• For The Birds

    Posted by on March 23rd, 2007 · Comments (11)

    Can Alex Rodriguez get a better deal for himself if he opts out of his contract and leaves the Yankees (as a Free Agent) after this season?

    I get asked this question – often. So, I thought it made sense to have something here to point towards (for the next time I’m asked it). First, what’s the bird in A-Rod’s hand now? As I stated back on December 6, 2006 -

    We know that the remainder of Alex Rodriguez’ current contract looks like this:

    2007: $27 million – $7 million paid by Texas
    2008: $27 million – $8 million paid by Texas
    2009: $27 million – $7 million paid by Texas
    2010: $27 million – $6 million paid by Texas

    But, we also know that A-Rod’s team must increase the salaries for 2009 and 2010 by the higher of $5 million or $1 million greater than the average annual value of the non-pitcher with highest annual average value.

    However, after the 2007, 2008 or 2009 season, A-Rod can void the remainder on his contract as well.

    Therefore, if Alex Rodriguez does nothing and lives out the life of his current deal, he will get $91 million (from 2008 through 2010) – with the Texas Rangers paying 23% of the bill. It’s this $91 million for three years that Rodriguez has sitting on the table – to keep or to walk away from (with the hope of doing better) after the season.

    Actually, the key number – in terms of an initial driver for A-Rod’s call – has nothing to do with money. Instead, it’s all about age.

    Alex will be 32-years old after this season. Related, he would be 35-years old after 2010 (the last year of his current contract).

    Alex Rodriguez the 32-year old should be able to get a 6-or-7 year contract offer in the Free Agent market after this season. Why so many years? Simple – teams will be willing to pay for a guy, that long, since he would only be 37-or-38 at the end of deal.

    Alex Rodriguez the 35-year old will have a hard time getting a contract offer for more than 4 years after 2010. The fact of the matter is, given the money that Alex will command, no one will want to be paying that much to a guy who will be so close to his 40th birthday at the end of the deal – unless they know that they’re going to get a very good number of years from the guy prior to his 40th birthday.

    Yes, I’m following the math here. If A-Rod opts out of his contract after this season, his “new” deal will probably run through 2014. If A-Rod lives out his current contract, his “next” deal will probably run through 2014 as well (according to what I am saying here). So, what’s the big difference?

    Here’s where it goes back to dollars. Right now, at this stage in his career, Alex is no longer the best hitter in the game. Granted, he’s one of the “Top 15″ hitters in the game – thereabouts. But, he’s no longer where he was circa 2000-2003. Now, as a member of the “Top 15,” Rodriguez, these days, will still command top dollar on the open market next winter. However, who’s to say that Alex will still be a “Top 15″ hitter by the time he’s 35-years old? He could start to slip some more? Or, he could have an injury? If A-Rod and Scott Boras think that Alex v.2011 will be the same hitter as Alex v.2008 they’re ignoring the risk factors that are out there for a player as he gets older.

    In the end, this is what it’s all about for A-Rod:

    1. Keep the $91 million for three years and hope that nothing happens to you, or your production, or even the market, and then take your chances as a the 35-year old Free Agent (who will be lucky to get a new deal that runs through 2014). Or,

    2. Walk away from the $91 million for three years, enter a player-friendly market, while you’re still one of the best 15 hitters in the game, and take your chances as a 32-year old Free Agent (who should easily get a deal that will run through 2014).

    Do you keep the bird in the hand and hope for another to come (knowing there’s risk that the next bird may not be as good), or, do you let the bird in the hand go, because the skies are full of birds now and you’re at your peak in terms of bird-catching (and should have no problem getting more than one bird once your hands are free)?

    The old line is “A bird in the hand is worth two in the bush.” But, this is A-Rod the poker-player and Scott Boras the wheeler-dealer we’re talking about here. These guys want to be on the top of the leader board in terms of having the most birds. If they see a chance, they’re going for it. To them, I’m sure they believe that “Alex Rodriguez can get a better deal for himself if he opts out of his contract and leaves the Yankees (as a Free Agent) after this season.”

    It will be a “better deal” (if he goes now) because it will be a “sure” deal to run through 2014 at mega bucks – instead of a deal that may not happen after 2010 (or maybe not to the levels that he’s used to seeing).

    Comments on For The Birds

    1. March 23rd, 2007 | 11:53 pm

      Not to mention the bird I will be giving anyone who boos Alex Rodriguez for no reason. That one is very much in hand.

    2. jonm
      March 24th, 2007 | 12:58 am

      I’m not convinced because you avoid attaching some numbers. To not lose money over the next three years (and get the additional four years), ARod would have to get a seven year contract for at least $191 million. Plus, he would have to make sure that teams don’t backload any of the $91 million he’s due over the next three years. This issue of backloading is very important. Soriano got $136 million for 8 years, but he is getting paid “only” $9 million in 2007, $13 million in 2008, and $16 million in 2009. An additional $100 million, say, for ARod’s 2011-2014 would not be worth any sacrifice of the present value of his current contract.

