The Value of the Opt-Out Clause in the David Price Contract

David Price can opt out of his seven-year, $217 million contract in three years? That’s either terrible for the Red Sox or a boon for the Red Sox, depending on how you think about it.

It’s terrible for the Red Sox!

It’s power in the hands of the player, since it’s a player option. If Price plays well, and the market continues to grow, they’ll have paid $30 million a year for three years and will have to get right back into negotiating with their ace, along with every other team.

If he gets hurt or plays poorly or the market doesn’t perform the same way going forward, they suddenly have to pay yesterday’s going rate for an overpriced, possibly hurt, aging ace… for another four years.

And before you say that it’s great for the Sox to be able to walk away if they feel the market will overvalue their pitcher… they could trade him if the market valued their under-contract ace more than they did. They would have a way to react other than just walking away, and they’d presumably get some sort of return for their asset.

It’s great for the Red Sox!

The opt-out makes it more likely that they get three good years from their investment and move on. It has to make it more likely than it would if the team gave him a seven-year confirmed deal, at least. That might be a matter of semantics, but it’s a fact. And teams prefer fewer years and higher average annual salaries, since it allows them to avoid larger commitments and work with greater flexibility.

The age-related decline experienced by a player — and especially by a pitcher — isn’t as regular as our aging curves suggest, not typically. With this contract, the Red Sox can see some of the better years of Price’s career and collect the internal data that results in re-signed free agents outperforming those who changed teams. There’s some benefit to the team.

There’s no better argument for this then the fact that the contract Price actually got was cheaper than our calculator estimates. It looks like the Red Sox got as much as $24 million off the asking Price for adding in the opt-out, so they got money for their efforts.

David Price’s Contract — 7 yr / $217.0 M
Year Age WAR $/WAR Est. Value Actual Contract
2016 30 5.3 $8.0 M $42.4 M $30.0 M
2017 31 4.8 $8.4 M $40.3 M $30.0 M
2018 32 4.3 $8.8 M $37.9 M $30.0 M
2019 33 3.8 $9.3 M $35.2 M $31.0 M
2020 34 3.3 $9.7 M $32.1 M $32.0 M
2021 35 2.8 $10.2 M $28.6 M $32.0 M
2022 36 2.3 $10.7 M $24.7 M $32.0 M
Totals 26.6 $241.2 M $217.0 M
Assumptions
Value: $8M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), 0 WAR/yr (28-30),-0.5 WAR/yr (31-37),-0.75 WAR/yr (> 37)

But that’s a bit simplistic, maybe, to just take the contract number and subtract it from the calculator’s number and call that the value of the opt-out. David Price got $2 million more than Clayton Kershaw — probably so he could have the biggest contract ever given to a starting pitcher. That sort of thing happens.

Here’s another, simple way of showing that the top contracts don’t move with the same velocity as the rest of baseball. Roger Clemens was the highest paid player in 2007, with a $28 million salary. Miguel Cabrera and now Price lead today’s baseball with $31 million a year. In the meantime, the cost of a win on the free agent marketplace has increased by roughly twofold.

We should also look at the value of the opt-out in terms of possible outcomes. If the Red Sox get a 10th percentile David Price, they get him for seven years and keep him. If the Red Sox get a 90th percentile David Price, they get him for three years and lose him. Add up all the different ways this can go down, and you get another monetary value for that opt-out clause. Sky Kalkman made a calculator that attempts to break down the value of the clause just this way.

Starting with Price’s Steamer-projected 5.3 wins in 2016, and having Price opt out at the 70th percentile or better, Kalkman’s calculator suggests that the the opt-out clause is worth $10 million to the player. Dave Studeman’s version (below Sky’s) operates on slightly different assumptions and produces a figure of $13 million. That doesn’t quite get us to the difference between the actual contract and the calculator’s version, but we know that the fringe tails of the market don’t always work the same as middle.

And if you look at it this way, it’s fine for both sides. The Red Sox got a few dollars off the contract and upped the likelihood that they just signed a premier player to three of the best years of his career. The player got long-term security, an opt-out worth $10 million once you sum up the possible outcomes, and the chance to get back on the market before he’s considered too old to reward handsomely.



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Graphs: Baseball, Roto, Beer, brats (OK, no graphs for that...yet), repeat. Follow him on Twitter @enosarris.


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Bomok
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Bomok
5 months 27 days ago

I’d like to say something (somewhat random) to all of the Babe ruth haters. i’ve heard alot of people on this site (not all of you), hate on Babe Ruths accomplishments because he wasn’t facing Black players. Or japanese, or Korean. but this is very narrow minded.
Babe Ruth played before beseball expanded. so alot of the guys in the big leuges today wouldn’t ave qualified for the bigs back then. Babe ruth played against the best f the best (in america). today, there are alot of guys who shouldn’t be in the majors, but are because there are 30 teams. There are alot of players today, who wouldn’t have been nearly as good if they played in ruth’s era.

Mike
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Mike
5 months 27 days ago

I think that the beer drinking and reported hot dog eating more than equalized any benefits Babe Ruth experienced from baseballs previous exclusionary history

Dr. Obvious
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Dr. Obvious
5 months 27 days ago

And the benefits of medicine now. People were dying in the 20’s of things we cure with a shot or a pill

Penicillin wasn’t yet being used when Ruth played

Serbian to Vietnamese to French and back
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Serbian to Vietnamese to French and back
5 months 27 days ago

I (somewhat mandatory) for all the hate to say Babe Ruth. Miracle so many people on this site (not all), I hate hip Babe achievements, because he is not faced with black players. Or Japan or Korea. But it is very narrow gradually.

Babe Ruth played for the expansion beseball. a lot of guys in the big leuges today I state to be eligible for the football team. Babe Ruth played with the best of the best F (in the US). Today there are many who are not in the big leagues, but there are 30 teams. There are many players who are now not nearly as good, if they played in the era of Ruth.

,
Guest
,
5 months 27 days ago

.

jruby
Member
Member
jruby
5 months 27 days ago

Cool. Story. Bro.

Something (somewhat random)...
Guest
Something (somewhat random)...
5 months 27 days ago

A lot is two words.

Alright
Guest
Alright
5 months 27 days ago

All right!

Dave Studeman
Member
5 months 27 days ago

It blows me away that people see player opt outs as win/win situations. If the team owned a similar option on the player, would you feel the same way? Having a great player under a long-term contract is a great thing if the player performs–but with an Opt Out, you will only have him under that contract if he DOESN’T perform. That is a true cost, just like a no-trade clause (but easier to quantify).

Think Greinke’s Decision to opt out isn’t hurting the Dodgers? If it wasn’t, they wouldn’t be trying to sign him at a higher cost. If he hadn’t decided to opt out, then he wouldn’t have been performing and the deal would be a net loss. The Opt Out is a true cost to the team.

Ryan
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Ryan
5 months 27 days ago

And yet, teams keep agreeing to include opt out clauses. The decision to do so is just a calculated risk on the team’s part, the same as any other part of the negotiations process.

Doug Lampert
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Doug Lampert
5 months 27 days ago

Yes, they keep including opt-out options. Teams also keep including things like more money than league minimum.

That teams include a clause doesn’t mean that particular clause is of value to the team in any sense other than that it helps get the player to sign.

The only value an opt-out has to the team is that it helps get a player to sign. An opt-out clause is a benefit for the player and cost for the team.

Eno Sarris
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Eno Sarris
5 months 27 days ago

Yes, the opt-out has a value to the player, something like $10-15 million. Which was ostensibly taken out of the full value of the deal.

jruby
Member
Member
jruby
5 months 27 days ago

Essentially, cash dollars are fungible and opt-outs are not

Owen S
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Owen S
5 months 27 days ago

I agree Dave. A Contract between a player and a team is a zero-sum game. What is good for the team is bad for the player, and vice-versa. When people discuss “win-win” contracts, what they actually mean is that the deal is fair, in that neither the player nor the team is inappropriately valuing the worth of the player.

