In the end, I guess things seem to have worked out for Alex Rodriguez and the Yankees. A-Rod took advantage of an opt-out clause in his contract to become a free agent and essentially signed a seven-year extension with New York. There are no opt-out clauses in this new contract.
Actually, A-Rod received more than just an extension. He also received a bonus for signing his new contract, and he received an increase for the next three years. So he got an extension and a raise. Nice job for someone who was already making $27 million a year.
Here’s how the raise worked out: A-Rod was going to receive $27 million a year from 2008-2010. In the new contract, he will receive $27 million in 2008, and $32 million in 2009 and 2010. Summing all three years, that’s a 12% increase from a contract signed seven years ago, equivalent to about 2% a year on a compound annualized rate.
Let’s think about this for a second. Seven years ago, A-Rod signed an outrageous 10-year deal with the Rangers that would make him worth as much as Mitt Romney. That contract was so outrageous that Texas agreed to pay the Yankees $71 million just to take it off their hands three years ago. And now A-Rod gets a raise.
I’m just playing with numbers, but the two contracts are actually quite similar, making the “raise” a relatively legitimate comparison. Both deals were ten-year deals. They both included bonuses for $10 million. They both varied the salary schedule, so that A-Rod made more money in the later years of his first contract (when, presumably, he got better and ballplayers were paid more) and will make less money in the later years of this contract (when, presumably, he doesn’t produce as prolifically as he has lately).
Plus, the Yankees dealt with the revenue impact of A-Rod’s potential home run record chase in a creative way, adding a clause that will pay him additional salary as he approaches some key home run milestones.
So, for the three years of these two comparable deals, A-Rod will make 12% more money. 12% more than the amount he would have been paid under the most outrageous contract anyone in baseball had seen since Eddie Gaedel inked a deal with Bill Veeck. Is there a better sign that free agent salaries are flying out of the stratosphere? Can other superstar free agents, like Mark Teixeira in 2009, expect salaries close to $30 million a year?
I know that contract negotiations are more complicated than that. A-Rod probably said something to the Yankee braintrust along the lines of “Well, I have to get paid more the next three years to save face.” And they probably said something like “Okay, but then we’ll pay you less for the rest of the contract.” And they probably went back and forth from there.
But the two deals are so similar that the direct comparison works pretty well. And, yes, free agent salaries are indeed flying out of the stratosphere.
Having played around with the particulars of A-Rod’s contract, I thought it might be fun to see how other free agents have done over the years. So I put together a little database of players who have signed several free-agent contracts over the last nine or 10 years and picked out the ones who have signed several in that time, to see what might pop out.
This isn’t an exhaustive (or probably even completely accurate!) review of the subject. Most of these players are aging veterans who have managed to have some good years in their advancing years, so you can’t really pick out any “long term” trends, as we did with the A-Rod contract. I really did this just for fun, but here are a few players who might be worth noting. The years refer to the “signing” year, prior to the season’s year. In other words, players who signed a contract in 2002 played under that contract in 2003. The last column is the average annual salary of each contract.
2001 Lofton, Kenny CWS 1 $1,025,000 $1,025,000 2002 Lofton, Kenny PIT 1 $1,025,000 $1,025,000 2003 Lofton, Kenny NYY 2 $6,200,000 $3,100,000 2005 Lofton, Kenny LAD 1 $3,850,000 $3,850,000 2006 Lofton, Kenny TEX 1 $6,000,000 $6,000,000
In 2001, DHL superstar Kenny Lofton had the worst year of his career, batting .261/.322/.398 for the Indians, and his subsequent deal with the White Sox reflected it. But he has managed to be a consistently valuable player ever since, posting fine on-base percentages, stealing some bases, hitting some line drives and not fielding well. Really, the guy should only play left field at this stage of his career.
But his constantly rising salary is a testament to both his consistent production and the stratospheric free agent market. Even at $6 million last year, he was a good bargain, with a positive overall Net Win Shares Value. We’re still waiting to see where he lands in 2008.
