Long-Term Deals for Bright Young Stars
by GuyinNY on May 13, 2011 7:59 AM EDT
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Pursuant to a discussion which developed in the initial Hosmer call-up thread, I thought it would be a good chance to spur conversation. Eric Hosmer, assuming he develops as expected, will likely be beyond the price range of the KC Royals at maturity. This is nothing new to small market clubs, and most have taken to signing their young stars early, offering financial security in exchange for buying out prime years at what are likely discount rates (never forget the marginal value of your first $20M or so.) The most extreme example so far is likely Evan Longoria, who was signed long-term almost immediately after debuting in MLB. In the article below, Hosmer's agent Scott Boras seems to put the kibosh on the idea.
Were you KC, what would you do? Generally, do you think large-scale investment in largely unproven commodities is a worthwhile strategy?
Agent Scott Boras, who represents Hosmer, scuttled those hopes Thursday by telling Yahoo! Sports that baseball’s changing financial picture argues against such an extension at this time.
“Athletes have to know that you have to look at the market you’re in,’ Boras said. “You can’t look at the markets of the past. For players like Hosmer, as you go back and look, as (Mark) Teixeira had his own market and (Prince) Fielder had his own market, Hosmer will have his own.
“And something tells me it's going to be a rather eventful one.”
The Royals have not expressed any interest publicly in signing Hosmer to the type of long-term deal as a rookie that Tampa Bay negotiated in 2008 with third baseman Evan Longoria.
Boras’ message seems clear: Don’t bother trying. He cited the anticipation of increased television revenues in coming years that should impact Hosmer’s expected eligibility for arbitration after 2013 and free agency after 2017.
“The arbitration markets and free agent markets are going to be vastly different,” Boras predicted. “Sports are not DVR’d. People stay and watch it. They don't flip channels. There's a broader way of understanding the market. There's huge values in sports broadcasting rights.”
Read more: http://www.kansascity.com/2011/05/12/2871403/royals-notebook-coleman-says-first.html#ixzz1MEUfucRo
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Shocking...
I would be SHOCKED if we see a deal before the next CBA, if we see one at all (which would also be shocking).
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I concur
That said, I would be less then shocked if they get a deal done to cover his Arbitration years.
The only thing that will motivate a longer deal would be what we are seeing in Basketball right now, guys trying to lock down deals before what what they fear will be a more restrictive CBA
I really don't understand the rush in these deals.
The time to minimize risk is sometimes after his 2nd year of service time, with arb looming on the distant horizon. Unless you get a massive discount you’re better off letting a guy establish a major league baseline before doing something like this.
I also see a lot of these deals going down where the team is basically paying market… so let me repeat: There is only 2 reasons to do these deals:
1) You’re getting a discount off what you project the player would make over the same period in arb & pre arb awards.
2) You’re buying out a year of free agency (presumably at less than full market)
If you’re getting neither of these things you shouldn’t be doing the deal. Take it year to year and minimize your risk! In fact, given the volatility of young players I’m disinclined to do this kind of deal unless I’m getting BOTH of the above. If not, I’d rather wait, see what the player does (both performance & health wise) and then pay a little more if I have to if I then decide to. In fact, if I’m not getting a discount off market I don’t have to pay any more by definition (See Braun, Ryan, parts 1 & 2). Its worth waiting b/c for every Longoria deal there are lots that don’t work out where they player got hurt or his true talent turned out to be far different than what we had presumed.
Right...
But outside of Tulo, Howard, and Braun part II (which aren’t comparable because they were extensions not pre-arb/pre-Fa first contracts) which players haven’t been at a discount? I can’t think of many. In hindsight how many risks have failed to work out? I’m not sure but this is a recent trend and not too many come to mind.
The first part of Braun’s contract has been great, so I don’t now where that is coming from.
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You can find my musings at Bullpen Banter and Beyond the Box Score.
Its the second part of Braun's contract that made no sense.
They got nothing extra and they paid him what he would get in free agency even though he was already under control. Agreed its probably a bad example b/c he doesn’t quite fit what we’re talking about (he wasn’t a pre arb, or 1st or second year arb guy on a yr to yr deal or anything) but its a good example of a team giving an needless extension. If they waited a couple years the price wasn’t going up any more. It could only go down.
The failures aren’t listed among spectacular failures b/c they typically aren’t for huge amounts, but they happen – and its opportunity loss, as well. Think Alex Rios. Bobby Crosby. Eric Chavez. Austin Kearns. Uh… Ryan Howard.
RE
You included Braun part 1 in the (…). So i just wanted to correct that part. Agree 100% on Part two. Even if his MV ends up being greater than 18 the risk that it isn’t over that period of time is too high to justify that deal.
Yeah, but at the time some of those deals were good ideas. In the ex ante view, can’t fault the team for correctly balancing risk v reward and just getting hit hard by injuries.
Bullpen Banter's Top 100 Prospects for 2011!
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You can find my musings at Bullpen Banter and Beyond the Box Score.
IMO the risk is usually higher than the reward
for these types of deals.
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