Also, the bit about Clemens making $28M and Price/Miggy making $31 is quite misleading. If memory serves, Clemens signed a 1 year $28M deal. Comparing the AAV of a 1 year deal to a 7 or 10 year deal is..well..misleading. Im sure if Price wanted to sign a one year deal he could have earned something in the $40M neighborhood.

Momus
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Momus
5 months 26 days ago

Also, fairly importantly, a *pro-rated* $28M one year deal iirc.

TMB
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TMB
5 months 27 days ago

THANK YOU!!!! Finally, someone gets it. An option can only have value for the option holder (and just like with a financial option, no doubt Price paid for the option through a smaller contract). And yet, on Over the Monster and even with Eno here voice is given to how great the option is for the team.

dom
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dom
5 months 27 days ago

Yeah, I find it surprising that Eno wrote Boston “upped the likelihood that they just signed a premier player to three of the best years of his career” by including the opt out. Think about how wrong that statement is. In no way shape or form did Boston’s inclusion of an opt out increase the likelihood that they were capturing 3 of Price’s best years. That would have been captured in the 7 year deal. Unless you want to make the argument that the opt out will cause Price to pitch better than he normally would have, that statement makes no sense.

Larry
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Larry
5 months 27 days ago

You’re 100% right dom, that line makes no sense.

And Eno, you saying that “without the opt-out, they wouldn’t have the possibility of getting three great years and not being on the hook for the end” implies that being “on the hook” for the last 4 years would be a bad thing if Price pitched 3 great years, which it would not be.

Larry
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Larry
5 months 26 days ago

So you’re going to the “RS are smarter than Price/the market” argument. Fair enough, they haven’t exactly been showing it lately though.

phoenix2042
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phoenix2042
5 months 27 days ago

Look at the Sabathia opt out. The Yankees would be free of a pitcher who has been terrible the last few years much sooner if he hadn’t had the opt out. Yes, they made the choice to re-sign him. They could have let him walk. But with no opt out, he would not have had the leverage to get the extra years and money that he did. The same thing happened with Arod’s ten year extension after he opped out of his Rangers contract.

dom
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dom
5 months 26 days ago

Exactly. As a Yankee fan, we knew the extension would definitely hurt on the back end, but letting him walk at that point in time would have been very painful. He was still a top pitcher, we were still a WS contender, and it would have been impossible to replace his 6 WAR or so in the rotation.

The opt out just always messes stuff up for the team. It’s easy to say now, okay great we’ll got 3 good years from Price and let him walk but it won’t be that simple to just let your ace walk away while he’s still pitching like an ace.

The opt out takes away from the upside of having Price for what will likely be a sub-market rate if he continues on this HoF path. The original Sabathia contract would have been arguably the best big money FA pitcher contract if he just pitched the original 7 years with no leverage to force an extension.

Dave T
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Dave T
5 months 27 days ago

TMB – you are absolutely correct.

Price’s deal can be broken down as a 3 year deal plus Price having a put option (the last 4 years) that he can exercise after 3 years.

It should be possible for someone to use a Black-Scholes model to price the value of that put option with various assumptions (the biggest one would be Price’s future performance, followed by MLB salary inflation). It’s beyond my personal abilities to work through that calculation, but it should be possible. The spreadsheet from Kalkman may approximate what a robust look at option pricing would tell us, but the “correct” math for valuing an option is quite a bit more complicated than that spreadsheet.

Roger
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Roger
5 months 27 days ago

Of course the deciscion to opt out is hurting the Dodgers. And the decision to seek an option out clause in the first place hurt Greinke by reducing the amount of money he otherwise would have received. There is nothing inherently unfair or inequitable in the bilateral decision to include an option out.

Dave Studeman
Member
5 months 27 days ago

It didn’t hurt Greinke to include the opt out. It helped him. There is real monetary value in the opt out clause. I’m not saying it’s unfair. It’s just not a win/win. It’s a true cost to the team.

Atreyu Jones
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Atreyu Jones
5 months 27 days ago

I think Roger was saying that, unless the Dodgers stupidly gave him the opt-out for free, it reduced the dollar amount of the original contract.

vivalajeter
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vivalajeter
5 months 27 days ago

Agreed, Atreyu. When the Dodgers signed Greinke, they had two options:

1: Sign him for 6 years, $147MM, and an opt-out.
2: Sign him for a bigger deal with no opt-out.

They didn’t have the third option of 6 years, $147MM, with no opt-out. (If they did have that option, there’s no way they would have passed it up).

Brian L
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Brian L
5 months 27 days ago

Agreed. The only counter-argument I buy is that it incentivizes greater effort & better performance b/c there’s another potential payday on the horizon, but (a) that’s the sort of unquantifiable aspect we can’t evaluate and (b) even if we could quantify I doubt it would come close to making up for all the lost value you just described.

mr
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mr
5 months 27 days ago

Another counterargument is that the signing team might value youth more than the rest of the league. The highest bidder for 30 year old Player A might not be at all close to the highest bidder for 33 year old Player A. If the remainder of the contract falls between what the incumbent team values the 33 year old at and what the market does, it’s win win.

ReuschelCakes
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ReuschelCakes
5 months 27 days ago

wait, what? how can teams “value youth?”

sure, teams can have more or less aggressive ageing curves, but either way you’re gonna get to the option and it’s not going to be win/win

Shirtless George Brett
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Shirtless George Brett
5 months 27 days ago

Its not win/win but it does have an significant upside for the team.

Essentially it allows them to sign a big time free agent to a much shorter term contract then they likely ever could (Price is not agreeing to a straight up 3 year deal). If all goes well then you will get three very good years of David Price (possibly the last 3 very good years of his career) and then he will opt out to chase bigger money and become someone else’s problem. So you get the best of what’s left without being on the hook for his eventual decline due to age.

Now the counter point is the significant risk attached. That being the possibility that he doesn’t pitch well and subsequently doesn’t opt out and you pay a ton of money to a terrible pitcher. But one would assume that any team signing him or any guy like him would do a proper assessment of the chances of that happening.

Bip
Member
Member
Bip
5 months 27 days ago

Actually, what it precisely does is reduce upside. The upside of the 7 year deal is that Price is way better than he is getting paid for throughout the deal. The opt-out limits the upside the Sox can get.

K
Guest
K
5 months 27 days ago

That’s not telling the whole story.

Large free agent contracts are generally for post-prime years. They usually mean a team is sacrificing value at the end of a contract in order to gain surplus value in the early years.

When a player opts-out, the risk of these latter years is negated.

What you are suggesting is that the player would only do this if he is going to be worth more than the remainder of his contract anyway, in which case the team would want to keep him at the option’s price. But that isn’t true.

A player opts-out if he *expects* to get a better deal. Because there are several other general market factors (supply and inflation, for example) that contribute to this expectation – and because the team’s own situation can change dramatically over time – that player’s expectation alone does not necessarily mean his current team would have wanted to keep him for the price of the remaining contract.

In other words, its entirely possible for Boston to have signed Price for 3 years and $90M, have him perform so well that his market at the end of those three seasons is north of 4 years and $127M, and yet still not be interested in him at 4 years and $127M.

ReuschelCakes
Guest
ReuschelCakes
5 months 27 days ago

well yea, but…. a) his value doesn’t equal the annual payments, so there is no way they could have signed him for 3 / $90 and b) what is the logical leap you are making that BOS would all of the sudden be much lower than the “market” for the next 4yrs?

also, the implication that a player would opt out *expecting* more value is fairly naive — what % of opt outs receive less value? do you have real examples?

lastly, the notion that BOS could “win” on the back-end is just a farce and I have no idea why it is being propagated. As Studeman aptly points out, they are being paid $ up front (lower contract value) for value at the end (probability-weighted scenarios of opt out when good or bloated contract if terrible.) the notion that this could be a win / win is absurd.

