The 2016 offseason, while not finished just yet, can be remember for many things: huge contracts for superstars like David Price and Chris Davis, huge contracts for the more mediocre pitchers like Jeff Samardzija and Mike Leake, and above that, the Yoenis Cespedes situation (which has resulted in a three year deal with the New York Mets). But, there has been one recurring feature this offseason. One little clause that the majority of big contracts this offseason contained: the opt-out clause.
The opt-out clause is an interesting one. It took centre stage at the very start of the offseason when Zack Greinke opted out of his contract with the Los Angeles Dodgers to pursue free-agency. And, as of then, it has been a prevalent part of the market. David Price received one, Johnny Cueto received one, Scott Kazmir received one, Jason Heyward received one, Justin Upton received one, Wei-Yen Chen received one, Ian Kennedy received one, and now, Yoenis Cespedes has received one.
They make a lot of sense for the players. They get the guaranteed security of a lucrative long-term deal, with the added bonus of the option to opt-out of the deal to pursue another even more lucrative deal. Essentially, a win-win for the player. The opt-out craze even has relevance to the Houston Astros. It's rumoured the difference between the Dodgers' offer for Kazmir, and the Astros' offer, came down to the simple opt-out clause. But, is there any benefit for the team?
Personally, I have no issues whatsoever with the opt-out clause. If the player opts out? No problem. The chances are, if the player thinks the opt-out is the correct choice, you've extracted tremendous value in the early years of the deal. And, more importantly, you avoid the one hindrance we all hate about signing free agents; the ridiculous length of the deals. You avoid the latter, expensive, painful years of the deal.
On the other hand, if the player doesn't opt out? No problem. You honor the contract you felt the player was worthy of in the first place. But, of course, it isn't quite as simple as that. If it was, after all, every single team would have included one. If the player gets injured, perhaps, and he doesn't opt-out, the deal hurts. If the team takes a risk on those potential costly, injury riddled years, surely they need to compensated with the potential upside of those years, something the opt-out denies.
A compelling argument, therefore, can be made against the opt-out. Perhaps, the Astros were right to sacrifice Kazmir at the expense of the opt-out (and, maybe, a little more money). Then, the Cespedes deal happened (and, I remembered one other facet of the clause, leading me to writing this article). The Mets, quite clearly, got compensated for the risk of allowing Cespedes to walk, if productive, or stay, if unproductive or injured. They chopped around three years off of the deal that Cespedes was originally pursuing in return for receiving an opt-out.
When Greinke opted out of his contract with the Dodgers, it concluded what was an extremely fruitful and valuable deal for the Dodgers. Greinke signed a six-year deal worth $147 million, making for an average of $24.5 million per year, with an opt out after the third year. During his three years with the Dodgers, he pitched like an ace. The following tables assumes the accepted average value of a win in free agency to be eight million.
|Year||WAR||Expected Value||Actual Value|
|2013||3.4||$24.5 million||$27.2 million|
|2014||4.4||$24.5 million||$35.2 million|
|2015||5.9||$24.5 million||$47.2 million|
The Dodgers paid Greinke to be a pitcher worth $73.5 million, rather, the Dodgers got a pitcher worth $109.6 million. Of course, it would be great if Greinke was still around to see out the end of his deal. But, in the world of baseball and business, the Dodgers got great value, they now move on, and search for another starting pitcher whom they can extract great value from. More importantly, the Dodgers even got some compensation for allowing him to opt-out.
When a player opts out of his contract, just like when a player reaches the end of his contract, he can be offered a qualifying offer. When Greinke moved on, the Dodgers were awarded a compensation pick. The Dodgers got a contract of extreme value, and now also have the 32nd overall pick in the draft. A pretty good deal, all in all.
We may have taken a slight detour away from the Houston Astros. But, in a day and age where the Astros are a competitive team, and the Astros are likely to start moving for free agents, it's important to be aware of the opt-out clause. The clause which, this offseason, is everywhere we look. The clause which may well be a key part of a deal for the Astros. The year the Astros moved permanently back into relevance: the year of the opt-out clause.