Baseball Contract Analysis

We've been going through contract and salary data, in order to improve the artificial intelligence in Baseball Mogul 2013 and future versions.

Contract Lengths for Major League Baseball Players (n = 516)

We examined the 516 players on Major League 40-Man Rosters (as of opening day) that had reached either arbitration or free agency. The first fact worth noting is that the vast majority (84%) of all player contracts are between 1 and 3 years. The longer deals get all the headlines, but the shorter deals dominate team rosters.

In fact, more than half of the contracts (almost 53%) were for just one year. As might be expected, these one-year contracts were at the lowest salary levels. They were also awarded to older players (age 31.2) showing that one-year contracts are used primarily to sign journeymen that fill out the roster and provide depth in case of injury.

Contract Length	Players	Share	Average Salary	Average Age
1 Year	272	52.7%	$3.51 Million	31.2
2 Years	126	24.4%	$4.86 Million	31.4
3 Years	34	6.6%	$7.80 Million	29.7
4 Years	22	4.3%	$9.45 Million	28.9
5 Years	20	3.9%	$10.16 Million	28.5
6 Years	26	5.0%	$13.01 Million	28.7
7+ Years	16	3.2%	$19.18 Million	30.1

Of the 272 players with 1-year contracts, almost half (42%) had been awarded those contracts during arbitration. The average age of players with contracts awarded in arbitration was 28.6. If we remove those contracts from the pool of 1-year contracts, the average age rises above 33.

1-Year Contracts	Players	Share	Average Salary	Average Age
Arbitration	113	21.9%	$4.41 Million	28.6
Non-Arbitration	159	30.8%	$2.24 Million	33.1

Finally, if we look at the "Overall" rating assigned by Baseball Mogul, we see that the longer contracts at higher salary levels are awarded to the more talented players.

(Here is the data with the arbitration contracts split out from the pool of 1-year players)

Contract Length	Players	Overall Rating	Average Age	Average Age at Signing
(Arbitration)	113	78.9	28.6	28.6
1 Year	159	79.9	33.1	33.1
2 Years	126	81.4	31.4	30.8
3 Years	34	84.7	29.7	28.6
4 Years	22	85.6	28.9	27.4
5 Years	20	85.0	28.5	26.5
6 Years	26	88.2	28.7	26.1
7+ Years	16	90.7	30.1	26.6

It seems that the youngest group of players are those with 5-year contracts, with the average age rising again for 6-year and 7-year contracts. However, if we instead calculate the average age at which the contract was signed, we see a steady downward trend towards signing younger players to longer deals. This would seem to go against the conventional wisdom which holds that players don't sign deals of this magnitude (7+ years) until their late 20s (or early 30s), when they have had enough time to prove their worth on the free agent market.