ReuschelCakes
Guest
ReuschelCakes
5 months 27 days ago

this was meant to say:

“also, the implication that a player would opt out *expecting* more value but actually receive less value is fairly naive — what % of opt outs receive less value? do you have real examples?”

Shirtless George Brett
Guest
Shirtless George Brett
5 months 27 days ago

That doesnt really add up. According to the calculator in the article, the biggest value is in the first 3 seasons. The sox are paying $90 millon for the first three years when his value is closer to $120 million. So the Sox are getting the best value years and then letting him opt out when the value disappears.

how is that limiting upside? It seems like they are getting the maximum upside.

Chill
Guest
Chill
5 months 27 days ago

We are in total agreement. The opt out clause is all upside for the RS. They get a premium free agent for market value with little to no risk of paying for his decline phase. Total win for the Sox (and probably for Price too). The “loss” of Price’s services can be off set by simply resigning Price, signing someone else, or developing an ace internally. As a RS fan I pray to God Price has three lights out seasons and then walks. Let some other team gamble on a 33yo pitcher making 30+ mil/year.

Jeb
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Jeb
5 months 27 days ago

If the value disappears, Price won’t opt out. If Price starts juicing and doesn’t get caught (or just plays well), he will opt out and the RS miss out on his old juiced up years (where he could be worth $200mil but they would only have to pay him $127mil).

Jason B
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Jason B
5 months 26 days ago

“The opt out clause is all upside for the RS. They get a premium free agent for market value with little to no risk of paying for his decline phase.”

Quite the opposite; they have a *huge* risk of paying for his decline phase. At any time during the next three years, if Price gets hurt and is never the same? Performance falls off a cliff? They will be stuck with four years of overpaying for subpar performance as Price would never exercise that opt-out in either of those scenarios.

Jon
Guest
Jon
5 months 27 days ago

I would think that:

a) Price thinks there’s a good chance that he will do better than $127M/4 on the open market in 3 years, and

b) Boston would prefer that he opts out (in order “become someone else’s problem)

are mutually exclusive.

L. Ron Hoyabembe
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L. Ron Hoyabembe
5 months 27 days ago

You would be wrong.

Here’s a hypothetical example. The market is such that 4/127 is a near net neutral value contract for a player of Price’s age and ability. Price opts out, signs elsewhere for 7/160 (auction winner’s curse).

Red Sox take that 4/127 and spend it on part of Kershaw’s new contract, whom they can now afford because Price is off the books. Kershaw represents an upgrade over Price.

Larry
Guest
Larry
5 months 27 days ago

In your hypothetical Ron, the Red Sox could dump Price to the auction winner and sign Kershaw if they wanted to so badly.

Even if they couldn’t do that, your scenario still doesn’t disprove Jon. Hoping for an opt-out from a neutral value contract so you can enter the sweepstakes to overpay a moderate upgrade isn’t a rational course of action.

Jon
Guest
Jon
5 months 26 days ago

@L. Ron Hoyabembe

If he opts out, then by definition the Red Sox have an undervalued asset. He would thus have value to them, or to another team as Larry said.

The only situation in which the Red Sox would be happy that he opted out is if Price and his agent completely misjudge his market, and not a single team is willing to give him more than $127M/4. The odds of that happening are extremely small.

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 26 days ago

If he opts out, it could mean he is undervalued, but it could also mean that he is overvalued in the highly inefficient free agent market. I’m trying to point out that there is a real (if perhaps unlikely) scenario where 4/127 might be a fair deal, but the Red Sox would prefer not to take that risk on a 33 year old pitcher. There is an extra wrinkle with the compensation pick, which might be a better return than what the Red Sox could get on the trade market.

How about this. Price opts out and gets 4/135 from his new team. The Red Sox believe that 4/127 was an overpay for a pitcher his age, but they committed that because they were really after the first three years. But the deal wasn’t good enough to get any kind of return on the trade market.

This all involves unlikely hypotheticals, but I think there is a plausible scenario where the opt out ends up not hurting the Red Sox.

JD Sussman
Guest
JD Sussman
5 months 27 days ago

Spot on, Studes. The rationale floated that the option is beneficial to the Red Sox is easily dunked by the Greinke example. Simply put, if Price’s fair market value at the time of the opt out is greater than the remaining contract liability, he’ll opt out and the Red Sox will be losing an asset (or paying more to retain him, a la Greinke). If his FMV is less than the remaining obligation, he won’t.

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 27 days ago

You can’t guarantee Price’s performance over the last four years of the contract even if you know the first three years though. If Price plays well and opts out, then you got Price for 3/90 which is pretty great. Then comes the question if giving 33 year old Price 4/127 is a good deal, given that we know he was good 30-33. All things considered, 4/127 would probably be a good deal, but even if the Red Sox would take that, it’s not like they lose the money if they don’t. They could reallocate that 4/127 to try to buy a Kershaw or Harper, or some other better investment.

Jon
Guest
Jon
5 months 27 days ago

Yes, getting Price for 3/90 would be good. Do you know what would be better? Getting him for 4/127 after that, if Price performs well enough to make himself worth more than 4/127. This decision is entirely up to Price.

“even if the Red Sox would take that, it’s not like they lose the money if they don’t. ”

By this logic it wouldn’t be so bad if the Cubs just release Kris Bryant right now, because it’s not like they lose his $500k salary in that case.

K
Guest
K
5 months 27 days ago

Do you know what would be better? Getting him for 4/127 after that, if Price performs well enough to make himself worth more than 4/127.

This just isn’t necessarily true. Let’s say at the end of three seasons, at age 33, he’s “worth” 5/$160M instead of 4/$127M. To whom is he worth that? In all likelihood, one team (the team that would sign him). Maybe two.

It’s entirely possible for the Red Sox to not be one of those two teams. In that scenario, the only argument then is that they’d prefer to have him at 4/$127M because they could trade him.

Well, a player’s monetary value on the open market and his exchange value once signed are not identical. In this case, the universe of trade partners for Price is one or two. And those two teams may have been willing to *pay* Price that money, but that’s no guarantee they’re willing to pay him that money *and* give up an asset of their own.

Moreover, if Price opts out, Boston acquires a draft pick. So even if they could convince one of those two teams to hand over an asset, it would have to be an asset at least more valuable than a player they could have scouted and selected for development in their system.

All of this is fraught with risk. It’s just not reasonable to say definitively that getting Price at 7/217M is better than getting him at 3/90M even in the elite performance scenarios.

K
Guest
K
5 months 27 days ago

This is only true if you assume every team always wants to acquire any player who has surplus value. And that simply isn’t the case – especially when we’re talking about the most expensive and riskiest class of players in baseball. There are many more variables in play for any given team at any given time – and the variables change all the time.

It simply is not a given that a team wants to acquire anyone who has surplus value without regard for the magnitude of that value and the magnitude of the risk associated with the acquisition.

glenstein
Guest
glenstein
5 months 27 days ago

If Price opts out, the Red Sox recover 4/$120 (and, pending CBA rule changes, a draft pick) to spend on the next best thing. The Red Sox only “lose” if Price is worth more over those next 4 years than whatever that next best thing is. And not even that, the Sox only lose if that difference is large enough that it cancels out the surplus value they reaped prior to the opt-out.

Could the Sox lose? Maybe? Is the difference likely to be dramatic? Probably not, given everything we know about the performance of pitchers age 33 and beyond.

The other risk is that the Red Sox only get years 4-7 if Price is not worth them. The opt-out effectively shuts them out of any opportunity to reap value on those 4 years.

