Bad Contracts?

Over the past 15 years or so baseball organizations have handed out some lucrative contracts. The debate is whether or not these contracts are good or bad for baseball. A majority of owners, GM’s, and agents will argue that these contracts are good for baseball, for the team, the city, and the community. Anybody spending that kind of money better have the ability to justify shelling out those large amounts of coin. Some GM’s, coaches, and some smaller market teams might come up with an opposing argument on why paying players such fruitful contracts. Let’s play both sides of the fence.

I recently heard Scott Boras, Super-Agent, speak about how big and long tenured contracts are good for the game of baseball. He of course is biased since he takes a percentage of those same contracts that make people’s eyes pop out of their head. He brings up a good point in terms of marketability and a business investment. A player like Albert Pujols before signing his 10 year $254 million contract has earned roughly $104 million in his career thus far. Boras argues that he (Pujols) has made the Cardinals easily $150 million during his tenure as a St. Louis Cardinal. Thus signing a player like Pujols to a contract that might seem absurd to anybody else is actually a great business decision. You have to spend money to make money. That $100 million dollars wasn’t like going out and spending it on a car that would depreciate in value once you handed over the money and took the keys. It was like investing it in a stock that was sure to rise. In the business sense, yes it makes perfect sense. To a team and an owner who has that kind of money to spend it’s a great investment, but to a small market team who can’t afford it, ehh not so much. It pushes them right out of the market for a player like Pujols. That’s another reason why big market teams like the Yankees and Red Sox can pull off deals like this, because they have a large fan base. They also don’t want a player of that caliber to land on a rival team so over betting may be one way to make sure that that situation doesn’t happen.

Why is a bad decision to sign someone to such a cost-effective contract? There’s plenty of reasons; a several million reasons actually. First, most players don’t get these types of contracts when they are under 25 and it would be asinine to give such a young player a 10 year $200 million plus deal when they haven’t proven anything. Most players get them around 30 years of age give or take a few years. Let’s just say you get the deal at 30, then you’ll be 40 years old when your contract comes to an end, making the player 40. I’m not sure there is any player in baseball who is worth around $20 million a year at that age. In Pujols’ case he will be 42 years old and his contract is heavily back loaded at $30 million a year in his final year. Pujols may be the greatest hitter I’ve ever witnessed, but at 42 years old and $30 million later I’m not so sure he’s worth that. Let’s say the Angels in the next few years hit a potential snag in their finances and can only spend $100 million a year on their roster. Well 30% of that number is already locked up into one player. Can’t happen? Anything is possible just ask Mets owner Fred Wilpon, who cut roughly $50 million in payroll this year due to inflexible financial issues.

Most of these contracts are given out after a player has performed well enough to deserve such a deal. At that point most of these players are in their prime and will most likely be past their prime well before their contract runs out. Only a few players are inked to a deal right as they are hitting their prime. Alex Rodriguez was one of them. The 10-year $256 million deal he signed in 2001 came at a perfect time. Don’t forget though that he never played out the full 10 years before signing another 10-year deal at even more eye-opening $275 million. The first time he signed a 10-year deal may have been justified somehow, but the second time around, hardly. He is nowhere near the player he once was. That is no fault of his own, he’s 36 now and it would be impossible to think that he could still put up the numbers he did 6 years ago after going thru such a grueling baseball season year in and out.

Troy Tulowitzki is another example of possibly justifying getting a 10-year contract being that he is still young, getting his deal at 26. His contract also entails that he never makes more than $20 million in a given year which kicks in when he turns 30, around the time a player is expected to hit their prime years. His contract isn’t heavily backloaded like most contracts as he will make $14 million in his final year of the contract with $15 million team option or a $4 million buyout. Tulowitzki’s contract was only for $157 million over 10 years which is about $100 million less than the big contracts that A-Rod and Pujols receieved, and about $60 million less than Prince Fielder’s deal. The Colorado Rockies aren’t deemed a big market team and they did what they had to do to lock up arguably the best shortstop in the game. Players like that don’t come around too often especially at the shortstop position so it is understandable to give him such a long-term deal. He’s one of the rare cases in baseball where his contract is completely justifiable as was A-Rod’s first 10-year deal.