2001 Alou, Moises CHI 3 $27,000,000 $9,000,000 2004 Alou, Moises SFG 1 $7,250,000 $7,250,000 2006 Alou, Moises NYN 1 $7,500,000 $7,500,000
In 2001, Alou signed a three-year deal with the Cubs for $9 million a year and produced pretty well for the Cubbies, though he probably wasn’t worth that money. His big year was 2004, when he hit 39 home runs, ranked 14th in All-Star voting and overreacted to the Steve Bartman incident. The Giants then signed him to a more reasonable one-year deal (with an option year) for $7.2 million, which the Mets essentially matched in 2006. In fact, by 2007 Alou was such a good “deal” that the Mets took an option year for next year at another $7.5 million.
Like Lofton, Alou is having a pretty remarkable run for a 40-year-old.
2001 Stairs, Matt MIL 1 $500,000 $500,000 2002 Stairs, Matt PIT 1 $900,000 $900,000 2003 Stairs, Matt KC 1 $1,000,000 $1,000,000 2005 Stairs, Matt KC 1 $1,350,000 $1,350,000 2006 Stairs, Matt TOR 1 $850,000 $850,000
In terms of their playing styles and strengths, you might call Matt Stairs a poor man’s Moises Alou. Literally. In baseball dollars.
1998 Mesa, Jose SEA 2 $6,450,000 $3,225,000 2000 Mesa, Jose PHI 2 $6,800,000 $3,400,000 2003 Mesa, Jose PIT 1 $800,000 $800,000 2004 Mesa, Jose PIT 1 $2,500,000 $2,500,000 2005 Mesa, Jose COL 1 $5,000,000 $5,000,000 2006 Mesa, Jose DET 1 $2,500,000 $2,500,000
This guy is actually older than either Lofton or Alou. Jose Mesa has had quite the career as a peripatetic reliever, posting some outstanding years alongside some not-so-outstanding years.
In particular, he was lights out for the Phillies in 2001 and 2002, but when they called his 2003 option for $5.2 million (not shown in the table), he was lights off (a 6.52 ERA). Since then, he’s bounced around and provided decent work, though he may have hit the wall of age last year. His salary has bounced around as well, and only his 2005 Colorado deal smells of the recent free agent inflation we’ve seen for relievers.
2002 Hernandez, Roberto ATL 1 $600,000 $600,000 2003 Hernandez, Roberto PHI 1 $750,000 $750,000 2004 Hernandez, Roberto NYM 1 $650,000 $650,000 2005 Hernandez, Roberto PIT 1 $2,750,000 $2,750,000 2006 Hernandez, Roberto CLE 1 $3,300,000 $3,300,000
Hernandez parlayed a fine 2005 into a nice payday.
2000 Gordon, Tom CHI 2 $4,000,000 $2,000,000 2002 Gordon, Tom CWS 1 $1,400,000 $1,400,000 2003 Gordon, Tom NYY 2 $7,250,000 $3,625,000 2005 Gordon, Tom PHI 3 $22,500,000 $7,500,000
Gordon has had some great years, particularly in New York, but this looks like a case of salary inflation to me.
2004 Schoeneweis, Scott TOR 2 $5,250,000 $2,625,000 2006 Schoeneweis, Scott NYN 3 $10,800,000 $3,600,000
Speaking of reliever inflation…
2000 Tavarez, Julian CHI 2 $5,000,000 $2,500,000 2003 Tavarez, Julian STL 2 $4,200,000 $2,100,000 2005 Tavarez, Julian BOS 2 $6,700,000 $3,350,000
More reliever salary inflation, but Tavarez’s contract isn’t a terrible deal. In fact, Boston picked up his option year for 2008 at $3.85 million.
1998 Timlin, Mike BAL 4 $16,000,000 $4,000,000 2002 Timlin, Mike BOS 1 $1,850,000 $1,850,000 2003 Timlin, Mike BOS 1 $2,750,000 $2,750,000 2005 Timlin, Mike BOS 1 $3,500,000 $3,500,000 2006 Timlin, Mike BOS 1 $2,800,000 $2,800,000
Speaking of Boston relievers, Timlin’s salary has been pretty consistent, sort of drifting a bit with his performance, and he’s re-upped for 2008 with the Red Sox at about $3 million again (when he’ll be 42 years old). I had forgotten about that big four-year deal with Baltimore.
