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Buying out free agency for the kids


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#1 Mugsys Jock


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Posted 23 April 2008 - 08:24 AM

[I'm not an experienced thread-starter, and will take no offense if this is booted for having been discussed elsewhere. Not that "taking offense" is such a big deal]

I remember some years ago when the Indians made a point of sewing up their passel of young talent all at once to make a run at the pennant -- Snyder, Ramirez, Baerga... I think a few others. And it nearly worked, and buying out arb has become a not-uncommon practice.

The recent Longoria signing accelerated the process -- longterm contract put into place for a player who has scarcely played at all in the majors.

Seems like the conversation must be getting kicked around for the Sox as well, particularly with regard to Pedroia, Buchholz, and Ellsbury. [Presuming it's already too late for Youkilis, who's close enough to arb and free agency to want to see what's out there.]

I guess the luxury of being a big-market team is that you can afford to play things out year-to-year, overpaying a bit on an annual basis but assuming no risk if a player craps out. But while the Sox are assuredly a high-revenue club, competing with the MFYs in a world where their new stadium will give them untold resources kind of makes that irrelevant.

I'd get the phone working.

#2 CaptainLaddie


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Posted 23 April 2008 - 08:38 AM

I don't know what the Yankees have to do with Red Sox arb-eligible players and what they're making, but I get your point.

I guess I'm of the mind that the Red Sox have the financial resources to be able to go year-to-year if they want. That's not something the Rays can do.

#3 DJnVa


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Posted 23 April 2008 - 08:39 AM

Short version: the Sox don't need to take the risk that they misjudge a guy or there is an injury because they can afford to pay them when they approach FA. The Rays likely wouldn't be able to do the same with someone like Longoria, so they pay him more now, and he agrees to hang around a bit longer. Teams like the Sox and Yankees generally don't need to do that.

#4 TomRicardo


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Posted 23 April 2008 - 08:47 AM

Seems like the conversation must be getting kicked around for the Sox as well, particularly with regard to Pedroia, Buchholz, and Ellsbury. [Presuming it's already too late for Youkilis, who's close enough to arb and free agency to want to see what's out there.]

I guess the luxury of being a big-market team is that you can afford to play things out year-to-year, overpaying a bit on an annual basis but assuming no risk if a player craps out. But while the Sox are assuredly a high-revenue club, competing with the MFYs in a world where their new stadium will give them untold resources kind of makes that irrelevant.


Your second paragraph answers your first. There is absolutely zero reason for the Red Sox to sign Pedroia, Buchholz, Ellsbury, Lester, Papelbon, Delcarmen, or Youkilis to a long term contract. Youkilis is 29 and on his first year of arbitration, it is not dire to tie him up.

#5 amarshal2

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Posted 23 April 2008 - 09:06 AM

Your second paragraph answers your first. There is absolutely zero reason for the Red Sox to sign Pedroia, Buchholz, Ellsbury, Lester, Papelbon, Delcarmen, or Youkilis to a long term contract. Youkilis is 29 and on his first year of arbitration, it is not dire to tie him up.


There is an exception here. I agree with you on a few guys, Papelbon in particular. However, part of the process is not just minimizing risk but maximizing value. There was some risk in the Beckett contract (i.e. if he continued to pitch the way he was pitching when he signed the deal or if he got hurt) but there was plenty of upside in it for the Sox. I could see something similar happening with one of the younger players. The one that would make sense to me is Lester in a while if he's still up and down and the Red Sox think the upside is worth the risk of the guaranteed money.

#6 Chuck Schilling

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Posted 23 April 2008 - 09:08 AM

There is absolutely zero reason for the Red Sox to sign Pedroia, Buchholz, Ellsbury, Lester, Papelbon, Delcarmen, or Youkilis to a long term contract.

Well, sure there's one potential reason - if the Sox feel they can get better value by locking an arb-eligible player up and buying out a FA year or two, they will. A player who's yet to secure his family's future might not be willing to roll the career-threatening injury dice and instead sign for less now than he might command by playing out all the arb/FA options year to year. The Sox won't do it to save 5%, but they might to save 25% or more of what they project to pay over the course of several years.

or, what amarshal2 said above.

Edited by Chuck Schilling, 23 April 2008 - 09:10 AM.