I think this conflates “dollar value of a contract the market will award to a player” with “performance that player will actually provide, when all is said and done.” Those are two similar things that often overlap. But historically, the market overvaluing a player his his mid to late 30’s is the rule, not the exception. So even if Price is set to underperform in years 4-7 the risk is mitigated (not erased, but mitigated!) by the a market that belligerently remains willing, even excited, to jump at the chance to overpay aging players.

Vernon Wells
Guest
5 months 27 days ago

Not quite right. If Price is worth it for years 4-7, he opts out. If not, Arte Moreno will take years 4-7 from the Red Sox.

boringdan
Member
boringdan
5 months 27 days ago

I disagree. No one knows if the Greinke opt-out will work in the Dodgers’ favour until after 2018 or so.

Look at the Sabathia deal- I bet the Yankees wish they had let him walk when he opted out.

Jason B
Guest
Jason B
5 months 26 days ago

But we do know for certain that it did work out in Greinke’s favor. We don’t know how it will play out for the team, but having the opt-out is a clear win for the player.

jdbolick
Member
Member
5 months 27 days ago

Having a great player under a long-term contract is a great thing if the player performs–but with an Opt Out, you will only have him under that contract if he DOESN’T perform.

Would you rather have David Price for $90 million over three years or $217 million over seven years? I’m assuming that you and everyone else who plus-oned your comment would rather have the former, yet Price was never going to sign for only $90 million over three years. So if Price stays healthy and performs well, then we would all agree that Boston received a great deal for those three seasons.

Jon
Guest
Jon
5 months 27 days ago

Yes, but if he stays healthy and performs well, then $217M/7 would be better than $90M/3. That’s all we’re saying.

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 27 days ago

In a vacuum, yes, you’re probably right. But you have to pay attention to where those final years fall. You have to account for the risk that his age 33-36 years are just not as good as his age 30-32 years, and every additional year exposes you to more risk of injury.

jdbolick
Member
Member
5 months 27 days ago

Yes, but if he stays healthy and performs well, then $217M/7 would be better than $90M/3. That’s all we’re saying.

You can’t assume that the final four years would follow the same trajectory. Again, the question is whether you would prefer to give Price $90 million over three years or $217 million over seven. If you choose the former, as everyone should, then you’re acknowledging that the opt-out has value to the Red Sox in addition to Price.

Nivra
Guest
Nivra
5 months 26 days ago

But they aren’t getting price for 3/$90M. They are getting Price for 3/$90M plus the added risk of a sub-par performing or injured Price for 7/$217M.

Price only exercises his “put option” if he is sub-par and the final four years of his deal are more than what the open market would give to him.

frug
Guest
frug
5 months 27 days ago

Yeah, any unilateral option inherently favors the option holder at the expense of the other party. That doesn’t mean that it is automatically a bad idea for teams to give them out, it just means that for a team to “win” in doing so, the player must overvalue the option by giving up an inordinate amount of guaranteed money in exchange for the opt out.

Larry
Guest
Larry
5 months 27 days ago

It blows you away, yet later in these comments you say it could in some cases be good, smh…

nerf
Guest
nerf
5 months 27 days ago

I think this needs to be said:

The idea that Dombrowski will pay for top-flight free agents (particularly pitchers) and Cherington isn’t entirely fair. Cherington might very well have sprung for Price, but he simply wasn’t available when Cherington was in charge. And for people comparing Lester to Price, I think we can all agree that Price has been more consistent, with better peripherals.

That said, I think this is a fair deal for the Red Sox. I just don’t think we should be so quick to jump to conclusions about front office habits and paradigm shifts. Ben Cherington has spent money (just look at last offseason; that was arguably a less-justified splurge on two relatively large question marks, whereas Price is a bit more safe of a bet).

Dave Studeman
Member
5 months 27 days ago

Teams keep offering Opt Outs because they are a proxy for more money. By offering Opt Outs, they increase the value of the deal to the player, just like a long-term contract increases value to the player. Value that the team is giving up. It’s a form of inflation. That’s why you can’t just multiply a one-year WAR value for a multiple-year contract.

There is one key way the Player Opt Out is different than the Club Opt Out. If a player opts out in the future, the club may have developed some low-cost talent to replace the player via their farm system. So, yes, there is a chance that a player opting out can be a win/win for both sides at the time it occurs.

But how often does that happen, particularly for pitchers? Maybe 10% of the time?

By the way, I think Opt Outs cost teams more when they’re included for pitchers (instead of position players). When you replace a starting pitcher, you’re replacing him with your sixth-best starter regardless of where he sits in your rotation. With position players, you have more replacement options.

glenstein
Guest
glenstein
5 months 27 days ago

Perhaps this is another way of saying the same thing, but there’s the distinct possibility that, after 3 years, Price is worth more to the market than he is to the Red Sox.

If Rodrigez/Owens/Espinoza develop, or a good free agent class comes along, the free resources may be more valuable to the Red Sox than Price, even if Price is worth more than what remains on his deal.

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 27 days ago

As the article pointed out, they could just trade Price at that point if he was under contract.

Chill
Guest
Chill
5 months 27 days ago

But trading a 33yo pitcher under contract for 4/127 will likely net you next to nothing. Very few teams will give you a boat load of prospects while taking on a massive salary, the Rangers deal for Cole Hammels notwithstanding. Chances are the compensation pick, if they still exist in 2018, will be worth more to the RS than what they could get in trade for Price.

glenstein
Guest
glenstein
5 months 26 days ago

So much the better for the Red Sox, then!

They can’t necessarily trade him, though, because the baseball trade market, a barter system, is less than perfectly efficient. The number of teams willing to part with value and assume a $30MM contact on short notice may be few even if Price turns out to have many suitors during the offseason after the opt out.

Plus the Sox may want him for the remainder of the season in order to compete even if they don’t want him for the subsequent four, high risk seasons.

For the crowd confidently declaring there’s no upside to the team, there’s a curious lack of engagement with nuances about how such a trade would actually work. There’s a lot of dogmatic declarations that proceed from first principles that lead to dead ends. “A buyer will materialize from somewhere. Where? How? Heck if I know!”

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 27 days ago

You are replacing him with your 6th best starter, plus all the money you had committed to the pitcher that opted out. So then you can take that money to pay for the replacement pitcher.

Larry
Guest
Larry
5 months 27 days ago

Your low-cost talent argument is awful. If you develop lost cost talent and have a high cost pitcher with surplus value, great, trade one of them for other assets! It’s like saying that if Kershaw was on the Mets the Mets should try to void his contract, b/c they don’t “need” him – utterly ridiculous.

Your thought that Opt Outs cost teams more when they’re included for pitchers is very likely correct (b/c they are more likely to get catastrophic injuries), but I’m not sure I follow your reasoning that there are “more replacement options” for position players. Looking at the top 20 free agents this year (http://www.fangraphs.com/blogs/fangraphs-crowd-the-top-82-free-agents/), 10 are SP. 0 3rd basemen, 0 catchers (Wieters took a QO), 0 CF.

glenstein
Guest
glenstein
5 months 26 days ago

It’s more like saying you have CC Sabathia circa 2012, and you’re worried that, contrary to the markets perception, he’s going to fall apart. Will someone give you anything of value for Sabathia? Well maybe, maybe not. If they want to, great! But the trade market may not be efficient enough to do that

And in any case, whether you get something back, beyond the benefit of just parting with Sabathia is a trivial concern next to the more fundamental objective of parting with his impending black hole of a contract.

Losing him is a net benefit for the team irrespective of whether they hypothetically could have, on top of everything else, got some trade pieces.

Larry
Guest
Larry
5 months 26 days ago

If the market perceives he will deliver surplus value, by definition you can get something for him. Something of value is better than nothing. If the free agent market is going to give him 4/140, someone will give you a pick or a prospect for him in a trade. Thus the opt out isn’t a win for the RS.

McNulty
Guest
McNulty
5 months 27 days ago

but isn’t an opt out identical to a player option in the sense it discounts the salary during the (player) guaranteed years?

