Baseball Musings: The Opt Out

December 10, 2008

The Opt Out

There's an opt-out clause in Sabathia's contract:

Sabathia is expected to receive an opt-out clause after three years, which was a prerequisite for him to sign with any team, not just the Yankees, according to a source.
Such a clause would give Sabathia the chance for another monster payday in free agency at age 31 -- and provides him with an escape if he finds the New York experience unappealing.

Since players are more and more exercising their opt-outs, I can imagine the Yankees feeling a little more comfortable with the deal. Unless CC totally breaks down in the first three years, the probability is high that he seeks free agency again in a better market for pitchers.

Posted by David Pinto at 12:53 PM | Free Agents | TrackBack (0)

Comments

How could this make the Yankees MORE comfortable? It limits their upside to 3-years (he performs well), while committing to the downside (injury, Wellsian weight gain). The opt-out is all good for CC, and no good for Yankees.

Posted by: chris at December 10, 2008 01:32 PM

I disagree. The opt-out gives CC the incentive to do well for three years so he can make even more money in 2012. So the Yankees likely get three good years out of CC. Sure, there is down side for New York, but that downside is there if the contract has an opt-out or not.

This way, the Yankees get three-years of Sabathia at a reasonable price, and then someone else pays a lot of money for his decline phase.

Posted by: David Pinto at December 10, 2008 01:52 PM

Apparently, he was going to get an opt-out clause no matter who he signed with. It's the danger of doing business these days.

Posted by: sabernar at December 10, 2008 01:59 PM

When considering the amount of flexibility that the opt-out gives CC, consider the recent precedent to a player opting out of a contract with the Yankees. I don't think it's as much flexibility as it sounds like.

Posted by: Ben in Boston at December 10, 2008 02:09 PM

Chris has the better argument here. If CC has three great years and remains healthy, the Yanks would be pretty happy with the rest of that contract. The Yanks only get "stuck" with the contract if CC tanks or if the market changes so much that it's now a bad contract regardless of CC's performance. In other words, the Yanks have all of the downside risk and none of the upside risk of a good long term contract. I'm not sure how losing a great player because the contract now benefits the team is a plus.

Sure--give him an opt out. But there should be a reciprocal opt out for the team at the same time. The risks and rewards should be balanced. Otherwise, what you really have is a 3 year contract and a player's option to extend for FOUR years at big dollars. Doesn't sound as good when it's put that way.

Posted by: Mark at December 10, 2008 02:14 PM

I dunno. I don't think the economy is going to be good enough in three years to where another team will be willing or able to make a better offer to CC than what he has with the Yankees.

And for another team (which is going to be a limited pool, Red Sox, Dodgers, Angels?) to offer that, CC is going to have to have pitched extremely well for the Yankees. As a Yankee fan, I'll take that risk.

Posted by: rbj at December 10, 2008 02:27 PM

I disagree. The opt-out gives CC the incentive to do well for three years so he can make even more money in 2012. So the Yankees likely get three good years out of CC.

That's ridiculous - what do they expect him to go at half speed for $23M? I would hope NYY got an option somewhere. 7 years is a long time.

Posted by: Bandit at December 10, 2008 02:49 PM

Not half speed, but lots of players seem to have another gear when it comes to their contract year. When the day of reckoning is sooner the pressure is higher. It's easy for a player who is guaranteed a boatload of money over a long time to become complacent. (See: Ramirez, Manny)

However, given the cautionary tale of ARod's opt out, I think it will end up being a red herring anyway.

Posted by: Ben at December 10, 2008 03:28 PM

That opt out clause is a nice little gun to the head of the deranged Yankee fan type who have often made A-Rod's life so miserable. If CC has three solid years, but takes a lot of abuse, he can say "bye" and seek a city where the fans aren't insanely abusive to merely excellent players. If he tanks and the fans are over the top abusive (think Ed Whitson), he can cheerfully collect every penny of that seven year contract while metaphorically extending a middle digit to those fans. It might be a wise idea for said insane fans to sit down for a nice cup of STFU for the next three years, until that option is resolved.

Posted by: M. Scott Eiland at December 10, 2008 03:50 PM

Compare the $160/7 with no-opt out and the $72/3 with a player option for $88/4 tacked on (roughly). The riskiest year of any deal is always the last, as the cumulative chances of injury and decline pile up. The value of these contracts is almost always in the early years.

Roughly speaking, let's look at some options:

a. CC tanks. He'll decline to opt out and the Yankees are stuck. Same as if they didn't give him the clause.
b. CC is healthy and maintains his current level for three years, and the economy improves. He'll opt-out and see if he can get more money. The Yankees lose out on the benefit of a 31-year-old ace with a solid health record under contract for his 31-35 years for $22M/year or so.
c. CC falls back from his current level due to injury or something else and the economy improves. He might opt out, and the Yankees might be happy he did, but it's probably not a lot either way.
d. CC gets traded.

The Yankees lose under b), and win under some variants of c). If you think CC is a Hall of Fame pitcher in waiting (and I'd guess that any pitcher who reels off nine seasons like his last six would be), then the opt-out is a lose.

My personal opinion is that CC is a fine pitcher who will end up in the Hall of Pretty Darn Good, and the opt-out will not be significant. A lot can happen in three years.

Posted by: Subrata Sircar at December 10, 2008 04:47 PM

Only the party controlling the option gets any benefit from it. As Subrata illustrated this is all in CC's hands and he gets all the upside.

I don't think that this provides 3 years worth of incentive either, CC only needs to excel in the 3rd year for everyone to come a-courting in his option year.

Posted by: thumble at December 10, 2008 10:14 PM

If NYY thinks he needs an escape clause to motivate him to perform they need to think twice about signing him. Options only benefit the holder - it's not like they got a mutual option/buyout. As both Texas and NYY saw with ARod when you overpay and lock up guys long term it brings a lot of problems. If you see a 350 lb Sabathia in the 3rd year or see the guy with a 7.9 postseason ERA then it's going to be an unhappy marriage. If you see the guy whose never had a losing season and a WS championship in the first 3 yrs then he opts out and hits the market again.

Posted by: Bandit at December 11, 2008 07:26 AM

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