#7 Hairps

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Posted 23 April 2008 - 09:18 AM

I wonder at what point the Players' Union starts to step in. There's been a crapload of potential future free agent money left on the table recently (Tulowitzki, Longoria, Rios, ARZ Chris Young, Fausto Carmona), and I'd think the union would get real nervous, real fast if the more traditionally big FA spending, big money teams started locking up their own young stars, as well.

Just something to keep an eye on.

Edited by Hairps, 23 April 2008 - 09:30 AM.


#8 jodyreeddudley78

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Posted 23 April 2008 - 09:22 AM

I tend to agree with T Ric on this. The idea of tying up money where it is not mandatory implies that the player is a sure thing. I don't think that anyone can say that currently about Ellsbury, Buchholz, Delcarmen, or Lester. They should be good long term, but far from certain. Then there is Paps. I would think that tying up money in a pitcher before absolutely necessary is not what the FO wants to do. The risk for a derailing injury would seem to be too large. Really, at this point, the only one with a significant case would be Pedroia. But why rock the boat? Meaning, why give the other pre-arb guys a chance to be disatisfied employees? I think a team with the resources of the Sox doesn't have to "gamble"(for lack of a better term) on buying out these years, as they are valuable in maintaining flexibility.

#9 gars finnvold

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Posted 23 April 2008 - 09:35 AM

I don't see why the Union would be concerned about young players signing long term deals. Those deals give the younger union members long-term security, something the players wouldn't have had if the clubs went year to year. Sure, there is risk that the bigger free agency payday is diminished, but a lot can happen before a player becomes eligible for free agancy. One thing that can happen, for a variety of reasons, is that the pay day when the player hits the open market is not as big as everyone expected in the player's rookie or sophomore season.

Think back to the Nomar deal when the Sox locked him up for 7 years following his rookie season. He got much bigger money than Jeter and A-Rod were making at the time he signed that deal. However, by the time Nomar was eligible for free agency (following the 2004 season), A-Rod and Jeter were making a lot more than Nomar. During the course of his contract, Nomar had proven to be injuryprone and that, among other things, contributed to why Nomar didn't get the big money he felt he deserved. Looking back on it now, the Sox dodged a bullet when Nomar declined their 4 year $64 million offer.

Edited by gars finnvold, 23 April 2008 - 09:42 AM.


#10 OCD SS


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Posted 23 April 2008 - 10:07 AM

I wonder at what point the Players' Union starts to step in. There's been a crapload of potential future free agent money left on the table recently (Tulowitzki, Longoria, Rios, ARZ Chris Young, Fausto Carmona), and I'd think the union would get real nervous, real fast if the more traditionally big FA spending, big money teams started locking up their own young stars, as well.


If the Union has a problem, it should look at how it represents these players that are going to be coming in as members, rather than selling them out to get concessions that will benefit their members that will be leaving the rolls in a short time. If it didn't make sense for these young players to sign these deals then they wouldn't, but I can't see how a young player should look at shouldering the risk of turning down a lifetime of security to help drive up the earning potential of the Kyle Loshes and Julio Lugos of the world.

#11 MannysDestination


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Posted 23 April 2008 - 10:10 AM

I tend to agree with T Ric on this. The idea of tying up money where it is not mandatory implies that the player is a sure thing. I don't think that anyone can say that currently about Ellsbury, Buchholz, Delcarmen, or Lester. They should be good long term, but far from certain. Then there is Paps. I would think that tying up money in a pitcher before absolutely necessary is not what the FO wants to do. The risk for a derailing injury would seem to be too large. Really, at this point, the only one with a significant case would be Pedroia. But why rock the boat? Meaning, why give the other pre-arb guys a chance to be disatisfied employees? I think a team with the resources of the Sox doesn't have to "gamble"(for lack of a better term) on buying out these years, as they are valuable in maintaining flexibility.


Risk does not necessarily equal bad though. Risk is important for any organization (or business entity for that matter) to take. I'd agree with the other comments saying that Paps is a clear case of the risk being more than the reward - one significant injury and he could lose all effectiveness. A vital position which has such a huge open-market premium, such as closer, is a perfect opportunity to minimize long-term risk by paying more than a long-term contract would obtain by going year-to-year. There's a flip side to this though, in that even an organization as wealthy as the sox can use value. Saving $10 mil (arbitrary figure) by locking Ellsbury or Pedroia up for a few years of free agency is good. There's presumably less long-term injury risk at 2B and SS than at closer, so the risk-reward profile changes.