I want to see a deal where someone like Price gets 4 player options at the end

tz
Guest
tz
5 months 27 days ago

In Price’s case, I don’t think the opt-out has a ton of value. Here’s the scenarios for him, with and without the opt-out:

Price is great years 1-3:

– With opt-out, Price signs elsewhere for more money
– No opt-out, Price stays in Boston for his decline years at fair value but not much upside for the Red Sox.

Price stinks years 1-3:

– With opt-out, Price takes the guaranteed money and is an albatross for the Red Sox

– No opt-out, Price is also an albatross, possibly for more money per year.

So really, it’s not too bad of a concession for the Red Sox.

The situation where the opt-out is a real big deal is when the free agent is heading into his peak years, where there’s a bigger chance of some upside in the second part of the contract. For a guy like Heyward, you’d probably want to backload the money to the second part of the deal, so you’d have gotten a bargain if he opts out and also to make him more likely to stay if he second half of the deal is good.

Randle L.
Guest
Randle L.
5 months 27 days ago

+1

The Sox have bought one of four things:

(1) 7 years of much worse-than-expected Price at a slightly cheaper rate than if there was no opt-out;
(2) 7 years of worse-than-expected, but still somewhat useful, Price at a slightly cheaper rate;
(3) 3 years of slightly worse-than-expected, but still projectable Price at a rate above his value;
(4) 3 years of Price as great and projectable as ever, providing $30M or so in excess value and walking before he can continue to provide BOS excess value or otherwise be traded.

Options 1 and 2 are good for Boston compared to the no-opt-out situation because they bought 7 years of bad performance at a cheaper rate than without the opt-out. Option 3 stings the most, at least on its face, since Boston didn’t come out with excess value and Price nonetheless leaves (this would be a pretty fine situation — maybe a non-TJ injury for this whole season before two seasons of peak Price). Option 4 doesn’t look that bad — they still get excess value from the deal and could always sign Price again — but it forecloses them from trading that valuable Price or, if they want to keep him, requires them to pay more than what they could have bought him for today. That’s a pretty big bummer considering they’ve purchased the downside of bad years 4-7, even if it’s not bad to get three years of excess value and flexibility in 2018.

Let’s say this saved them $13M as per Eno’s link in the article. Let’s say come 2018 free agent Price can be had for something similar to what Greinke wants now: 6 years and $35M/yr (bumping up a bit for inflation). As fate would have it, that’s exactly $13M over 2019-22 as compared to this deal, and two more years of commitment past what they were willing to agree to today. So its something of a hedge — Sox save a chunk if Price is bad, but have to pay that back if he’s good and they want to keep him. (And they’re forced to keep him around longer, as is the norm on big ticket deals.)

So yes, this assumes that the opt-out is player positive — it also assumes that the team has received consideration in the form of less money going to the player. If team’s are handing these out without that consideration, of course it’s foolish — it’s the same as paying too many dollars or giving too many years. But the tool itself is no different from dollars or years, and should not be considered foolish as such to include in bargained-for agreements.

glenstein
Guest
glenstein
5 months 26 days ago

In the case of #3 and #4, you left out that the Sox collect a compensation draft pick and recover 4/127 to reinvest in whatever they want.

So the Sox only “lose” the difference between Price’s performance and whatever they reinvest those resources in.

Larry
Guest
Larry
5 months 26 days ago

When you say:
– With opt-out, Price signs elsewhere for more money

You see that more money part at the of your sentence? That’s part of the value of the opt-out.

When you say:
– No opt-out, Price is also an albatross, possibly for more money per year

You see that more money part, near the of your sentence? That’s part of the value of the opt-out.

Can’t believe this is upvoted.

Richard Bergstrom
Guest
5 months 27 days ago

I’m kind of curious how many players had contracts with opt-out clauses and didn’t opt out (or renegotiate)?

Vernon Wells
Guest
5 months 27 days ago

Did someone say something?

TA
Guest
TA
5 months 27 days ago

I’ve seen many comments here and elsewhere that suggest that the only way Price would opt out is if he has three very strong years. What if he’s injured for part of that contract, but still has $32MM+ annual value at the end of year 3? For example, a broken finger on his left hand in year 2 and/or a torn hamstring in year 3?

It’s not a likely outcome, but it’s one of several scenarios where years 1-3 are not good for the Red Sox and yet he’s still able to walk away while retaining high value. I think many are ignoring such a possibility.

jdbolick
Member
Member
5 months 27 days ago

I’ve seen many comments here and elsewhere that suggest that the only way Price would opt out is if he has three very strong years.

Those comments are based on the misguided notion that Price will only opt-out if he can beat his current deal’s average annual value. That is not the case. Price’s agent will make the decision on whether or not to opt-out based on the estimation of total money he can secure in a subsequent contract. So if it comes down to choosing between $127m over four years and $155m over six, he’s almost certainly going to opt-out and take the $155m over six.

Jon
Guest
Jon
5 months 27 days ago

That’s an oversimplification. Are you saying he would take $128M over 10 years instead of $127M over 4 because $128M is more than $127M? Sounds like it.

Price will opt out if the contract he can get as a free agent is more appealing to him than $127/4.

He might prefer a 3 year, $110M deal in 2019, and want to go back on the market again as a 36-year-old. Who knows?

Josh
Guest
Josh
5 months 27 days ago

This may be the most pedantic comment I’ve seen on this site. The person you’re replying to in no way expressed what you are addressing as an “oversimplification.” It was said that Price would “almost certainly” opt out for a 6/155 deal rather than stay for 4/128. That’s entirely rational and can be seen in the current Greinke negotiations. No one, save you, suggested any 10 year deal for a trivial amount more.

Jon
Guest
Jon
5 months 27 days ago

@Josh

It was hyperbole of course, and also I disagree. I don’t see any way that he prefers $14M/season for 2023-24 over becoming a free agent again at age 37 (assuming that his next 3 years are good enough that he can exceed $32M/season for 2019-22).

Now of course (and again, this is also hyperbole, in case it’s not clear), if he could get 20 years for $30M/season instead of 4 years for $32M/season, he would take that.

Also I may have missed it, but there hasn’t been much talk of AAV.

jdbolick
Member
Member
5 months 27 days ago

Are you saying he would take $128M over 10 years instead of $127M over 4 because $128M is more than $127M? Sounds like it.

Josh is spot on. I sincerely doubt that you’re addled enough to believe that what I said was in at all equivalent with choosing $128 million over ten years. So your options are to either claim that you are that genuinely daft or admit that you intentionally made a ridiculous comment. Furthermore, your disagreement is irrelevant. History has shown us time and again that agents go for long-term security rather than the highest average annual value.

Jon
Guest
Jon
5 months 26 days ago

I intentionally exaggerated to make a point. If that is ridiculous to you, then you’re perfectly entitled to that opinion.

Re: AAV, I agree with you. You said “Those comments are based on the misguided notion that Price will only opt-out if he can beat his current deal’s average annual value” – and my claim is that nobody is really saying this.

Atreyu Jones
Guest
Atreyu Jones
5 months 26 days ago

I agree with Jon. It seems everyone understands that Price will opt-out if he things he can get a BETTER contract, and everyone also understands that a better contract does not necessarily mean higher AAV.

JDbolick invented an oversimplified viewpoint (only AAV matters) and replaced it with an equally oversimplified viewpoint (only total value matters) – even though he obviously knows that both are oversimplified.

Larry
Guest
Larry
5 months 26 days ago

Don’t waste your time arguing with idiots Jon, you are of course right.

Well put Atreyu, although jd’s replacement viewpoint I’d argue is even more “oversimplified” (read: wrong), as Jon so clearly demonstrated.

