How the Rise of Overseas Contracts Could Impact the MLB

The past few years, off-seasons in particular, have been met with frustration and anger from MLB players and the Major League Baseball Players Association over the free agent market and the compensation structure/control currently in place. Yes, the Bryce Harper’s and Manny Machado’s of the world will certainly get their money. But, those are two of the best players in the game, so it’s not necessarily fair to use them as examples.

Free Agency Delay

Generally, it takes six years of major-league service time before a player reaches free agency.  Historically, there hasn’t been as big an issue with it since many players in their late 20s or early 30s were still cashing in large contracts with long-term security. With bad contracts burning many teams over the years, they are less willing to pay that large contract over a long period of time for someone that may have already reached their prime, or even on the way out of their prime. The problem is players cannot always cash in on their true value for the first six years because they are controlled by the team/league rules, to a certain extent.

More Money Overseas

It was recently announced that nineteen-year-old pitcher, Carter Stewart, has agreed to a six-year contract with a professional baseball team in Japan worth more than $7 million. Stewart was the 8th overall pick in the 2018 draft by the Atlanta Braves, but did not sign after the two sides could not agree on a signing bonus amount. While his signing bonus could have been in the $2 million range, his next six years would be considerably less, barring a rapid rise to the major leagues.

By signing a professional contract in Japan, Stewart, represented by mega-agent Scott Boras, can guarantee himself significantly more money than he could have with a major league organization during that time frame. Under current MLB rules, Stewart also can enter MLB free agency at the conclusion of his six-year stint overseas. More and more players are signing professional contracts overseas to not only make more money now, but also in hopes of reaching MLB free agency sooner than they may have with a major league organization.

The increase in number of players, especially higher profile players, going overseas to play should cause concern for the MLB. And the fact that a first round MLB draft pick has done so may have enough long-term ramifications that Major League Baseball has to address the issue and make changes, sooner than later.

For professional baseball players looking for tax planning and compliance, whether in the MLB or overseas, the Anders Sports, Arts & Entertainment Group has the knowledge and experience to help. Contact an Anders advisor to learn more.