There's also another risk for not giving pre-arb guys a chance at a long-term contract, and that is a chance to have a disastisfied employee by NOT offering them a long-term contract. Being paid NOW and locking up your financial future has real value - look at Beckett. He could have easily received more if he held out, but financial security is real. For every Papelbon clamoring for every extra dollar, there is probably a player who would sacrifice some earnings power for security - both long-term and knowing they'll probably be playing for the same team they love for the next X years. Stringing every player along with year-to-year contracts seems more likely to engender badwill rather than goodwill.

I'd LOVE locking up pedroia after this season, I think it's a win-win even at tulowitzki levels. The organization has shown a willingness to do this with Beckett and if the sox can sign key players to slightly below average contracts, it puts them in a better financial situation to compete with the MFY on marquee free agents.

Edit: me spell gud.

Edited by MannysDestination, 23 April 2008 - 10:28 AM.


#12 LahoudOrBillyC


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Posted 23 April 2008 - 10:16 AM

The union does not have a problem with this at all. The union wants unimpeded bargaining between parties, and this is a perfect example of that. There have been plenty of cases where teams have bought out arbitration years and regretted it.

I disagree with the idea that a rich team should be more likely to avoid this type of deal. The Red Sox are smart. If they project Pedroia to be worth $9M in 2012 and they can get him for $6M, they should do it. There is just as much money to lose not doing it as there is doing it.

#13 Buzzkill Pauley


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Posted 23 April 2008 - 10:18 AM

I tend to agree with T Ric on this. The idea of tying up money where it is not mandatory implies that the player is a sure thing. I don't think that anyone can say that currently about Ellsbury, Buchholz, Delcarmen, or Lester. They should be good long term, but far from certain. Then there is Paps. I would think that tying up money in a pitcher before absolutely necessary is not what the FO wants to do. The risk for a derailing injury would seem to be too large. Really, at this point, the only one with a significant case would be Pedroia. But why rock the boat? Meaning, why give the other pre-arb guys a chance to be disatisfied employees? I think a team with the resources of the Sox doesn't have to "gamble"(for lack of a better term) on buying out these years, as they are valuable in maintaining flexibility.


I agree on the clubhouse issues, especially insofar as the leadership of the team is both veteran and handsomely paid. It's not at all the same dynamic as Cleveland, Colorado, or Philly where your studs also happen to be in their first few years.

I would assume that the next string of expiring contracts will have to come off the books, before the FA will be willing to dole out more AAV than necessary. There's maybe about $30M coming off the books at the end of this year, so I expect that maybe one or two key players will get extended (just Papelbon as my guess) after this year ends.

But the Sox' real window with the current roster is through 2010, when about $75M or more will dump off the books. This, of course, assumes the options for Beckett & Manny are picked up, but not for Ortiz & Lugo, Youks hits FA after his last arb year, etc. Until then, the Sox look to be very boring in the offseasons -- from an agent's perspective, at least. I think that we'll have to wait until then to see Pedroia and Ellsbury have some arb years bought out.

#14 Green Monster

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Posted 23 April 2008 - 10:26 AM

Didn't the Sox try this with Nomar, only to have him still expect top dollar when it was time to resign, despite the team paying him more than required during his earlier years?

It wouldn't shock me if they tried to work something out with the position players, but I wouldn't expect it. Since pitchers are more prone to serious injury, I think the likelihood of the Sox doing this with a pitcher is much less.

#15 The Allented Mr Ripley


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Posted 23 April 2008 - 10:35 AM

Didn't the Sox try this with Nomar, only to have him still expect top dollar when it was time to resign, despite the team paying him more than required during his earlier years?


Why wouldn't he expect top dollar? We can question whether Nomar was worth what he was seeking once he approached free agency (he obviously wasn't), but if he he had been, he had every right to seek a market contract. It's not a horse trade for a hometown discount once free agency is reached, it's simply a method to buy out arb years and maybe one or two years of FA in exchange for long-term security for the player. Once the player actually hits FA, I don't think anyone expects him to agree to a below-market contract because the team signed him long term when he was younger.

Edited by The Allented Mr Ripley, 23 April 2008 - 10:37 AM.


