This is general to baseball, but also will have an effect on some of the Twins’ free agents-to-be.
What’s up with 2021? Does anyone really know?
Free Agents (as usual) are going to want as much guaranteed money as possible, but teams might be reluctant to have high payrolls in 2021.
With unknowns come…. Market inefficiencies. So what are some alternative contract strategies?
Tactic #1 – Back loaded contracts. Instead of 3/30 being 10/10/10, why not 4/13/13. This pushes the bulk of the contract out to when the finances of baseball will likely have stabilized more. Additionally, this is beneficial to the player (not counting time value of money) because I’d say it’s still a bit of an unknown whether the full 162 will be played in 2021. For the sake of easy math, lets say it gets chopped to an 81 game schedule. When that happens instead of the player losing out on 5M (half of 10M) they only lose 2M (half of 4M). That brings me to ….
Tactic #2 – Front loaded contracts. Instead of 10/10/10, why not 14/8/8. If you’re a team and you’re fairly confident that a decent amount of 2021 is going to get lopped off then why not front load the contract with a year that’s going to get trimmed down, then have the player at a discount after that. The risk is that the full 162 gets played, but if that’s the case, then likely we aren’t in the financial doomsday scenario that teams are dropping their payrolls to protect against. From the players perspective it’s not great, but nothing about this offseason is going to be great for them and having those guaranteed pay days in 2022 and 2023 might be worth it.
Tactic #3 – Signing Bonus. Are these allowed? We never hear about them. It’s more of an NFL thing since their contracts aren’t guaranteed like MLB, but if they are allowed… The deep-pocketed teams might be able to sway some free agents their way by having a signing bonus. Frustrated that your paycheck was depressed in 2020? Well here’s a check for $10M and then your contract will be 4/8/8 for the next 3 years.
Tactic #4 – Deferred money. (See: Bonilla, Bobby)
I’d say the most likely Twins Free agents to be affected by any of these would be Odo and May.
Odo is coming off a nightmare season in terms of injuries. Which would normally point to a 1-year make good contract. Not being able to really hit the FA market last offseason was made better with that $17.8M guarantee…. That turned into $6.6M. So he’s still hunting for that BIG payday that will set him up for life. But there’s a non-zero chance that if he opts for a 1-year make good contract, that he never makes good, and never gets that big payday. Ultimately it was the Odo discussion in the Gleeman and the Geek podcast that led me to go down this “Contract Tactics” rabbit hole. He maximizes his eventual earning potential with a 1-year contract, but also leaves open a doomsday scenario for him. So, would Odo take a 3/30 contract, let’s say, backloaded a little 8/11/11? Worse case that’s probably $26M guaranteed. But that’s also below full market value if you look at how he’s pitched the last couple years.
As for May, he doesn’t have the nightmare 2020 looming over him like Odo, but he’s likely fighting against a market that, if payrolls are dropping, will largely ignore high priced RP. Why not pay Alcala $500k instead of May $6M? Also, as they noted in the GATG podcast, he’s never earned more than $1M in a season. That sounds like a good opportunity for a signing bonus. $4M signing bonus, then 2/5/5 after that. From the team’s perspective a $4m signing bonus is a relative drop in the bucket, but for May it represents more money than he’s earned in his entire career up to this point. But to warrant that signing bonus, he’s going to have to take a bit of a discount after that.