Princely Sum To Include Royal Tax

The relative quietness surrounding the pursuit of free agent first baseman Prince Fielder heading into the new year should not have been mistaken for an overall lack of interest from teams across the league. Or, at least that’s what his agent, Scott Boras, would have us believe when he informed members of the media that:

There’s a lot of passengers on the PF Flyer. I keep having discussions with teams, and they keep coming back after those discussions. We are having a very robust and constant communication with many teams. We’ve had an opportunity over the last 10 days to certainly get more definition, I would say. Normally in free agency, after a period of time you have teams that move to the background. When we think that’s happened, those teams have called back and they’ve changed their position.

The latest on Fielder not only suggests that the Washington Nationals have become the leading candidate to earn his services, but also that in doing so, they may have to include some sort of opt out clause for the 27 year old.

According to Ken Rosenthal:

Such a deal would provide the team with an immediate bang while giving Fielder the chance to hit the market again at 30 or 31, when teams such as the Yankees, Red Sox, Dodgers and Mets might be in better position to bid.

Several teams have already indicated that they’d be more interested in a short term contract for Fielder than one of length, while the first baseman himself would love the opportunity to hit the free agent market one more time during his peak, he’d likely only do so if he could maintain the same security extended to his contemporaries: Miguel Cabrera, Adrian Gonzalez and Mark Teixeira.

An opt out clause would provide the best deal for both sides, right?

According to one of Rosenthal’s MLB sources, it’s not such a slam dunk. A team offering a free agent an opt out clause takes on a ton of risk. If the player exceeds his value over the short-term, the team will either lose him to free agency or be forced to pay him a considerable amount more than the original contract to retain his services. If the player fails to live up to his expected value, then the team will still be forced to live up to its end of the contract despite the diminished returns. While a mutual opt out clause would insure against this, it’s exceedingly unlikely that Boras and Fielder would agree to such terms.

I’m not so convinced that a player opt out clause is such a doom and gloom scenario to a signing team, in fact we’ve seen before how it can become a blessing in disguise.

Previously, we’ve discussed how a signing team hopes the majority of value in a free agent contract will come in the front end of the deal. When an organization deals in long term contracts it’s anticipating that any deal will underpay at the beginning and overpay at the end. It’s the cost of doing business on the free agent market.

However, an opt out takes advantage of those early years and potentially allows for another team to get fooled into picking up the back end of the original deal. Let’s consider A.J. Burnett who signed a five year $55 million contract with the Toronto Blue Jays ahead of the 2006 season, with an opt out clause after the 2008 season. Through the first three years of the deal, Burnett earned $31 million in bonus and salary, while providing $47.3 million in value according to FanGraphs.

He opted out of his deal, and signed a new five year contract with the New York Yankees for $82.5 million. It obviously hasn’t worked out well for New York, but if we go back and time and pretend that Burnett didn’t opt out of his original deal with Toronto, it wouldn’t have worked out for the Blue Jays either. Burnett would’ve earned $24 million from the Blue Jays in 2009 and 2010 to provide $21.5 million worth of value. Overall, Toronto’s contract with Burnett could have been labelled a success, but it worked out even better thanks to the opt out clause.

This is obviously just one example, but it’s an important one. Yes, the Blue Jays lost a an above average season from Burnett in 2009, but his decline after that year  more than makes up for any of the value that they would have gained from him sticking around. This is the same attitude that any team extending Fielder an opt out clause must possess. It’s quite likely that they’ll miss out on a season or two of peak or near peak performance, depending on when the opt out clause occurs in the deal, but that’s an affordable cost to avoid an anticipated decline throughout the back end of a contract.

There’s another important element for a team considering an opt out offer that we haven’t touched on quite yet, and that’s what if the player chooses to stay and not take advantage of the clause. Frankly, no team should rest on the opt out clause as happening until it actually does. In other words, don’t make the deal anticipating that the opt out clause will be exercised.

Obviously, in signing a player of Fielder’s ilk, a team is most likely building something around him, or at the very least using him as a main player. From that perspective, I think you have to assume that he’ll be there for the length of the deal without the opt out clause, but simultaneously plan for the very real possibility that he leaves the team.

