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$100 Million Contracts: Big Risk or Death Sentence?

baseball_money

In today’s world, people define success by using many different standards.  These measures include happiness, wisdom, or even helping other members of society. Unfortunately all of these people foolishly overlook the true answer–earning a $100 million contract to play for a Major League Baseball team. Who doesn’t want to play a kiddie game for disgusting amounts of money?

CC Sabathia, Jose Reyes, and Albert Pujols have already agreed to these mega deals this offseason. Prince Fielder is not too far behind. But while these contracts are great for the players, they appear to always end poorly to the teams that hand them out. To make matters more troubling, these laughable mistakes do not seem to deter these same franchises from allowing history to repeat itself. Why is the $100 million disaster contract handed out as often as ever?

The Current Nine Figure Contracts

Despite the multitude of players who have been signed for $100 million or greater, only three have ended in success (Manny Ramirez, Alex Rodriguez, and Albert Pujols [the 2004-2011 contract]). Three. As in one…two…three. The logical conclusion would be that $100 million contracts are probably not worth the money unless the player is indisputably a once in a lifetime transcendental talent. In that case, three appears to be a very appropriate number. However, there are more than three nine figure contracts currently signed in baseball right now. In fact, there are 22.

THE BIG 22:

  • Alex Rodriguez
  • Joe Mauer
  • Mark Teixeira
  • CC Sabathia
  • Troy Tulowitzki
  • Adrian Gonzalez
  • Miguel Cabrera
  • Carl Crawford
  • Johan Santana
  • Alfonso Soriano
  • Todd Helton (His $100M deal through 2011 was extended in 2010 to cover 2011 and 2012.  Only for about $9M extra.)
  • Barry Zito
  • Vernon Wells
  • Jayson Werth
  • Ryan Howard
  • Matt Holliday
  • Cliff Lee
  • Carlos Lee
  • Ryan Braun (His $100M extension doesn’t kick in until 2016, but the total value is higher than $100M)
  • Jose Reyes
  • Matt Kemp
  • Albert Pujols

Let’s sort these contracts into three categories. Category one is for train wrecks. Category two is for players who performed decently, but not close to being worthy of the contract they received. Category three is for contracts that at the end of the day were undeniable successes, probably Cooperstown worthy. While many of the Big 22 are in their early stages of these deals, it is surprisingly not difficult to predict which category they will fall in. With room for debate, this is how I would sort them with explanations where they seem necessary:

CATEGORY ONE: DISASTER DEALS/NO PRODUCTION:

Players: Jayson Werth, Barry Zito

Explanation: Can anyone actually defend these? Is Werth really signed for six more years?

CATEGORY TWO: NOT WORTH THE MONEY/ SOME PRODUCTION:

Players: Carlos Lee, Ryan Braun, Jose Reyes, Matt Holliday, Vernon Wells, CC Sabathia, Ryan Howard, Alfonso Soriano, Johan Santana, Todd Helton, Miguel Cabrera, Adrian Gonzalez, Troy Tulowitzki, Matt Kemp, Mark Teixeira, Joe Mauer, Alex Rodriguez, Cliff Lee, Carl Crawford, Albert Pujols

Explanation: There is a wide range of players in this group who could potentially be categorized into the other two. But, take a step back for a minute. Some players had great years, but were derailed by injury and decline in others (Santana, Beltran, etc.). As much as people blast Vernon Wells and Carlos Lee, they aren’t hurting their teams by playing–their caliber of play is just nowhere close to the level it needs to be to justify their bloated contracts. Other players such as Todd Helton have actually had quite a few good seasons, but they simply did not deserve as much as they made for their efforts.

Others will be upset over my placement of popular players such as Kemp, Tulowitzki, and Cabrera. In return I ask this: will any of these players still be the elite in five years? Six years? Seven Years? Even in three years, these guys could be commanding salaries they do not deserve. Mauer was a league favorite two years ago. I’m not sure he can even play catcher today. Things change too fast to make such a big investment.

CATEGORY THREE: WORTH EVERY PENNY/HALL OF FAME PRODUCTION

Players:  None.

Explanation: Even I’m a little surprised by this. See the issue here?

So What’s the Problem?

If $100 million deals are reserved for the best of the best, and not a single member of the Big 22 can boast to deserving such a contract, then there is clearly a problem. Issue number one is obvious–we live in a world where we only value the best. And when the best isn’t available, we convince ourselves that what we have is actually the best. Jayson Werth was a good outfielder…but as one of two above average outfielders in the free agent market last season, teams convinced themselves that he was significantly better than he probably was. Obviously the lack of a salary cap doesn’t help the situation. Jose Reyes had a good season and is the best free agent shortstop. So, obviously the Marlins will disregard his injury-riddled past and commit six years to him. Let’s see how they feel about that one in year four. What about Albert Pujols? Sure, I’ll take him for a few years now. But can the Angels really depend on him to be a force in eight or nine years? No way.

