Teams are gaining a tremendous financial advantage by signing young players to long-term contracts:
Teams have extracted a net value of over $500 million in savings by locking young players up with extensions taking them into free agency. Despite team wins in only one-third of the contracts, the savings are so great and the risk to team is so low that the net benefit works out incredibly well for the team. Teams still must choose wisely when giving out these types of contracts, but when they pay off, the team makes out very well.
From 2008-2011, the good contracts produced $668M in residual value. The not so great contracts cost $154 million in residual value. Players are leaving money on the table by not opting for arbitration and free agency. Of course, universal free agency, where everyone from amateurs to rookies to veterans can sign with any team for as long as they like might alleviate this disparity.
from baseballmusings.com http://ift.tt/1PRBmZU
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