Hank
Guest
Hank
5 months 27 days ago

This is a real risk/hidden trap that I think people ignore – underpeformance short term which won’t impact long term value (like the examples you gave)

The other cost to the team, which is probably minor, is if they ever want to deal him BEFORE the opt out, his trade value is much much lower. For example If he’s pitching reasonably OK and Boston is going in a different direction say after year 2, he’s more or less a rental player to the acquiring team. The opt out doesn’t just mean the team loses out on potential trade value of the post opt out years, it also lowers his trade value leading up to the opt out too.

Larry
Guest
Larry
5 months 26 days ago

The first 3 years are irrelevant to the value of the opt-out clause, other than their use in projecting his final 4 years.

SCMT
Guest
SCMT
5 months 27 days ago

It isn’t a win\win as such a clause is to the benefit of the player in particular but there are possible winning scenarios for the team as well. Some focus in these discussions is having to pay full price if he doesn’t perform, gets hurt, or the market goes in a downward trend but those are true regardless of such a clause or not and do not hurt the team.

If Price goes all Pedro or Kershaw on us the next three years or the market spirals upwards dramatically that can be a losing situaion for the Sox. The former isn’t highly probable and the latter is less of an impact to a team like the Sox with plenty of resources to pay market value regardless of the year. But those are true cases where the opt-out can hurt the Sox.

A possible winning scenario is Price performs on par, opts out, and he makes even more money/years. There is a reasonable probability of this happening and if so there is no certainty the Sox will decide to pay the decline years even though we know some team will.

The Sox overpaid in prospects for Kimbrell and overpaid in dollars for Price (or at least paid the upper end of market value for him). Can’t we also say they overpaid some for Chris Young? The Sox are overpaying this winter because they don’t have leverage. They may not want to pay FA pitchers in their 30s typically but they may not have really had a choice this time. In three years the situation may be very different and they may feel quite comfortable letting another team pay a 30s pitcher decline years.

Josh
Guest
Josh
5 months 27 days ago

We’re all trying to guess at the motivations behind all this, but when you consider the Red Sox past stance on aging pitchers, it’s pretty clear that they made their choice here on purpose.

By including the opt out in the deal, the team is tacitly agreeing that they’re cool with the risk of Price opting out after three years. If he opts out, it means he was reasonably productive and they get a draft pick. That outcome may not be as desirable as a trade that nets a package better than that draft pick with another team for the remaining 4/128 for Price, but they seem to be saying that this is an outcome perfectly fine for them.

They would retain payroll flexibility, intimate knowledge of Price and his health as he hits the market again, that draft pick, and ultimately, the ability to decide whether or not they see him as a worthwhile investment as he gets into his late 30s. I think the potential that the last four years of Price’s deal are great, Maddux-esque years is dwarfed by the possibility he hits a steep decline during that period.

Jon
Guest
Jon
5 months 27 days ago

They were perfectly fine with this *because* they are paying him less money because of it.

Unless you are saying that if David Price’s agent gave them the following options:

A) 7 year, $217 Million contract with opt-out
B) 7 year, $217 Million contract with no opt-out

Then they would choose A over B.

I’ll give you more credit than that though…

Also: “I think the potential that the last four years of Price’s deal are great, Maddux-esque years is dwarfed by the possibility he hits a steep decline during that period.”

I agree. But we’re not talking about what we think now. We’re talking about the state of Price, and of baseball, 3 years from now. And basically, if Price opts out, the chances of Boston being happy about that are tiny.

Zorlock
Guest
Zorlock
5 months 27 days ago

Are there any circumstances under which it would be advantageous for a player for the team to hold the option? I can’t think of one. I don’t see why this wouldn’t be symmetrical. Of course, if the team gets a discount or the player gets paid more than the option is worth, then it is advantageous, but the option in and of itself is not favorable for the party not holding it. I think those who claim so commit an error similar to the sunk cost fallacy. Comments like “if a player opts out then the team has guaranteed its gotten the players best years” are false. The team has gotten the players best years regardless of whether he opts out or not. The cost has been paid and the performance performed.

Bip
Member
Member
Bip
5 months 27 days ago

I just thought of a reduction of this issue.

In order to think that this opt-out is good for the team, you have to believe one of two things:

1. Price and his agent are not capable of accurately assessing his own market
2. Teams are not capable of accurately assessing Price’s likely future value

If neither are true, then after 2018, teams will assess how much they think Price is worth and formulate their idea of a reasonable offer for that. Price will get a sense of what those offers are. If those offers are more than 4/127, he will opt out. If less, he will not. If less, the opt-out has not come into play and is irrelevant. If he opts out, that means some team correctly values him at more than 4/127, which means either the Red Sox would be getting a bargain if he stayed, or that they could trade him for something valuable to a team that values him higher.

None of these scenarios are better for the Red Sox than the same scenario without it. So, again, in order to prefer the opt out, they would have to be betting on one of the two above.

If Price cannot judge his own market, he might opt out thinking he will get more, when he actually gets less. In this case they could simply re-sign him for less than he opted out of. This strikes me as incredibly unlikely. If it is the latter, and teams cannot project him, then the Sox would prefer that he opts out, because then some other team is paying him even more, when in fact he is worth less. This is also very unlikely, since I also doubt Price opts out if he projects his own performance to be worth less.

L. Ron Hoyabembe
Guest
L. Ron Hoyabembe
5 months 26 days ago

This does not paint the whole picture. There are a limited number of teams, an even smaller number of teams for whom David Price makes sense, and an extremely limited number of David Prices. The market is not efficient. His market value and his actual future value will almost certainly not be the same.

Jay
Guest
Jay
5 months 27 days ago

Those future year projections for WAR and values are interesting. Is there anywhere on the site where we can find the equivalents for other players?

Chill
Guest
Chill
5 months 27 days ago

As I see it, the opt out is nothing but a positive for the Red Sox and this is why.

If the Red Sox, or any team, had to choose between offering Price a 3/90 or a 7/217 contract every single franchise would choose the former. Every single franchise. Every time. Given Price’s age and the number of dollars involved it is impossible to imagine any team choosing the later. Ever. Unless they had a crystal ball that could foretell seven years into the future of a 30+ year old pitcher with a substantial amount of mileage on his arm. All else being equal the 3/90 contract is far better for any team, especially given Price’s age and the vicissitudes of pitcher health.

So why did the Red Sox offer Price 7/217, you ask? Because they had to. They are a big market team that needs to mollify a restive fan base and usher out one of their all-time greats, Papi, on a winning note. The market dictates that 30 something starting pitchers with any kind of successful resume get overpaid for their declining years. That’s simply a fact of MLB reality. The examples are too numerous to list. One can rail against this reality but that won’t change the reality. Life is unfair. Billionaire owners have to pay over the hill pitchers tens of millions of dollars that they will likely never earn. C’est la vie.

So why is the opt out advantageous to the Red Sox under any circumstances, you ask? Because there is no possible downside given the reality the Red Sox live in. If Price stinks and decides not to opt out, the Red Sox were going to sign Price, or another of his ilk, for substantially the same contract. As long as the Red Sox were determined to land a front line FA pitcher this off season, and they clearly were, a nine figure contract was inevitable. The opt out does nothing to change that reality. If Price pitches well and decides to opt out, that is even better for the Red Sox. To begin with they get three years of an Ace level pitcher for market value while he generates both surplus value and actual on field performance. That’s great for the Red Sox. And for Price too! He will then get to renegotiate a more lucrative deal for himself with any team he likes. The Red Sox will have the chance to see Price up close for three years and then revaluate both the pitcher and where their team is at competitively speaking. (I don’t think it’s a coincidence that Kimbrel’s deal, including the team option, ends at the same time as this opt out potentially kicks in). If the Red Sox decide they want to resign Price for more money so what? I doubt it will be any more costly than Scherzer’s deferred money on his big contract. The flexibility the Red Sox will have at that point is worth the risk of not being able to resign Price if he opts out. Even paying more for Price in three years time does not out weigh the value of that potential flexibility.

