Why Don’t Major League Baseball Teams Front-Load Contracts?

One of the possible deal breakers for trading Roy Halladay might not have anything to do with Halladay at all. It could come down to whether another team wants to take on Vernon Wells’ contract.

The sticking point is that Wells is owed $97.5 Million IN BASE SALARY ALONE over the next five years. He has commitments of at least $21 Million through 2014, when he will be 35 and definitely at the end production wise.

According to SI’s Jon Heyman, nobody wants to touch Wells’ contract and Tyler Hissey wrote the piece about Wells’ untradeable contract. Which got me thinking:

Why don’t these teams front-load their big contracts?

This is more sensible tactic to the back-loading process which goes on now. Why do teams continue to pay the players the most money per season when these are the years their production is in decline?

Instead, front-load those deals where the player is getting most of his money during his prime years.  Most of the time when a team wants to lock up a real good young player, the player is signed either a year before or during his arbitration years. This saves headaches during the arbitration process and the team benefits by locking a player up during his first couple years of free agency.

Perfect examples are the Florida Marlins deal with Hanley Ramirez and the Tampa Bay deal with Evan Longoria, who was signed long term really early. The deals for David Wright and Jose Reyes of the New York Mets are other examples.

Unless these players deals are reworked (and Longoria’s likely will be redone – it is a steal for the Rays), all four players will become free agents for the first time during their peak years of 28-31, and if they hit the free agent market, many teams will vie for their services.

A team will have to sign them for 4 or 5 years in order to get them, while guaranteeing big money through the years of 32-37. Those early to mid-30’s years have historically see a gradual, but sometimes precipitous, drop in production. Only Reyes at 28 years of age when he hits free agency will be under 30, but with a game built on speed and with leg issues already, what will his 28 to 30 something years be like?

So instead of paying the player smaller amounts earlier in the contract when production is likely to be the highest, why not reverse the contract and pay them less in the later years?

What this process would do is to get the biggest bang for the buck.

For example, take Mark Teixeira’s New York Yankee contract.  Teixeira’s contract is for 8-years and $180 million. After the $5 million signing bonus is paid, Tex will receive $20 million this year and 2010, plus $22.5 million per season through 2016. At age 35 and 36 will Teixeira be as productive as his late 20’s seasons? Will he even be equivalent to his 162 games averages of 40 doubles, 37 HR’s, 121 RBI’s and .288/.378./540?

Before you say, “of course Teixeira will,” remember that Wells was coming off  a .303/.357./.542 season before he signed his mega-deal and was in his prime age of 27.

Why not pay Teixeira $35 million for the next four seasons (through age 33) and then $8.75 million in years 2013 through 2016? The last four salaries could also be gradually declined from a high of $15 million in 2013, to $10 million in 2014 and $5 million each in years 2015 and 2106. And he is still getting the most money of any team, and he is getting the money much more quickly.

There are benefits to this situation for both the team and the declining player.

POSITIVES

1) More flexibility – Lets say Player A is declining in production and said team has a young minor league stud they want to bring up, but Player A is making $22 million and has no trade value. If the contract was front loaded, the still viable player (but not worth $22 million) could go to a contending team and try to win a title.

An aging slugger would fit well with a hungry young team looking for a bat, but unwilling to pay a massive back ended salary. Example: any expensive bat would be a great fit in San Francisco.  Said bat would be easier to move with a reduced price.

From 1949-1953, the New York Yankees won five straight World Series titles, the only such team to do so. A key bat off the bench for those teams was Hall of Famer Johnny Mize. The Big Cat was past his prime, but still viable in certain situations. In fact, during the 1951 season Mize hit 25 homers in 305 plate appearances, and in the 1952 World Series, Mize hit .400 with three homers and six RBI’s in the Yankees victory over the Brooklyn Dodgers.

Those were the only World Series Championships for Mize.

2) Adding a needed player – without being saddled with “dead money” for an aging player on the decline, a contending team could add some payroll. A team like Boston is going to ahve big money still to be paid to David Ortiz, Mike Lowell, Julio Lugo and JD Drew, four aging players way past their prime and worth. Will a huge payroll guaranteed for next season, plus maybe having to re-sign Josh Beckett, will they have enough to add payroll this season or next if they need a player?

3) Value of compounding – why wouldn’t a player want most of his money up front? Why not have it your own accounts earning interest instead of the owner’s bank account? I always remember a former boss telling me that he always worked his taxes every year so he paid ” a little something” to the government every year, because he didn’t want to give Uncle Sam and “interest free loan every year.” 

Same concept here. Player A gets big money early, and value of compound interest works in his favor. Placing those big monthly checks in various guaranteed interest accounts sure would keep a ballplayer happy later in life.

There are some perceived negatives, too. Everything can’t be perfectly rosy in MLB, can they?

NEGATIVES

1) Players egos – Players like the back loaded contracts because they keep the player within “the market value of the times. Later in Teixeira’s career he would still be making $22.5 million, probably similar money to another young first baseman just entering his prime earning seasons. Why would Teixeira want to earn significantly less than his younger counterpart? It is not market value.

The compensation is that a experienced veteran could be traded from a lower division squad into a pennant race with a more modest salary.

2) Willie Mays – aging players never want to admit they can’t perform anymore more. Most players end up going out on managements terms rather than their own. It was a sad sight to see Willie Mays a shell of his former self when he was with the Mets. For every Joe DiMaggio who bows out gracefully, there are many Willie Mays types.

Most players believe that getting old and slow won’t happen to them and would not look favorably on getting released for money concerns. You have to give credit to Ricciardi for releasing dead weight like BJ Ryan, but many more GM’s would just have Ryan occupying a roster spot and not contributing. With lower back end salaries, these players are more easily expendable when they decline.

Getting money back ended keeps the flow coming in when the player may not be playing anymore.

3) Smaller free agent market – a GM who starts talking about front loading contracts will undoubtedly get reprimanded by the Players Union, the word collusion will be bandied about and said GM will likely lose out on certain free agents.

The name of the game for GM’s is win now. What have you done for me lately is the new battle cry. GM’s can get fired if ownership is pressured by its fan base to start winning now. The GM might give in to the long term deal demands to just get that one piece he believes he needs to win a World Series. 

Unfortunately, that one piece almost never helps, and the escalation of salaries continues.

There are many benefits to front-loading contracts, both for the teams and the players. There would be more flexibility for the teams to deal, both getting that piece they need and in trading an aging star while the value is equivalent to his production. Managers would not have the pressure of having to play a veteran because he makes $20 million a year. The aging veteran could be the next Johnny Mize.

This scenario offers positives to both the current team in more roster flexibility, and a potential contender seeking to improve their team at an affordable salary. 

The players could even receive more money if they play the game right, all the while helping over-aggressive GM’s keep their dead money under control. So instead of Teixeira getting his money over eight years, with the last four at reduced rates, he could inform the Yankees he wants the $180 million (same market value) but now over, say, five or six years.

I don’t mean to pick on Teixeira nor am saying I think he will decline over his contract, but am using Tex as an example of a player who will get big dollars well after the so-called prime years.

But as egos take hold, the Players Union would pressure to see that front-loading did not happen and players would be more selective in choosing which teams they signed. The desire to win now for GM’s would further diminish the desire to change.  

It would take a maverick GM, someone secure in his position, maybe coming off of a recent World Series title or two. A GM who had built a good farm system so if a free agent or two decided to go elsewhere, the GM had enough resources to supplant a positional need with his own talent.

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