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Astros offseason: Structuring free agent contracts

In another of our big-picture looks at the offseason, let's discuss how free agent contracts are structured and if they can be changed.


Man, there have been a lot of unpopular ideas floated around in the past week. It seems that the David Price fake trade is pretty universally disliked (though I knew that was coming) and most TCBers are against adding Shin-Soo Choo. In fact, even the TCB staff is starting to speak out about how that addition would be a bad idea.

Why is Choo unpopular? As Chris said, Choo is a very talented player who could put up good stats in the short-term. But, what Chris cautioned about was the Carlos Lee factor. Will a deal for Choo look good now and terrible two years later? Will he be vastly overpaid before the contract is even half over?

It's a fascinating question for what it suggests on the margins. Like, why should fans care how much money players are making? If the Astros have a chance to add a 5-6 win player, they absolutely have to do it, right? Houston's right fielders combined for -2.1 fWAR last season, meaning Choo could easily add 7-8 wins to the Astros 2013 total by himself. If Houston rebounds in one-run games (which I expect them to), then they could get to 70 wins with just one addition.

But, that's not why fans seem to dislike Choo. They're afraid of the money he's getting, even though a 5-win player would be worth $25 million on the free agent market and Choo figures to be that good a player for at least the next three years. His best offensive skill is on-base percentage, which ages well, so he should at least keep that for the life of his contract.

The reason fans care about the money is that teams talk about it all the time. If Houston signs Choo this winter and then has to trade away Jordan Lyles because they don't have the money in the budget to sign him long-term, fans will blame the Choo deal. They'll point to it and complain.

The solution

If it's the money Choo would be earned on the back-end of that deal that's the problem, why not just change that up? Why not offer him a front-loaded contract, where he gets something like $30 million in Year 1, $20 million in Years 2 and 3, and $10 million in Years 4 and 5. That gets the deal to $90 million and leaves his final four years at palatable levels.

It works for the player, since he's still worth that overall value. It works for the team, because they're paying the player for his production instead of paying for past production. It works for the agent because the average annual value (AAV) of the deal remains the same no matter how the money is paid out. So, the agent can still trumpet how much he got his client on a per-year basis when recruiting new clients.

In Houston's case, it also puts most of the burden of the new contract in the present, when the Astros have no payroll obligations. Choo making $30 million this year doesn't block the payroll for important, younger players. Adding him doesn't block any promising prospects and gives the Astros another face of the franchise.

This can't be a new idea, right?

It sort of is. Most Major League Baseball contracts are structured to grow. A player will make $13 million in Year 1 before moving up to $18 million the next two years and finishing at $25 million. If there's a drop, it usually happens in the option year at the end of the contract.

Other contracts are evenly distributed. Take Prince Fielder's deal with Detroit. He's set to make $24 million annually for the life of the deal starting in 2014. Most big paydays are either one of those two deals. Some will have minor variations, but none of them start out big and fall back smaller.


Simple human nature, I think. No one wants to lose money from their salary each year. People want to get raises each year. That's why it makes sense to structure a deal in that way. Also, from a team's perspective, $30 million five years from now may not cost as much as $30 million now thanks to inflation.

From a player's perspective, there's also some financial ramifications to losing money off a deal. What if you buy two houses and four cars? How do you support that lifestyle if you're losing money each season?

Since you're reading this article, I'll assume you're a practical person. You're probably also wildly successful, charming and disarmingly funny, but for this, we only care about your practicality. When I tell you that a player can't pay for his lifestyle because his contract decreases, you probably scoff.

You probably have no idea what making $10 million a year is like. You assume that's more money than anyone can spend in a lifetime, so you rightly assume if the player wants to maintain a level of expenditure, he can just take money from that first year and save it for those lean contract years in the future. Which is absolutely true. As long as the player has sound financial planning, the structure of a deal shouldn't matter.

Another reason these kinds of deals don't happen, though, is likely because of the salary cap. NFL contracts come in all shapes and sizes, because of the salary cap. Teams have to get creative to hit a salary mark and they just don't have to do that in baseball. In fact, it may make more sense for long-term planning for baseball teams to keep things even every season for a player. That way, they can control costs and plan for the future.

But, none of those are good reasons that it doesn't happen. A creative front office coupled with a creative player's agent could absolutely make something like this work. It may not be the player's first choice, but if one team is offering him $70 million on a traditionally structured deal and the Astros offer him $90 million with a descending pay scale, is the extra cash enough to overcome the slight problems with the deal?

More importantly, does a deal structured like this change how you view a Choo signing? Would you rather the Astros spend big on a free agent at the front end of a deal now, when the payroll is at a rock-bottom level?

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