#16 TomRicardo


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Posted 23 April 2008 - 10:39 AM

I wonder at what point the Players' Union starts to step in. There's been a crapload of potential future free agent money left on the table recently (Tulowitzki, Longoria, Rios, ARZ Chris Young, Fausto Carmona), and I'd think the union would get real nervous, real fast if the more traditionally big FA spending, big money teams started locking up their own young stars, as well.

Just something to keep an eye on.


There is no chance in hell the PA will step in. It doesn't make sense. This players are trading big potential paydays for guaranteed money for a small to decent discount. How the hell would the union justify fighting against the wishes of the players? This isn't ARod trying to give money back. The players aren't getting robbed. Also some players prefer staying in a town when they are settled. You don't see the union going off on Wakefield for his ridiculous contract.

#17 Hairps

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Posted 23 April 2008 - 10:41 AM

Fair points, OCD SS & LoBC. I probably over-stated my case regarding the MLBPA, or am simply wrong.

I've just been very surprised by the number of pre-arb contracts getting done lately, the quality of the players involved, and what I see as the bargains the teams seem to be getting. And I'm biased by my views that the front offices swinging these deals (CLE, ARZ, TB), are some of the smartest in baseball.

And I'm all for the Sox locking up Pedroia this year. Heck, I'd probably take a shot as Ellsbury, too.

#18 ToxicSmed


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Posted 23 April 2008 - 10:55 AM

Short version: the Sox don't need to take the risk that they misjudge a guy or there is an injury because they can afford to pay them when they approach FA. The Rays likely wouldn't be able to do the same with someone like Longoria, so they pay him more now, and he agrees to hang around a bit longer. Teams like the Sox and Yankees generally don't need to do that.

The fact that the Sox don't have to do it shouldn't enter into the equation because the flip side to that is that if the Sox do sign someone, pre-arb, who becomes ineffective they can swallow the contract without too much pain.

The formula is pretty simple: you sign guys long-term if you think that his 50th percentile performance over that contract exceeds what you'd pay for the same performance through arb and free agency. Spread that over a few players and the ups and downs should balance out. If you are likely to save money, do it. If you are likely to overpay, do not do it. Simple as that.

Where it becomes decidedly less simple is that it is still notoriously difficult to evaluate young players so if one is going to do this type of thing one needs to be very confident in the assessment of the player in question.

#19 jodyreeddudley78

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Posted 23 April 2008 - 10:58 AM

Risk does not necessarily equal bad though. Risk is important for any organization (or business entity for that matter) to take. I'd agree with the other comments saying that Paps is a clear case of the risk being more than the reward - one significant injury and he could lose all effectiveness. A vital position which has such a huge open-market premium, such as closer, is a perfect opportunity to minimize long-term risk by paying more than a long-term contract would obtain by going year-to-year. There's a flip side to this though, in that even an organization as wealthy as the sox can use value. Saving $10 mil (arbitrary figure) by locking Ellsbury or Pedroia up for a few years of free agency is good. There's presumably less long-term injury risk at 2B and SS than at closer, so the risk-reward profile changes.

There's also another risk for not giving pre-arb guys a chance at a long-term contract, and that is a chance to have a disastisfied employee by NOT offering them a long-term contract. Being paid NOW and locking up your financial future has real value - look at Beckett. He could have easily received more if he held out, but financial security is real. For every Papelbon clamoring for every extra dollar, there is probably a player who would sacrifice some earnings power for security - both long-term and knowing they'll probably be playing for the same team they love for the next X years. Stringing every player along with year-to-year contracts seems more likely to engender badwill rather than goodwill.

I'd LOVE locking up pedroia after this season, I think it's a win-win even at tulowitzki levels. The organization has shown a willingness to do this with Beckett and if the sox can sign key players to slightly below average contracts, it puts them in a better financial situation to compete with the MFY on marquee free agents.

Edit: me spell gud.


I agree with pretty much everything that you wrote. The business risk/reward model is certainly a factor here. Right now Paps, for example, is low risk(not much money at a potentially high injury position)/high reward(essentially, the best closer in baseball). Although, I don't know if I would call it it "stringing them along". These are the rules of the game, so to speak.