As a pure baseball decision most of these contracts never pan out. Maybe you get several good years of production from these players, but the latter days of these contracts don’t really go as expected particularly with the amount of dollar they make. When someone is making $15 million-plus they are expected to put up a certain production level. Not all short-year big-money contracts work out either. Take Jason Bay for example. He made upward of $18 million last year and performed well under what his production was expected and that’s being nice. GM’s will strikeout when it comes to getting what they payed for, it happens. It can be avoided though by giving maximum 6-year deals. Those deals should only be given to baseball’s elite. Take Jose Reyes for instance, he just signed a 6-year $106 million deal. He only played in 126 games last year and no more than 133 games in the past 3 years. Is that the kid of money you want to spend on a guy who might not be able to take even take the field? I love Jose Reyes and I think he’s a great player, but he has been injury prone his whole career. That has to be taken into consideration. I understand he might be the most exciting player in the game to watch, but GM’s should proceed with caution when it comes to him. He gives it 100% every game and doesn’t hold back and you have to love that about any player, but the way he plays the game is reason why is oft injured. Then again he is an elite player at his position and like I said before no more than a 6-year contract should be given out. The Marlins seemed to follow that protocol.

Another reason why these deals are ludicrous is because this money is guaranteed whether they play all 162 games or if they are hurt. Unlike the NFL, and this is where I think the NFL has it right when it comes to giving out contracts, these deals are 100% guaranteed money. If the contracts given out such that one got a 10-year $250 million deal, but only $125 was guaranteed then it would make more sense and save GM’s and owners from themselves. Once they start handing out contracts with long years and big money the next player to hit free agency will compare themselves to that player to induce such contracts. It’s a vicious cycle and the owners got the ball rolling on this one.

Maybe I can’t fathom why these players get such contracts because they are making preposterous amounts of money. According to Forbes, the average American makes $51,000 a year. A-Rod and Pujols will make about triple that per game at about $170,000 and $157,000 per game respectively. So it will take the average American three years to make what these guys make in about 3 hours of playing a kids game! Where did we go wrong? Ok their talents are undeniably greater than mine or any person not playing professional baseball, but those numbers are insane. We are partly to blame. We buy the tickets, we buy the jerseys, we idolize these demi-gods. I’m not complaining. Ok maybe I am a little bit.

Of the top 20 highest paid players in the MLB last year only about 4 played up to their expected production. Those players are C.C. Sabathia, Roy Halladay, Miguel Cabrera, and Ryan Howard. Even Ryan Howard’s BA. is suspect, but he gets paid to hit home runs and drive in runs and he is one of the best at doing that. I’m no math genius but that means that only 20% of the highest paid players actually performed up to par with what they get paid. They all got paid ranging from $32 million (A-Rod) to $16.5 million (A.J. Burnett). The proof is in the pudding. Nothing is going to stop these contracts from being written up and signed by MLB players, but GM’s should seriously think about lowering the length of these contracts. Salary cap anybody?

Wonder why Pujols and Fielder fled to the American League? The DH period. Of all the 8 year plus contracts given out only 3 have been signed in the National League, all by the Colorado Rockies, to Mike Hampton (8 years), Troy Tulowitzki (10 years), and Todd Helton (11 years). The AL has the power to move these players to DH when they can no longer be of adequate service on the field. The NL does not have the pleasure of doing that. Maybe we can blame the AL. Maybe we can blame the GM’s. Maybe we can blame ourselves. Either way bad contracts will continue to be handed out like flyers on the street. I’m not saying anything that a GM hasn’t heard already, but then hey it’s not like their spending someone else’s money.

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