The next problem is contract duration. The contracts teams are handing out can span anywhere from six to ten years. People already talk about Mark Teixeira as a player in decline. How many more years does he have left on his contract? It shows a complete lack of rational thought to sign a player in his early thirties and expect him keep up production into his late thirties or early forties. It just isn’t going to happen. 

By the time baseball players reach free agency, they are too old to have that many years invested into them. For this reason, I would say Ryan Howard’s deal is slightly more auspicious simply due to the fact he is only locked up for five years. The Red Sox tried to dodge the age problem by giving expensive, long term deals to Adrian Gonzalez and Carl Crawford on the nice side of thirty. Nevertheless, Crawford already looks like a dud. Maybe it’s a sign that these contracts are not meant to be?

Of course, one also has to consider that these players are not robots. Once they have this guaranteed money, do they really care? In some cases maybe they do. But I’ll bet most of the time, they become complacent and lazy like the rest of us. Do you blame them?

A last thought to consider is that athletes are more than athletes…they are often viewed as celebrities in our society. That being said, besides Derek Jeter and Alex Rodriguez, who in MLB is that marketable? I’d honestly be more excited to bump into James Posey, an NBA bench player, than Albert Pujols. The Patriots can probably pay off a chunk of Tom Brady’s salary by only using the profits they make from selling his jersey. Kobe Bryant makes the Lakers amounts of money well beyond what the team even pays him. Are MLB players really capable of commanding a market in the same way NBA or NFL players are capable?

What to Do?

I am by no means proposing that MLB institute a salary cap. What I would urge for is more responsibility on behalf of the owners. Next time a 32-year-old outfielder with a history of injuries is coming off a career season, think a minute before signing him to a fifteen-year contract. Of course, teams can make the argument “If we don’t do it, another team will.” If you want to cripple your franchise, then by all means, go ahead. Of the Big 22, a handful of those teams are small market franchises. A stupid contract isn’t going to kill them, but it will certainly do enough to ruin their payroll for a decade. But teams are not smartening up.  The Rockies are almost done with Todd Helton and they responded by giving Troy Tulowitzki ten years. Really?

Boston fans complain about the contracts given to John Lackey and J.D. Drew, but in comparison to some of these deals, the Red Sox were lucky. Until front offices learn from these mistakes, the future of MLB is not promising. Can you imagine a world where teams are strapped with apathetic and disinterested athletes who are signed to astronomical, long-term deals?

Wait a minute…

About Josh Segal

Josh Segal is a professional shock artist and trash talker. He also occasionally writes opinion pieces about the Red Sox, Patriots, Celtics, and their respective leagues at large. Segal is currently a junior at Kenyon College where he plans to double major in drama and political science. Apparently he also writes his own biographies in the third person.

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Discussion

12 comments for “$100 Million Contracts: Big Risk or Death Sentence?”

  1. Very good. This was well-reported.

    We’ll see about the HOF aspect. I’d think we’ll get over that whole, “PED thing” or figure out a way around it, because it excludes wayyyy to many players from consideration (IE A-Rod)

    Posted by Ryan Hadfield | December 6, 2011, 12:16 pm
  2. So, Jason Bay and JD Drew are bargains?

    Posted by Ken | December 9, 2011, 9:51 am
  3. [...] Sports of Boston wonders if $ 100MM contracts are ever worth it. [...]

    Posted by Baseball Blogs Weigh In: Pujols, Reyes, Cespedes | Forex News | December 9, 2011, 10:21 pm
  4. so many things wrong with category 2…the whole article really. wow, i cannot believe MLBTR linked this. screw the millionaire players – let’s make the billionaire owners richer!

    Posted by Josh | December 10, 2011, 2:45 am
  5. You’re a moron. Tulowitzki, Cabrera, and many others you listed are WELL worth the money they’re signed for.

    Thanks for wasting a few minutes of my time by thinking you were actually going to write an article that was based on the truth.

    Posted by Guest | December 10, 2011, 12:38 pm
  6. Guest, are you capable of proficiently comprehending the english language? The whole point of the article was that players such as Tulo and Cabrera may be elite now, but come four years time will be nowhere close to deserving those contracts. Do everyone a favor and take your irrational, emotional, and hormonal whims elsewhere.

    Posted by Rod | December 10, 2011, 12:43 pm
  7. How can you claim to know that a contract is “NOT WORTH THE MONEY/ SOME PRODUCTION” if it hasn’t even started yet? Also, how can you know a contract will provide “no value” one year into a 7-year deal. I’ve seen some good analysis of $100+ million dollar deals lately, but this is not one of them.

