If you've never thought much about negotiating a contract before, remember that every contract which is signed is in a sense "win-win". If both sides were not doing better to sign the contract rather than making different choices, it wouldn't happen. So, if you want to know whether a contract is possible here, we can look at the motivation for both sides.
The conditions here appear to be the following:
On the Red Sox side, having spent last year to avoid some of the luxury tax burden in upcoming years, they are in a position now to evaluate G38's $13M asking price as fairly close to $13M. Meanwhile, consider that a visibly diminished Randy Johnson recently got a $26M/2year contract extension from Arizona, and Arizona was willing to give up prospects in addition to that money in order to acquire his services. So from the Red Sox side, that says that $13M/1 represents a hometown discount. From a baseball point of view, given the contracts pitchers were given this offseason, a diminished G38 would still be worth $8-10M next year, and there is every hope that he will continue to be an effective pitcher. And in addition, the goodwill and accompanying merchandising that go along with signing him as well as the ability for him to work with younger pitchers like Beckett and Matsuzaka is worth money as well.
So the Red Sox should, objectively, think that at $13M they are getting a pretty good deal, and could probably even make a deal at $15-17M given the merchandising and goodwill they get out of it.
On the other hand, let's look at it from Schilling's point of view. He's interested in his public image because of future ambitions, and that's worth more to him at this point than some of the extra money he would get as a free agent, particularly because as a free agent he would have to court the Yankees in order to drive his price up. I think he greatly enjoys playing in Boston, and that's worth money to him. He also values his legacy in Boston, and I think he recognizes from what's happened to Nomar's reputation around here that if he does leave Boston, he's not going to get to choose the way that it's presented and it will hurt that legacy. So in the end, if the Red Sox make any offer not deemed to be an insult, then when you consider his future goals, his realistic options are to retire or to accept that offer if his ambitions beyond baseball are what they have been rumored to be.
So, if Schilling is offered $8M, with the idea that Beckett is making $16M in 2007 and 2008 combined, his best course of action is probably to make his case in the media that he's being badly undervalued, but that he's so loyal to the team and the fans that he's willing to accept it, because that increases the value of his legacy and reputation if it's done properly.
By my valuation, there is a whole lot of room to get a deal done here in which both sides should make it happen, and therefore it is going to happen. The question is simply whether it happens closer to $8M or closer to $13M, and that's entirely a question of how effective Theo and G38 turn out to be as negotiators. But unless my valuation is very different from those of the Sox and G38, there is so much room here that a deal of some sort is inevitable.
Edit: And if you read the comments of both G38 and Theo, they seem to be recognizing the same thing, that they can do all the posturing they want in a back room, but at the end of the day both sides understand that any number between $8M and $13M is a good contract, any number between $8M and $13M is a number that at the end of the day both sides could agree on, and both sides would simply like to figure out a way to make the final number fall closer to the one they want.
Edited by CSteinhardt, 20 February 2007 - 12:14 PM.