The Future of Top Free Agent Contracts? May I Propose Extreme Front-Loading, and Extreme Opt-Outing

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The Future of Top Free Agent Contracts? May I Propose Extreme Front-Loading, and Extreme Opt-Outing

Analysis and Commentary, Chicago Cubs Rumors

Setting aside the drip-drip-drip pace of this offseason’s transactions, including right up to, and now during, Spring Training, there are other oddities about the deals players have signed this year. There are more “non-guaranteed” big league deals for players who weren’t otherwise in their arbitration years, more big league split contracts, more bonuses and escalators required to get your “market” price, etc.

But the big thing that really stands out this offseason among the upper tier of free agents is the sudden proclivity for teams to front-load deals (an extreme rarity in years past), and pair that front-loading with early opt-outs.

Consider the Cubs’ deal with Yu Darvish, which is for six years and $126 million guaranteed ($21M AAV), but it features an opt out after just two years, during which he’ll make a slightly disproportionate $45 million ($22.5M AAV). Eric Hosmer got eight years and $144 million guaranteed ($18M AAV), but it features an opt out after five years, during which he’ll make a very disproportionate $105 million ($21M AAV).

And then you’ve got JD Martinez finally signing last night, getting five years and $110 million guaranteed ($22M AAV), but it features an opt out after just two years, during which he’ll make a disproportionate $50 million ($25M AAV). He can also opt out after the third year, during which he makes $22 million.

In all three cases, the free agents landed what might be seen as less-than-expected total guarantees, but (1) got a disproportionate amount of that money early in the deal, and (2) got the right to leave the cheaper years of the deal behind if they feel they can do better in a different market. I expect that Jake Arrieta’s deal, whenever he gets it, will probably feature something similar.

In this environment, where teams are increasingly reluctant to commit massive length AND massive dollars to free agents in their years past age 30, this kind of structure could prove the wave of the future. The deals are simultaneously team-friendly (shorter-term, lower total guarantee, luxury tax planning) and player-friendly (more money early in the deal, opt-outs to control future). Based on what we know about the aging curve, I tend to think these three deals will prove more team-friendly than player-friendly, but for now, as the market adjusts to what might be a new reality, this is at least a step in a new direction.

And it has me wondering.

Let’s imagine a world where, next offseason, despite the Yankees and Dodgers coming back out into the wild west of spending, and despite a loaded free agent class, teams are still committed to this new world order of contract structuring. I don’t think we’re going to see next offseason looking like this offseason in any case, but it’s not at all inconceivable that the days of laconic six-plus-year deals with no options or opt-outs, and a standard payment structure are over.

When we think about what kind of deal Bryce Harper could get in free agency next year, we’re usually thinking about insane length and insane guarantee. But what if, instead, it featured insane player-friendly terms?

Would Harper, then age 26, prefer – for example – a 10-year deal that guarantees him $350 million, and is otherwise pretty standard? Or would he prefer – for example – a 10-year deal that guarantees him only $250 million … but it is front-loaded to pay him $40 million in each of the first two years, and then he gets an opt out thereafter? Or maybe he even gets multiple opt-outs thereafter. Like … maybe he gets an opt-out every single year after the first two years?

(Photo by Stacy Revere/Getty Images)

In that way, the team is on the hook – if it’s a disaster – for significantly less money than they would have been with a more standard contract. And the team gets the young superstar, at a minimum, for his two “best” years at a price you’d totally be willing to pay him on a short-term deal ($40 million per year on a two-year deal for a guy who could easily put up a couple 7-win seasons? yes please). The player gets a massive AAV on a two-year deal, and then gets the right to dictate on his own when he next hits the market. Sure, his total guarantee is not nearly what he could get if he went all out on that front, but having this kind of supreme flexibility has to be worth something, right?

As I sit here today, I could be convinced that this structure, for a superstar like Harper, is actually preferable to BOTH the team and the player. Of course a team would rather have a long guarantee at a low AAV with no opt-outs at all, but in a world where a guy like Harper can take back a lot of that leverage, I think this kind of extreme front-loading-opt-outing deal – assuming he’s willing to take a much lower total guarantee – could be uniquely attractive to both sides.


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Author: Brett Taylor

Brett Taylor is the Editor and Lead Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and @Brett_A_Taylor.