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December 5, 2013

Ask the Industry

Why Have We Seen So Many Transactions?

by Zachary Levine

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Why now? Why so early? Why so many at once?

The questions were obvious after the Hot Stovepocalypse, as Ben Lindbergh and Sam Miller titled their podcast running down the Tuesday transactions that had various levels of impact on 14 different teams. (I voted for Beane-anza.)

Mix in the stunning trade of Doug Fister to the Nationals the night before, and it was a seismic 24-30 hours for Major League Baseball. Where this date ranks in the annals of transactions is difficult to establish scientifically, and not all that important. For instance, the Jacoby Ellsbury-to-the-Yankees transaction will officially happen at some date in the future when all the paperwork is done, but it served as the nightcap to the wild day that we won’t argue with calling no. 1.

Baseball has always been a sport that’s taken its time, building over roughly a month toward the Winter Meetings. Nobody is suggesting that it’s headed toward the NFL’s signing day frenzy. But why has the pace picked up?

The questions were obvious, but the answers weren’t.

So we reached out to a couple dozen front office officials, from general managers on down the organizational chart. We heard back from many of them, with many expressing their own confusion and internal dialogue asking the same questions.

But they came up with some good answers—or if not solid answers, at least some compelling theories—for what exactly happened this week. All of the officials were given the protection of anonymity, and their quotes are in italics.

So—Why now? Why so early? Why so many at once?

1. Why not?

- I do think the whole process has been accelerating for everything. I’m not sure why. I guess one of the main reasons is “why not.” Why wait weeks for the winter meetings? We have all this time.

- So many effective means of communicating (text email phone etc) that there is less reason to wait until we are all in the same hotel to have real substantive deal talks. Even at the winter meetings, deals get done without face to face conversations so why wait?

2. It’s about the money

The rich are getting richer, the poor are getting richer, and a couple of executives think teams are reacting to this by going on earlier spending sprees.

- My theory is teams have an influx of money on their hands and that is creating a change in the markets. The effect it has on free agency trickles down to trades, and teams become more willing to take risks (or make trades) because the consequences are mitigated by the influx of cash in the game.

- With the TV money coming in, that changes the market. If you feel like you’ve figured out something about this new economy and want to take advantage of it, you do it early. I think it’s going to continue to ramp up earlier. At some point we’re going to go to winter meetings and be pretty bored. Or bring fewer people.

- Everyone is making more money for the same performance. Both the players and the teams. So perhaps it's easy to split the money quickly and make everyone happy when there is so much of it going around. Agents are having their increased demands met by wealthy teams who can afford it. I don't necessarily think this means agents are doing a poor job and should be holding out for more. I there can may be more downside than upside to turning down a fair contract. I think people get excited by absolute dollars - not the percentage of revenue going to the players vs owners. Even if the respective percentages are the same, people are happier about their share and are coming to an agreement more quickly.

3. Supply and demand

There has been research done on how the timing of a free agent’s signing is correlated with his value. In 2012, Brian MacPherson of the Providence Journal determined that teams spend $5.52 million per win on contracts signed before New Year’s Day and only $3.60 million per win afterward. However, executives still saw some benefit to shopping early to lock up some cost certainty and take advantage of the new non-tender calendar.

- While everybody is talking about how much money is out there (which is certainly true), teams don't have unlimited funds. So cost certainty early in the offseason is a plus. Budgets are real as much as people seem to overlook that. So maybe GMs got back from Thanksgiving and wanted to look things over monday but get deals done before the Winter Meetings as they expect more competition to drive prices up a little?

- Non-tender deadline moving up before the winter meetings. Teams have to decide whether or not to make the investments and other clubs being creative about using potential non-tenders as ways to get short term deals (paying a premium for not having to sign multi year deals - especially in the case of contending teams like Oakland).

- I think it has everything to do with the contracts being offered to free agents. Given the escalating salaries for all types of players, trades actually appear to be a more fiscally conservative way to go – despite the fact that you have to give up a player to get something in return.

- [Tuesday] was quite a day. As with everyone, I can’t remember a day quite like that with no deadline. I asked (another official) if the industry decided to institute a new deadline of some sort. Wow. Anyway, my theory as to what led to it was a very uniquely crazy free agency…which has spurred more trade traction early in the off season. With some of the numbers coming in (Vargas-32M, Kazmir-22M, Guerrero, Abreu, Byrd- 16M)…and some of the alleged asks from other FAs…teams have shifted to other ways to get talent. I’m not sure that is the best theory, but trade currency seems to be much cheaper than free agent currency.

- For players at the same position (catcher), one move can trigger another as teams and players lose their backup plans or have to jump at their backup plans.

4. The weirdness of the calendar

This was my hypothesis heading into the surveying of the industry. The Winter Meetings are always on a Monday-Thursday, and they’re tied to Thanksgiving, falling two Mondays or 11 days after.

Because Thanksgiving fell on its latest possible date this year, what was overshadowed by the rare convergence with Hanukkah was the latest possible time for the Winter Meetings, which are being held six days later than last year.

So the transactionpocalypse wasn’t on December 3. Well, it was on December 3, but it was also on Day 29 of free agents’ being allowed to sign with other teams. Four years ago, in the last winter before the date was moved up for free agents to sign with other teams, Day 29 was December 18, which was eight days after Winter Meeting goers headed home. So maybe it’s time to shift our idea of what’s early.

Or as one front-office official put it:

- Perhaps players, agents and GM's "body clock" is still set to the time schedule of first week in December we start making moves.

5. Chance

Because even in the offseason, you can’t predict baseball, Suzyn.

- I do think that some of the deals are independent of some larger market shift in how deals get done. For instance the Ellsbury signing, at least to me, seems like it was done so quickly to screw Jay-Z and Cano from both the agent and club sides as well as to get the player the yankees wanted.

I don't think it's necessarily a "run" like you see in a fantasy draft where the deals are all interconnected. But I could be wrong.

- My guess is this is just as random as any other “hot streak” in the game.

6. And then there’s the correct answer

- The Premier League was especially boring this week, so Billy Beane decided to get some work done.

Zachary Levine is an author of Baseball Prospectus. 
Click here to see Zachary's other articles. You can contact Zachary by clicking here

Related Content:  Transactions,  Hot Stove,  Ask The Industry

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