The opt out is an unqualified good for both sides.

Anonymous
Guest
Anonymous
5 months 26 days ago

“To begin with they get three years of an Ace level pitcher for market value while he generates both surplus value and actual on field performance. That’s great for the Red Sox.”

You realize that has nothing to do with the opt-out, correct? Unless you’re framing the opt-out as a hedge, like betting against your favorite team so ‘you’ll win either way’, this is the negative part of the opt-out for the Red Sox.

Chill
Guest
Chill
5 months 26 days ago

I just don’t get why people don’t understand the unqualified upside to the opt out from the RS perspective. Let’s look at the worst case scenario from the Sox perspective with regard to Price choosing to opt out. If Price opts out its a given that he will have pitched like an Ace, a 30 million dollar Ace, for the better part of three seasons. Let’s be really conservative and say 15 WAR over three seasons and let’s value each win at 6 million. 15WARx6million=90 million dollars. So Price is worth every dollar but sadly not a cent more. Along the way he likely helps the Red Sox win lots of ballgames, sell lots of tickets and hopefully play deep into the post season. Then he opts out. This is the worst case scenario for the RS if we assume that Price will be in a position to opt out. The Red Sox will get exactly the player they paid for and hopefully have some hardware and jewelry to show for it.

So Price opts out. Where does this leave the RS? It leaves them in a position of maximum roster and payroll flexibility. The not unrelated timing of the Kimbrel contract expiring will leave the RS with around 45 million coming off the payroll in three years time. That will just about the time that Mookie and Xander will be looking for long term extensions. So the Sox will be in a position to make a decision, a decision in the afterglow of having an Ace leading your rotation for the last three years. Their decision will be how to allocate 45 million dollars worth of payroll. They can decide to resign Price for more money. I think it very very unlikely that a 33yo pitcher will be worth more than 32million/season for 5+ seasons. The RS could still decide to sign him and that would cost them money. Money they would be spending after accumulating 3 years of data about Price and his value on and off the field. That’s the downsides for the opt out for the Sox. The Sox would lose the right to pay a 33yo pitcher 127million over 4 years. That doesn’t seem like a bad bet. I’d bet there’s little chance that Price will ever be any more valuable to the RS than he will be in the next three years.

What could the Sox do with that $ instead? They could lock up some of their young talent. Mookie, Xander, Swihart, Erod, Moncada, Bientendi, Devers and Espinosa are all candidates for long term deals. Many of them will likely be impact players at important positions at around the time that Prive opts out.

So in three years, if Price opts out, the RS will have a choice. They can overpay an aging pitcher by a few more dollars than they originally budgeted for. (It is a given that Price and his agent think that someone will overpay, otherwise Price won’t opt out) Or they can use that money to lock up a nucleus of home grown position players that project to be impact big leaguers. If I’m DD I’ll take that choice every time. Maybe DD learned from the Miggy, Fielder and Verlander contracts. Long term contracts to aging superstars are not often a good gamble and yet some team will always take that gamble. I guarentee that the RS are hoping beyond hope that Price opts out in three years so that some other team can take that gamble in their stead.

Atreyu Jones
Guest
Atreyu Jones
5 months 26 days ago

Chill, think of the bonus clause that the Red Sox gave Curt Schilling before 2004 (ignore that the commish disallowed it): it said he would get a $2m bonus if the Sox won the WS in 04 or 05. And of course the Sox were THRILLED that it came into play … but it didn’t make the contract better from their perspective. Like now, the Sox will be thrilled if Price pitches well enough that he will opt-out, but that doesn’t mean it makes the contract better for them.

You talk about flexibility etc, but the simple thing is they will still be a big payroll team, and big payroll teams like ace pitchers on contracts that are sub-free agent levels. They just do. And if they lose something they want, that is a bad thing, not a good one. The Dodgers just lost Greinke at 3/$71m. They would love to have Greinke at 3/$71m right now. I don’t know how that example could be more clear-cut.

When teams lose assets that they want, it is not a win for them.

Chill
Guest
Chill
5 months 26 days ago

I take it as a given that Greinke will not be worth the extension he’s about to sign. The Dodgers will still sign it and then almost certainly come to regret it. The Yankees resigning Sabathia and Arod come to mind. I hope for the RS sake that Greinke gets a fat raise and then crushes it for the next three years making Price more likely to exercise his option. Signing Price for 3/90 and then having him earn that contract is a dream scenario for the RS. Losing the right to pay Price 127mil over the subsequent 4 years doesn’t mitigate that fact. The ensuing payroll flexibility will be worth far more to the sox than the guaranteed services of a 33yo pitcher making north of 30mil/year and frankly it’s not even close.

Thank God You're not my team's GM
Guest
Thank God You're not my team's GM
5 months 26 days ago

There really should be an IQ minimum to discuss such complicated things like why giving a free option can never be good (unless you think certain other participants are idiots).

Chill
Guest
Chill
5 months 26 days ago

Which GM wouldn’t prefer to sign Price for 3/90 instead of 7/217? The opt out preserves 3/90 as a possibility and allows the RS to reasses at that time. Your snark doesn’t mean you’re right. In fact your snark means you think DD is wrong. Meaning you think you are smarter than an executive being paid millions of dollars to run a multi billion dollar business. I suspect DD might have a better idea what he’s doing than you’re giving him credit for.

Again which team wouldn’t jump at the chance to sign Price for 3/90? The opt out preserves the chance that can happen. And the downside is that Price pitches so well that he deserves a raise from 32mil at the age of 33? I’m sure that will break DDs heart. Sign the best pitcher available and have him pitch lights out while avoiding a long term commitment. I don’t think I’m the one failing to grasp something here.

Chill
Guest
Chill
5 months 26 days ago

One must also factor in the market for FA pitchers in three years time. It’s possible that both Kershaw and Jose Fernandez will be FAs that off season. The opt out, if the RS are lucky enough that Price exercises it, will free up 32mil/year to allocate to a younger, presumably better, FA option than a 33 year old Price. I’ll say it again: the RS are hoping beyond hope that Price opts out after three years. They will take their compensation pick and walk away as happy as larks.

Atreyu Jones
Guest
Atreyu Jones
5 months 26 days ago

If cheaper than $127m/4 and better FA SP’s will be available in 3 years, Price won’t opt out!

We have the Greinke example happening this very off-season. Where are the cheaper and better options for the Dodgers compared to the $71m/3 that just disappeared?

Chill
Guest
Chill
5 months 26 days ago

If Price doesn’t opt out this entire discussion is moot. If Price does opt out the downside for the Sox is totally negligible. The Sox will have to pony up a few extra million for an over the hill pitcher. I’ll bet the RS eschew that option and allocate their resources more efficiently elsewhere. Prices valuation of his post 2018 worth may be in line with the market and still be divergent from the RS internal valuation. The flexibility that the opt out promises is worth it’s weight in gold.

As far as the dodgers are concerned they should walk away from Greinke and seek their number 2 sp elsewhere. They won’t but that’s a separate issue.

Atreyu Jones
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Atreyu Jones
5 months 26 days ago

But no matter where the Dodgers seek their #2, it isn’t going to be cheaper and better than the Greinke at $71m/3 that they just lost.

So right now they have to either have a worse pitcher, or pay a ton more for another elite pitcher. Which is the exact same situation the Sox will be in if Price opts out – and you are calling these wins for the team?

Chill
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Chill
5 months 26 days ago

You are making too many false assumptions to count. You’re assuming Greinke will be worth 3/71 if he hadn’t opted out. Every aging curve out there vehemently disagrees with that assumption. Signing Greinke for more dollars and more tears is even less likely to work out for the Dodgers. The fact that they have no better alternatives at this point is both irrelevant to the Red Sox situation in three years time and likely their own fault.