It’s understandable why baseball executives wouldn’t like such scenarios because it means planning for two different directions. However, if you think a player is worth a ten year deal to begin with, that evaluation should anticipate an eventual decline. The question then becomes one over a willingness to potentially give up on a couple years of good value in exchange for more years of bad.

Comments (27)

  1. I wonder if this puts the Jays in a better position to make a run at him. I still doubt AA would take that risk, but there has to be some non-zero chance that an opt-out clause increases their interest, no?

  2. The only way i see the jays interested in this is if Boras and Fielder are willing to do 5 years with an opt out clause after 3 years. Even then, i wouldn’t get my hopes up because of Beeston/Rogers

  3. I think a more realistic premise is an 8-10 year deal with an opt out after 3 or 5 years.

  4. Teams would be dumb to do a opt out unless a buyout is included.

    • I think you mean the player. An opt out with no buy out would be optimal for the team.

      • I meant Prince can have his 3 year opt out, but if he craps the bed the team can also pay 5-10 million to tear up the contract.

        • Oh. We’re talking about two different things. One is a player opt out, the other is a buy out option.

  5. So true. I’m of the same thinking. I think Fielder’s interest in hitting free agency again at 31 is a huge score for any team looking to sign him. Nothing could be better for the Jays then getting him for the next 4 years undervalue and having him opt out and end up on the Red Sox or Yanks during his decline.

  6. I disagree with Rosenthal here. The risk for a club signing Fielder is the same if the player under performs, whether or not there’s an opt out clause or not. In the case of a contract with an opt-out clause, the player doesn’t exercise his right (ala Vernon Wells). In the case of a contract without an opt-out clause, the full amount is paid regardless of performance. In either case, the club pays the full amount of the contract if the player under performs.

    • Yeah, I would almost look at the opt out as a bonus.

      • Obviously I feel the same way. I think what you bring up in terms of the uncertainty is the more pressing issue for the team offering the opt out although I think that things are sufficiently ‘certain’ in the context of an opt out after 4-5 years that this really shouldn’t be a significant concern.

        For the Jays, though, I still don’t see how the opt out sufficiently mitigates the risk of being crippled by a bad long term contract. The risk that Fielder under performs isn’t controlled for at all through a player opt out.

        • How much more could he possibly command in 3 years than he does right now? a 3-4 year opt out makes so much sense for Toronto, since we’re probably looking at 3-4 more years of Bautista prime too, and if we can’t win and fill Rogers’ asses with money by then, it’ll probably be time to pack up and rebuild once more.

  7. Yeah, on thinking this over I agree. If the Jays could get him at like 6 years with an opt-out clause after 3, that’d be great. They’d get a good hitter in his prime for the next three seasons, and if he does opt out, oh well, there’s a lot more payroll flexibility and we’ll cross that bridge if we come to it and find another 1B.

    • But the result is the same if Fielder flops in the guaranteed years of the contract: he won’t opt out and the Jays (or whatever team) will still be on the hook for the remaining years of the contract.

      The player opt-out only benefits the team if Fielder plays so well in the guaranteed years that his ‘new’ value exceeds the total of the remaining years of the contract.

  8. 75% chance Prince signs a 8-10 year contract. 25% chance Prince signs 5 year contract. I think there zero chance he signs anything in between 5 and 8 years.. it just doesn’t make sense for fielder. At 5 years he can sign another contract anything over 5 it hinders the value of the second contract. Whereas 8 years is the minimum i think he would take as his last big contract.

  9. I completely agree with Parkes on this one.

    Fielder would absolutely rake in the Rogers Centre – especially hitting behind Bautista (and potentially in front of Lawrie). Having an opt out at 3 years would allow him to drive up his value for when the Yankees or Red Sox are in a spending mood. I’d rather they take the risk of years 5 through 8 of his contract.

    I would have no problem with Fielder leaving at year 3 through 5 because by that time Bautista would also need to be replaced. The Jays would need to reassess where their (no longer) young pitching stands.