Timlin has been a consistently productive and healthy reliever in his career, a rarity. And you don’t really see any signs of outrageous inflation in his salary history.
2003 Pratt, Todd PHI 1 $875,000 $875,000 2004 Pratt, Todd PHI 1 $750,000 $750,000 2005 Pratt, Todd ATL 1 $850,000 $850,000
This is the going price for backup free agent catchers.
1998 Sanchez, Rey KC 1 $1,100,000 $1,100,000 1999 Sanchez, Rey KC 2 $4,600,000 $2,300,000 2002 Sanchez, Rey NY 1 $1,300,000 $1,300,000 2003 Sanchez, Rey TB 1 $1,000,000 $1,000,000 2004 Sanchez, Rey NYY 1 $600,000 $600,000
Remember Rey? Despite a decent-looking batting average, Rey Sanchez was a terrible hitter, the Neifi Perez of his day. But Sanchez could pick it. According to Tangotiger’s cutting-edge work in the latest Hardball Times Annual, Sanchez was right up there with Adam Everett as the best-fielding shortstop of the past 14 or 15 years.
He actually may have been worth that $2.3 million salary he pulled in 2000 and 2001.
2000 Vizcaino, Jose HOU 1 $1,500,000 $1,500,000 2001 Vizcaino, Jose HOU 1 $1,700,000 $1,700,000 2003 Vizcaino, Jose HOU 1 $1,200,000 $1,200,000 2004 Vizcaino, Jose HOU 1 $1,250,000 $1,250,000 2005 Vizcaino, Jose SF 1 $1,250,000 $1,250,000
In his prime, Vizcaino was an above-average fielding shortstop, but these contracts didn’t cover his prime. At bat, his best year was 2002, when he batted .303/.342/.397. Unfortunately, the Astros apparently had a $2 million option on him for the next year, when his batting stats plummeted, and he wasn’t able to cash in on his fine season.
2001 Schmidt, Jason SF 4 $30,000,000 $7,500,000 2006 Schmidt, Jason LAN 3 $47,000,000 $15,666,667
Bam! Salary inflation!
I’m just kidding, kind of. When he signed a four-year contract with San Francisco in 2001, Jason Schmidt was just showing signs of fulfilling his potential. When he signed with the Dodgers, Schmidt had established a pretty good record for himself. Regardless of the circumstances, this deal probably set a new level of extravagant spending for starting pitchers, soon to be outdone by the Giants themselves (with Barry Zito).
2003 Batista, Miguel TOR 3 $13,100,000 $4,366,667 2006 Batista, Miguel SEA 3 $23,500,000 $7,833,333
Exact same contract structure. Exact same pitcher, just three years older. Your fan dollars at work.
2001 Smoltz, John ATL 3 $30,000,000 $10,000,000 2004 Smoltz, John ATL 2 $20,000,000 $10,000,000
Smoltz signed an extension for $14 million next year. Rats. I was hoping for another $10 million year.
1999 Rogers, Kenny TEX 3 $22,500,000 $7,500,000 2002 Rogers, Kenny MIN 1 $2,000,000 $2,000,000 2003 Rogers, Kenny TEX 2 $6,000,000 $3,000,000 2005 Rogers, Kenny DET 2 $16,000,000 $8,000,000
Rogers is on board for $8 million next year, too. He was a real bargain from 2002 to 2004.
2003 Pettitte, Andy HOU 3 $31,500,000 $10,500,000 2006 Pettitte, Andy NYA 1 $16,000,000 $16,000,000
Which leads us to…
2002 Clemens, Roger NYA 1 $10,100,000 $10,100,000 2003 Clemens, Roger HOU 1 $5,000,000 $5,000,000 2005 Clemens, Roger HOU 1 $22,000,022 $22,000,022 2006 Clemens, Roger NYA 1 $17,400,000 $17,400,000
Clemens also received $18 million from Houston in 2005.
And that is all I have to say about that.
References & Resources
According to Answers.com, the stratosphere is the region of the atmosphere above the troposphere and below the mesosphere.
Thanks to Cot’s Baseball Contracts for the poop on the A-Rod contracts.