Some more food for thought. Lets pretend it is July. The Sox are looking for bullpen help. The trend among small to mid-market teams is not salary dumping. They tend to be looking for packages featuring prospects, but centered around one "ready now" key player. The "ready now" player is usually a Ellsbury/Pedroia type, meaning a somewhat proven commodity who is pre-arb. Even if the Sox don't intend to trade this type of player it is important to have them to at least bring the other team to the table. Even if the other team is a Tampa Bay type that has shown a willingness to sign the "ready now" guy, you are still lowering his trade value. In other words, you are limiting your flexibility to some degree.

A more extreme(and highly unlikely) example could unfold like this: it is July and both Lowrie and Lugo are performing well. The Sox feel confident that they have a long term solution at SS in Lowrie and they have teams that have expressed interest in a Lugo centered package. The other team's caveat is that the Sox pay the majority of the remaining Lugo contract, while taking one of their larger pitching contracts. However, the Sox have recently signed Paps, Pedroia, and Ellsbury to contracts and significantly increased their payroll, thus limiting their potential willingness to engage is such a trade. I realize that the Sox are "printing money" right now, but I'm sure there is a number that they have in mind as a ceiling. My point is, why limit flexibility when that is a large part of having young talent on the club?

edit:clarification

Edited by jodyreeddudley78, 23 April 2008 - 11:08 AM.


#20 smastroyin


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Posted 23 April 2008 - 12:00 PM

Why wouldn't he expect top dollar? We can question whether Nomar was worth what he was seeking once he approached free agency (he obviously wasn't), but if he he had been, he had every right to seek a market contract. It's not a horse trade for a hometown discount once free agency is reached, it's simply a method to buy out arb years and maybe one or two years of FA in exchange for long-term security for the player. Once the player actually hits FA, I don't think anyone expects him to agree to a below-market contract because the team signed him long term when he was younger.


Also, that deal cost Nomar money, not the Red Sox:

1998 (pre-arb.): $1.075 MM
1999 (pre-arb.): $1.400 MM
2000 (arb. 1): $3.700 MM
2001 (arb. 2): $7.250 MM
2002 (arb. 3): $9.000 MM
2003 (FA): $11.00 MM
2004 (FA): $11.5 MM

Compare that to Jeter. Nomar is not as good as Jeter but for the key years of this point you could convince an arbitrator that they were close.

1997 (pre-arb.): $0.550 MM
1998 (pre-arb.): $0.750 MM
1999 (arb. 1): $5.000 MM
2000 (arb. 2): $10.00 MM
2001 (arb. 3): $12.60 MM
2002 (FA): $14.60 MM
2003 (FA): $15.60 MM

So, Nomar made $44.925 MM through his second FA year (8th year service time) and then his contract ended.
Jeter made $59.1 MM and had just finshed the third year of his 10 year, $189 MM contract. His arb. request before signing the contract in 2001 was $18.5 MM and he probably would have gotten it, given ARod and Manny the year before.

#21 CaptainLaddie


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Posted 23 April 2008 - 12:39 PM

Also, shouldn't the title of this be "Buying out arbitration years for the kids"?

#22 Paul M


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Posted 23 April 2008 - 01:08 PM

I would never do this with a pitcher under 25, but I could see locking up Pedroia and Ellsbury. The other thing it does is enhance their trade value. Say in two years the Sox want a crack at Hanley Ramirez or BJ Upton or someone of that ilk. Not that I'd want to jettison our home-grown talent or anything but low salary/cost-controlled players mean less to a team like Boston.

#23 TomRicardo


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Posted 23 April 2008 - 01:46 PM

I would never do this with a pitcher under 25, but I could see locking up Pedroia and Ellsbury. The other thing it does is enhance their trade value. Say in two years the Sox want a crack at Hanley Ramirez or BJ Upton or someone of that ilk. Not that I'd want to jettison our home-grown talent or anything but low salary/cost-controlled players mean less to a team like Boston.


I can't see doing it to any pre-arb player, I just don't see that increasing their trade value. I also wouldn't do it with Ellsbury, Buchholz, Delcarmen, Papelbon, and Lester until their second year of arbitration. Pedroia would probably be the safest bet (outside of Youkilis) to lock up.

If it was me I would talk about extensions during the following offseasons:

2008 - 2009 - Youkilis, (Varitek, Okajima)
2009 - 2010 - Papelbon, (Beckett)
2010 - 2011 - Pedroia, Delcarmen, (Ortiz?)
2011 - 2012 - Lester, Buchholz, (Matsuzaka)
2012 - 2013 - Ellsbury