  10. I kind of look at it like this. Say he signs an 8 year deal, with an opt out after 3. If you could see into the future and know that Fielder would be healthy and productive over the next three years (i.e. the conditions where he might opt out), and you had the choice to sign him to a 3-year deal or an 8 year deal, which would you choose? I’d go with the short term even still.

    An opt out wouldn’t eliminate the risk of a disaster, but even if he retains his value in the short term, it’s unlikely he’d be worth it in the back end.

  11. The signing team cannot assume the opt out will be exercised by the player. What they can do, however, is to induce the exercise of an opt out by sufficiently front-loading the contract in order to leave a relatively meager amount payable in the years proceeding the opt out. The less money that the player leaves on the table, the more likely he is to opt out.

    • But then if you’re the team what is the point of that? The only way the player opt out works out in favour of the team is if they don’t front load the contract. Also, you’re missing the point here.

      Fielder is 27. From his perspective, breaking up the contract will land him more money long term. He’s probably hard pressed right now to get anybody to go to 200 mil for him. But if he can already get 5 years & 120 million from anybody (which is prob true). After that contract he will be 32, and if he played well through those years he could prob get up to 5 years and 80 mil from someone on the next deal. That’s a total of 200 mil in the same time span.

      That’s the best part of the player opt from the team perspective, if you make the age of free agency work out well, you don’t even need to front load the contract for it to be in the player’s best interest to opt out. If I’m the Jays, I time his opt out for the exact year that either Texeira or Gonzalez’s contracts end. He’ll be way to tempted not to opt out if he’s done well. The only thing you have to avoid is giving in so that you guarantee him the same money on one deal that he would get over the two. I’m not going to try to get to specific with the numbers, but there are definitely numbers for length and total that could work out well for the team regardless of whether or not he opts out. Fielder’s age gives a lot of options for contract structure.

  12. Does the opt out clause become less valuable because of the removal of draft pick comp?

    • No: The team could still obtain compensation within the parameters of the new CBA if the player spent the entire season on its roster and it extended a one-year a qualifying offer equal to the average of the top 125 paid players in MLB.

  13. so would rogers go 6/150 with an opt out after 3, then cross their fingers that he opts out?
    that gives boras corp. the aav he needs to show off, but doesn’t quite hit the long term payload that fielder would like, suggesting he would try for one more 5-7 yr contract at 30.

  14. Posted on by stoeten a few days a go. I thought it made sense due to the fact any contract a player overachieves has to be a bonus, no?

    Keith Law’s Take:

    mymrbig (NOLA)
    I know giving players an opt-out is generally viewed as good for the player, bad for the team. But I’m really questioning that logic. The Blue Jays should be fine with Burnett opting out. The Yankees are probably wishing they had just waved goodbye after A-Rod’s opt-out. I think a team might be smart to give Prince an opt-out after 3 or 4 years and hope he takes it. Basically, the team is almost hoping for the opt-out to avoid the decline phase, while the player still remains close to peak until the opt-out. Thoughts?

    Klaw

    What’s the benefit to the team of giving the opt-out? If the player is worth more than his salary, he opts out. If he’s worth less, he stays, and you’re stuck with him. If the player paid the club to exercise the opt out, that would be a different story, but I have never heard of such a thing.

    • The benefit is that you get Fielder if the money and term are comparable to another team. That is the whole point of no trade/opt out clauses… A carrot to be dangled.

    • I disagree with KLaw. I think there’s definitely an advantage to be had for the team. Again, that value will decline, and in a perfect world you pay for peak performance and watch the player opt out for decline, while some other team over pays.

  15. What if they front-loaded a contract and gave him an opt-out three years in, or even two? Sure you pay a premium but if he hits like he has he’ll be worth it. If it’s front-loaded he’ll be more likely to opt-out when he’s 29 or even 30 and go for another big deal.

    Or possibly four years at say 25.5 or 26 per year, topping Pujols, with an opt out after two. He’s guaranteed a bit over 100M and can opt out while he’s still a young 29 year old, or go for something similar to Pujols hitting free agency at 31. He gets to say he makes more per year than Pujols and still go for a possible ten year contract.

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