The Chicago Cubs have built a potential juggernaut of a team so far this offseason, and have also set themselves up well for the future. It is a very exciting time to be a Cubs fan, and although there are no guarantees in baseball, it’s fun to see the brain trust do their best to put this team in the best position to finally bring home a championship trophy. Speaking of options:
Iwakuma gets $1M sign bonus, $10M 2016 salary plus $1M buyout on club options in '17 and '18. $12M guaranteed. #mariners
— Jon Heyman (@JonHeyman) December 18, 2015
That’s Seattle Mariners ace Hisashi Iwakuma, who was supposed to sign with the Los Angeles Dodgers before LA pulled a Baltimore Orioles and backed out of the deal. I guess there’s something odd going on with Iwakuma’s physical, but at this point he gets just one year guaranteed, with some hurdles to clear before he can get the others picked up:
Iwakuma has club options for 10M but '17 option vests at 14M with 162 IP in '16 and at $15M in '18 at 162 IP in '17 or 324 in 16-17
— Jon Heyman (@JonHeyman) December 18, 2015
That’s unfortunately what happens when, despite being an elite pitcher when healthy, the player has suffered health issues that scare off the guys with the money. So now Iwakuma has to hope he stays healthy so he can grab that money. The double whammy of being old (Iwakuma is heading into age 35 season) and potentially breaking down logically dictates a decrease in pay. What does that have to do with the Cubs and other teams that we might care more about?
As you may have read, commissioner Rob Manfred, like us mere peasant fans, have noticed the increase in opt-out clauses being offered in lucrative contracts. Based off the commentary in that blog, Manfred doesn’t seem too pleased about opt outs, and may in fact be speaking on behalf of smaller market teams who cannot really afford to compete with those types of contracts, or the eventual increases in salary should the players exercise the opt-out clauses (they almost invariably do). In the case of the most recent signing, Jason Heyward, the opt-out allows the club (Cubs) to leverage the most likely “elite performance” years from Heyward while keeping costs manageable. The Cubs’ job was to make sure they got the player, because there won’t be another free agent like him until at least the winter of 2018, when Bryce Harper becomes a free agent at age 26 (imagine that). Heyward’s (and his agent’s) job is to make sure he gets paid, and in doing so, both sides had to make concessions. With money flowing like water through an open dam in baseball these days, the Cubs knew they had to pounce, Heyward knew he was going to get paid and have yet another chance at an even bigger contract later on when he was still young, and everyone goes home happy.
The timing of the opt-outs works for both the players and the teams, assuming good health and performances during the pre-opt-out period. As Crashburn Alley philosophizes here:
While the benefits to the player are relatively self-explanatory: the years after the opt-out act as an insurance policy should a player decline or suffer an injury in the early years of the contract and, if he continues performing well, the opt-out provides an opportunity to increase his salary through another round of free agency. From the team side, there is no such clear upside, but there’s also no significant downside. In order to sign an elite level free agent, a team always accepts risk of decline/injury on the later years of the deal whether or not there is an opt-out. The one negligible benefit to the team is that, if the player does opt-out, the team will likely receive some sort of compensation.
Again with the case of Jason Heyward, the bet by the Cubs and by Heyward is that he’s going to be awesome right before his first opt-out, and then he’ll either be gone (giving the Cubs a draft pick) or he’ll be on such a tear that the Cubs will just give him a raise. In any case, if the team decides that a player is worth it, they’re going to pay him anyway, so the opt out doesn’t seem to be a bad thing on the team’s part. With a traditional contract, the team was going to pay for the bad years anyway, so that isn’t really a gamble. The bigger gamble here is that the player will opt out, thus allowing the team to once again explore options before deciding whether to stay the course or change personnel. Crashburn Alley goes on to suggest that even though Manfred may not be a fan of opt outs, they may be very beneficial to every team in baseball, particularly large-market teams (like the Cubs hope to be again someday):
Since opt-outs essentially turn six-, seven-, and eight- year deals into three- and four-year deals with multi-year player options, a natural byproduct will be elite players reaching the free agent market with a higher frequency.
While it is true that some players, like Anthony Rizzo, opted for financial stability early on, most players who KNOW they’re going to be good tend to listen to their agents and the cash registers and to bet on themselves. Even Giancarlo Stanton, who received the largest guaranteed payout in the history of baseball with his $325MM contract, had an opt out negotiated in to coincide with his age 30/31 season such that he might be able to grab an even bigger payday. The opt out gives the team a potential date to look forward to in order to scope out a pool of talent that will hit free agency, and it also gives the players an out for when they are still in their primes (or in Stanton’s case, because his owner is very bad). With front offices getting smarter all the time, players have to leverage their contracts to try to score the surest gamble and secure their best possible contract. And if you’re an EXCELLENT player and still on the right side of 30, you have plenty of leverage in this game.
It seems logical that big market teams would have an advantage in adding through free agency, but as the Arizona Diamondbacks showed in becoming #MysteryTeam in the Zack Greinke sweepstakes, a team with the right plan (and I’m assuming Arizona has a plan) and wisely-stocked resources (AZ got a multibillion dollar TV deal, imagine that) can still compete for resources. Obviously, if they still depended on revenue sharing or had cash flow issues (like, say, the Tampa Bay Rays), they would have to be more careful, but with the changing climate of baseball economics, we’re probably not going to see very many super-team-friendly extensions for guys like Kris Bryant. On the other hand, the opt out clauses will allow for plenty of options in the coming offseasons, the players are still going to get paid, and we fans get to enjoy the fun. It’s a win-win for all, again assuming health and performance, and that can’t be a bad thing, right?