      What team is going to give ARod a non-backloaded, non-subsidized $191 million contract for
      his age 32-38 seasons?

    3. severin
      March 24th, 2007 | 4:17 am

      After having read, that Arod is a Top 15 hitter. Could you please do me the favor and list at least 10 hitters, who are better than alex?

      cheers

    4. March 24th, 2007 | 8:54 am

      ~~~After having read, that Arod is a Top 15 hitter. Could you please do me the favor and list at least 10 hitters, who are better than alex?~~~

      Actually, last year, it was more than 10. MLB ’06 RCAA leaders:

      Player – RCAA Total
      1 Ryan Howard 82
      2 Albert Pujols 76
      3 Travis Hafner 73
      4 David Ortiz 68
      5 Lance Berkman 64
      T6 Miguel Cabrera 60
      T6 Manny Ramirez 60
      8 Jim Thome 58
      9 Carlos Beltran 53
      10 Derek Jeter 52
      T11 Grady Sizemore 48
      T11 Jermaine Dye 48
      13 Jason Giambi 46
      14 Nick Johnson 45
      T15 Vladimir Guerrero 43
      T15 Chipper Jones 43
      T17 Barry Bonds 42
      T17 Garrett Atkins 42
      T17 Justin Morneau 42
      T20 Joe Mauer 39
      T20 Chase Utley 39
      22 Jason Bay 38
      T23 Bobby Abreu 37
      T23 David Wright 37
      T25 Alex Rodriguez 36
      T25 Brian McCann 36
      T25 Matt Holliday 36
      28 Carlos Guillen 35
      29 Alfonso Soriano 34
      30 Ichiro Suzuki 32

      But, we know that ’06 was a down year for A-Rod.

      On the whole, I would say these ten are better than A-Rod, right now – ranked in no order:

      Albert Pujols, Justin Morneau, Travis Hafner, Lance Berkman, Manny Ramirez, Vladimir Guerrero, Grady Sizemore, Ryan Howard, David Ortiz, Miguel Cabrera – and maybe even Bobby Abreu and Barry Bonds too.

    5. March 24th, 2007 | 9:05 am

      ~~~What team is going to give ARod a non-backloaded, non-subsidized $191 million contract for his age 32-38 seasons?~~~

      None, in my mind. But, I could see someone giving him $161 mill for his age 32-38 seasons.

      So, it’s a trade of $30 million, for the peace of mind knowing that he can get a contract for ages 35-38…which might not happen if he gets injured during ages 31 to 34.

      Would you punt $30 mill, to know for a fact that you would get another $161 mill – and avoid the potential that you might only get $91 mill if you don’t punt the $30 mill? It’s a gambler’s question. And, we know that Alex likes to gamble.

    6. jonm
      March 24th, 2007 | 10:27 am

      ~~we know that Alex likes to gamble.~~

      Actually, settling for $70 million for 2011-2014 is something that a gambler would not do. It’s a very conservative strategy. $70 million in baseball terms, given general inflation and baseball salary inflation, for 2011-2014 is not worth as much as it would be now. If ARod keeps up his present numbers with a slight age-related decline, he should be able to get significantly more than that for those seasons after 2010.

      Given that ARod all ready has financial security for the rest of his life (in other words, if he gets injured, financial concerns will not be a worry), it would be foolishly conservative for him to settle for 7 years at $161 million after this year.

    7. rbj
      March 24th, 2007 | 10:57 am

      2008-2010 is $81 mil, not $91 mil. 27 x 3 = 81.

    8. March 24th, 2007 | 11:32 am

      rbj – but, A-Rod’s team must increase the salaries for 2009 and 2010 by the higher of $5 million or $1 million greater than the average annual value of the non-pitcher with highest annual average value. That’s the extra $10 mill.

    9. March 24th, 2007 | 7:05 pm

      ~~~If ARod keeps up his present numbers with a slight age-related decline, he should be able to get significantly more than that for those seasons after 2010.~~~

      Then, why not kill the option now, and say that he won’t take it, no matter what, if he’s better off living out his current deal?

    10. jonm
      March 24th, 2007 | 7:20 pm

      ~~Then, why not kill the option now, and say that he won’t take it, no matter what, if he’s better off living out his current deal?~~

      Well, he could have a season like 2005 and possibly get $200 million for 7 years (I doubt this will happen) or he could have a season like last year in which he plays below his standards, is vilified by the media, and, thus, wants to get out of town. Why would he want to voluntarily give himself less flexibility?

    11. March 24th, 2007 | 11:10 pm

      ~~~Why would he want to voluntarily give himself less flexibility?~~~

      What flexibility? You said that any new offer now could not be as good or better as his current deal?

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