    Posted by Guest | December 10, 2011, 2:35 pm
  8. Do you honestly think Albert Pujols will still be .300/40 HR/ 120 RBI guy in 2017? That’s insane.

    Posted by Rod | December 10, 2011, 2:41 pm
  9. I just think it’s silly to judge a deal before it starts. What I think doesn’t matter. I’m saying we can’t KNOW…both how these guys perform and what contracts will look like in 5+ years. For example, doesn’t Adrian Gonzalez’ contract already look better in lieu of what Pujols (and eventually Fielder) sign for? Also, Derek Jeter’s 10 year contract appears to have been ignored by this article.

    Posted by Guest | December 10, 2011, 3:41 pm
  10. Fair enough, but it’s a little harsh to call the author a moron for being skeptical. Gonzalez’ contract DOES look nice right now, but you’d be dreaming if you think he will produce numbers worthy of $20 MM a season in year 7.

    This article only covers players that are currently signed to deals voer $100 MM. Jeter is not currently one of those players.

    Posted by Rod | December 10, 2011, 3:52 pm
  11. Oh…I’m not the same guest who called the author a moron. I agree, that name calling on the internet is uncalled for!

    I agree that a good number of the big money deals won’t work out, but I think some will. Also, it’s worth noting that while Gonzalez might not be worth $20 million a year in the last years of his deal, he may be worth MORE than $20 million in a few of the early years of the deal. That, plus inflation, may help some of these deals look good in the future.

    I think the key to one of these deals is signing a guy who’s under 30, has an athletic body, and who has a mix of skills. The one dimensional, big bodied, over 30 player is a bad bet, for sure.

    Posted by Guest | December 10, 2011, 4:17 pm
  12. I’m not defending these overwhelmingly large contracts, but there are two (2) major points are not mentioned in this article.

    1) Salary Inflation
    Salary inflation for sports is much greater than ‘normal’ inflation. One good indication is the league minimum. In 2011 it was $414k and by 2013 it will rise to $500k as outlined in the new CBA. That’s over a 20% growth in 3 years. If the minimum league salary can grow so rapidly, then what’s stopping free agent prices from growing? (Absolutely Nothing)

    Conversely, salary inflation for ‘normal’ people is typically 3% a year.

    2) Long term contracts are not necessary paid in level payments.

    From those two points, it is sometimes possible to say it was ‘fair’ to sign someone to a long term deal. Ten years from now, the value of $20m will have declined. Why? Because inflation will cause league salaries will have rise accordingly.

    I’ll illustrate an example using Miguel Cabrera’s contract:
    Miggy is signed to a $152/8yr contract; however, the payments can vary between years, depending on the contract.

    2008 salary: $11m – 2nd arbitration season
    2009 salary: $15m – 3rd arbitration season
    2010 salary: $20m – covers the free agency years
    2011 salary: $20m
    2012 salary: $21m
    2013 salary: $21m
    2014 salary: $22m
    2015 salary: $22m

    On AVERAGE, Miggy earns a $19m/yr, and by the end of 8 years, he will have earned $152m.

    In the early seasons, Miggy clearly outperformed his annual salary, so the Tigers have some surplus value. By 2015, Miggy’s performance will have sharply declined, but his annual salary remains relatively unchanged.

    A) You could argue that because of Miggly’s former surplus value can largely cover the deficits he will create later in his career. This is one method of curbing against future deficits.

    B) Miggy’s performance will decline, but at the same time, salaries will have risen. By 2015, it is expected that the dollar value for performance will have risen as well. Again this can curb against future deficits.

    Simply, everything I’ve said accumulates to the following:
    If the GM is smart forecaster, he will be able to protect himself from the risk of future deficits. Namely, the GM must be competent in predicting how a player will decline, and how salary inflation will affect the market.

    Case in point, look at Dave Stieb’s contract.

    Back in 1985, Pat Gillick the GM of the Toronto Blue Jays, signed Stieb to an $16.6m/11yr contract, with escalator clauses to a total possible value of $25m. This made Stieb one of the highest paid players in baseball! (believe it or not)

    Gillick took a lot of heat for negotiating such a risky contract, but 6 years later, it was Stieb who ended up regretting that contract. Salaries exploded (completely due to inflation) and by 1991 over 36 pitchers were earning more than Stieb, many of whom were clearly inferior.

    So whilst all of the aforementioned contracts are large and risky, VERY FEW of them are actually ‘death sentences’. Just be smart about offering large contracts.

    Posted by Just_Another_Comment | June 8, 2012, 7:50 pm

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