increase their financial flexibility but instead of then making a serious run at Harper, they signed A.J. Pollock. The Astros likewise spurned Harper in favor of a cheaper option, Michael Brantley, while the Cubs’ biggest free-agent pickup was utility infielder Daniel Descalso for two years and $5 million.

With so many of baseball’s top teams treading water at best, the top free agents were left on the market to negotiate with teams that are still undergoing rebuilds. Machado’s last three suitors were the Padres, White Sox, and Phillies. The Phillies and White Sox are big-market teams looking to contend soon, but all three clubs have posted losing records in each of the past six years. All three have assembled talented but cost-controlled young cores, leaving them with a sizable financial surplus, and the club that made Machado the most attractive offer bagged the best player on the market.

The Padres already have a few promising hitters—outfielders Hunter Renfroe and Franmil Reyes both exhibited exciting power last year—to go with veterans Eric Hosmer and Wil Myers. Catcher Austin Hedges is one of the best defenders at his position, and in 2018 his bat finally started to catch up with his glove. They also have the best farm system in baseball, with nine prospects in the Baseball Prospectus Top 101, including three in the top 20: infielders Fernando Tatis Jr. and Luis Urias and catcher Francisco Mejía. The latter two players already have big league experience, and Tatis will surely join them this year. Adding Machado to that mix will take San Diego from the team prospect hipsters watch on when the East Coast games are over to a club with legitimate playoff aspirations this year and probably the Dodgers’ biggest threat in the NL West from 2020 on.

The Padres built from within and are now spending big for a player they couldn’t develop themselves. That’s how it’s supposed to work.

But one happy free-agent ending doesn’t erase the multiyear evisceration of baseball’s free-agent class or solve the problem that even if we accept the CBT threshold as an upper limit of spending—which we shouldn’t—25 of baseball’s 30 teams aren’t within $20 million of hitting that barrier this year. Compare that with the NBA, which has a soft salary cap, and yet also has 29 of 30 NBA clubs over the cap this year, 14 of them by more than $20 million.

While Machado brings San Diego much closer to the playoffs than they were yesterday, the Padres still have a long way before the rest of the roster is filled out to championship standards. Top pitching prospects Mackenzie Gore, Chris Paddack, and Adrian Morejon are all at least a year away, leaving the rotation in the hands of Joey Lucchesi (94 ERA+ in 2018), Eric Lauer (89 ERA+), and the three original members of Blink-182.

Even after handing out this record-setting deal, the Padres are running a payroll only in the $120 million range. After Machado and Hosmer, San Diego’s next three largest payroll obligations are to Phil Hughes and Héctor Olivera, both of whom are no longer on the team, and Garrett Richards, who will miss all of 2019 while recovering from Tommy John surgery. The Padres are moving in the right direction but they could, and should, spend more money to fill out their roster.

Elsewhere in the league, free agency remains a broken system. Harper, Kimbrel, and Keuchel are still all twisting in the wind. Yasmani Grandal and Josh Donaldson had to settle for one-year deals, and too many of the biggest and best teams either stood pat or settled for minor improvements to the roster.

It’s good that for this one player and one team the system worked the way it should, albeit on a two- or three-month delay. Too bad for the fans, as well as dozens of other free agents who took short-term deals or opted not to test the market at all, that it doesn’t work this way more often.