In three years time the Red Sox may need to free up money to lock up Xander Bogaerts to a long term extension. Will the 32 million freed up by price opting out be better spent on an over priced 33 yo pitcher or on a homegrown 26 yo old all star ss? What happens if Erod develops under price’s tutelage and grows into being an ace himself? An ace at a fraction of the cost of price who is a decade younger?

I understand that price holds the option. I understand that if he opts out the RS will then have to pay more for his services IF THEY SO CHOOSE. There is certainly some potential downside in that. The upside however of being free to spend their money on something else of more value instead far out strips the loss of a 33 yo pitcher making 32mil/year. Anyone who can’t comprehend the value of that flexibility, at the potential cost of spending a few extra million for an already aging and over priced asset, is being willfully obtuse.

Thank God You're not my team's GM
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Thank God You're not my team's GM
5 months 26 days ago

Confirmed idiot. Every aging curve out there vehemently agrees Greinke is worth much more than $71m/3.

Chill
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Chill
5 months 26 days ago

You should try to realize a three things.

First, your childish insults and name calling are gratuitous, uncalled for and add nothing to the discussion. Rather than make me look stupid they only serve to make you look churlish and infantile.

Second, please demonstrate how Greinke will defy the vast majority of historical precedent and maintain his standing as an ace as he heads into his mid to late thirties. I can think of an endless list of examples that undercut that unsubstantiated assertion including but not limited to CC Sabathia, Josh Beckett, Pedro Martinez, Kevin Brown and on and on and on. Fangraphs projects Greinke to lose almost 2WAR of value between last season and the next alone! His era is projected to nearly double. The idea that Greinke is immune to the aging process requires more proof than an unsubstantiated assertion on your part. I am both happy and eager to be educated by someone who is clearly as intelligent as yourself.

Third, my assertion that the opt out in Price’s contract is advantageous to the RS remains unchallenged. Your appeal to popular opinion moves me not at all. If Price pitches well enough to opt out of his contract the RS will be big winners with regard to this signing. They will have signed an ace, who will then proceed to pitch like one, and they will retain maximum financial flexibility and avoid a long term financial commitment to an aging pitcher.

There is simply no downside to the opt out from the RS perspective. If the RS could have signed price to a 3/90 contract they absolutely, positively would have done so. That’s all the proof anyone should require to realize what an astoundingly advantageous opportunity the opt clause represents for both parties.

Nivra
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Nivra
5 months 26 days ago

So after thinking about this extensively, I think the opt-out does have benefit for the team if the player is willing to lower the overall AAV and dollars on the deal for it.

Hypothetically, let’s say Price is ok with all three of the following deals:
3yr/$129M ($43M AAV)
7yr/$238M ($34M AAV)
or
7yr/$217M with an opt-out after year 3.

What are the possible outcomes?
(1) Price rocks for 3 years, and opts-out. The Red Sox gained 3 years of great performance at reasonable cost relative to what it would have cost, but they lose a chance at having signed a historic-level pitcher to 4 more years of a reasonable deal.
(2) Price performs poorly or is injured and declines the opt-out. In this case the Red Sox are saddled with 4/$127M deal instead of a 4/$230M deal.

So in essence, the Sox are trading the chance at the surplus value from locking an over-performing Price up for 4/$127M in exchange for a $21M ($3M AAV) discount on the whole deal.

Jon
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Jon
5 months 26 days ago

Of course. And if they got a big enough discount, this could totally make sense for them.

But I can’t believe there are people saying that the opt-out clause is a good thing for Boston in a vacuum (i.e. assuming they’d be paying him the same amount either way).

Jon
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Jon
5 months 26 days ago

There is a very easy way to look at this and see that the opt-out can only be a bad thing for Boston:

Let’s fast-forward 3 years. There are 2 scenarios:

1) He’s been good, and is undervalued at the remaining $127/4.

2) He’s been bad, or gets hurt, or whatever. He’s overvalued at the remaining $127/4.

Now let’s consider what happens if he has an opt-out clause.

In case 1, Boston would prefer than he doesn’t opt out so they can keep their undervalued asset. Boston loses. Boston still got a good 3 years out of him for $90M.

In case 2, Boston would prefer to dump him if they could, but they can’t. Boston loses.

If he doesn’t have an opt-out clause:

In case 1, Boston keeps their undervalued asset. They got a good 3 years out of him. They continue to keep him for another 4. Boston wins.

In case 2, Boston would prefer to dump him if they could, but they can’t. Boston loses. This is exactly they same outcome as if he did have the opt-out.

It is completely irrelevant to say “Boston wins because of the opt-out clause because they got him for $90M/3 years.” That happens in case 1 in both situations above, regardless of the existence of the opt-out clause.

Now explain again how the opt-out can be good for Boston? Note that I’m not talking about the fact that they got him cheaper (presumably) because of the clause – I’m talking solely about people thinking the clause, in a vacuum, is a good thing for Boston.

L. Ron Hoyabembe
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L. Ron Hoyabembe
5 months 26 days ago

Let’s look at this from the Red Sox perspective. Say their target is Price at 3/90, because they want to minimize injury exposure/decline years/whatever it takes for you to believe that. There is no chance Price will make that deal, so here are their options:

1. Don’t sign David Price.

2. Sign David Price to a 7 year, 2XX million dollar contract, where XX is likely greater than 17. If he is good, then trade him after 3 years. If he is bad, try to dump him or keep him to try to recoup some value.

3. Sign David Price to a 7 year, 217 million dollar contract with a player opt out after three years. If Price opts out, collect a comp pick. If he doesn’t opt out, try to dump him or keep him to try to recoup some value.

2 and 3 are very similar scenarios. Your opinion of which one is favorable depends on if you think Price could net the Red Sox a bigger trade return than a comp pick.

Larry
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Larry
5 months 26 days ago

That’s the same thing all the smart people have been saying Ron, you were arguing before that an opt-out was a good thing period, not a good b/c it results in a smaller total potential contract than one without the clause.

glenstein
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glenstein
5 months 26 days ago

“In case 1, Boston would prefer than he doesn’t opt out so they can keep their undervalued asset. Boston loses. Boston still got a good 3 years out of him for $90M.”

This conflates the market projection for what Price will do at the time he is awarded the contract, for what he will actually do after all is said and done. And I think there’s a well-established precedent that the market tends to excessively value post-peak players in their mid 30’s. So the fact that the market will give Price more than what remains on his contract doesn’t mean the Red Sox are losing out on something by letting him go.

Hypothetically, the Red Sox could have an opportunity to make up the difference between perceived value and actual value by trading Price, but it may not be enough of a difference to facilitate a trade (the actual baseball trade market is an inefficient barter system, so a trade isn’t necessarily going to materialize just because the value hypothetically appears to be there.)

And in any case, the more fundamental objective is avoiding the black hole of a contract. Fulfilling that objective is good in and of itself, irrespective of whether they put the cherry on top by capitalizing on his perceived surplus value.

“It is completely irrelevant to say “Boston wins because of the opt-out clause because they got him for $90M/3 years.” That happens in case 1 in both situations above, regardless of the existence of the opt-out clause.”

Wrong! There’s a difference between (1) “yay, Price has been good, but now he’s gone and we have 4/127 and a draft pick to spend on literally whatever we want” and (2) “yay, Price has been good, so we’re somewhat encouraged that maybe he’ll stay good going forward.”

Being stuck with Price for his age 33-36 seasons and NOT being stuck with Price during those seasons are very different things! Investing $127MM in a pitcher for his mid-to-late 30s on the hope that he defies historical trends, and having the freedom to invest that money in whatever else happens to be on the market in 3 years time (which may not involve hoping your new investment defies historical trends) are very different things.

Chill
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Chill
5 months 26 days ago

Finally. Someone who gets it. I’m not alone in seeing the value of the opt out for the RS. Suddenly I don’t feel all alone in the wilderness.

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