Baseball needs to get rid of opt out contracts

Posted by Scott Wuerz on January 22, 2014 

If I could make one change to the MLB collective bargaining agreement -- and a salary cap wasn't on the table -- it would be to get rid of contracts with opt outs.

The New York Yankees announced Wednesday that they have signed former Japanese league pitcher Masahiro Tanaka to a seven-year deal worth $155 million that includes a chance for the player to void the deal after four years so he can try to get even more money on the free agent market.

I don't know how the dollars break down. But the Yankees had to pay a $20 million posting fee just to have the right to sign Tanaka. So, if the deal is divided equally over the length of the contract, that would average to New York coughing up a guaranteed $27 million plus over the first four years for a guy who has never thrown a pitch in the big leagues.

Not bad money if you can get it. He'll be paid as one of the elite pitchers in baseball -- whether he turns out to be one of them or not.

But why should the owners take all the risk?

It's ridiculous that the player gets the security of a mega deal -- AND -- the option to get out of the contract if it is financially advantageous due to salary inflation. 

If a player gets hurt or falls on his face, it's the club that is on the hook and there is no relief. People seem to think that contract insurance is some sort of magical safety net. But if a player just loses his ability to perform, the contract isn't covered. And, if the player suffers a career-ending injury, the settlement is often pennies on the dollar rather that a significant chunk of the payout.

So what? Let the Yankees, Angels and Dodgers handcuff themselves with stupid contracts. Well, that drives up the price for everyone else, too. Eventually the people in the stands at Busch Stadium will have to pay the cost of player inflation.

It drives me up the wall to hear people complain that Albert Pujols was "underpaid" when he made $16 million a year with the Cardinals at the end of of his stay here.

The Redbirds agreed to that contract when Pujols was a young player years away from free agency. They gave Pujols a lifetime of financial security in exchange for a likely break on the back end of the deal. Albert Realized well over $100 million -- which the team would have had to pay if he turned out to be a flash in the pan -- out of that deal and he knew what he was giving up in exchange for security. It wasn't nearly as bad of a deal for Pujols to "only" get $16 million a season as it would have been for the Birds to pay Pujols $16 million a year if he burned out.

But those are the kinds of deals smaller market teams have to make to remain competitive. Otherwise developing from within doesn't work because their home grown players flee for the big money clubs before they reach their prime. Think of the Kansas City Royals and their 29-year rebuilding project that saw Johnny Damon, Carlos Beltran and countless others leave before they could make a difference. They let those guys walk instead of taking a chance and ended up a Class AAAA team for three decades.

Today teams are less often able to make these sorts of shrewd deals that allow them to keep their homegrown products because the players want an opt out in their contract that guarantees they'll never have to trade maximizing their earning power in exchange for security when they're young.

These contracts are the single biggest escalator in the cost of doing MLB business because players aren't even expected to honor their contracts anymore. And I get the sense that owners are more willing to pass out mega deals with opt outs in them because they figure the odds are the player will cancel the deal midway through the contract and he'll be someone else's financial problem. Until the player falls off and sits on the end of the bench for the last three years of the deal collecting huge paychecks.

It was obscene that Alex Rodriguez's quarter-billion-dollar contract signed with the Texas Rangers -- the largest deal in the history of MLB -- had opt out language in it and that it was exercised to leverage an even bigger deal. The Yankees have paid dearly with A-Rod getting busted for cheating -- TWICE -- since the pact was signed to go along with a dramatic decrease in production. Yet, minus the money he'll lose from his 2014 suspension, he's still getting paid handsomely.

The Yankees were amazingly stupid to give in to A-Rod and sign him to the new deal when it was fairly obvious they were only bidding against themselves. But here we go again with the same type of contract. It's been proved repeatedly that owners are incapable of showing restraint. The only way to stop this nonsense is a rule change.

It's only fair: If the rules prohibit performance-based incentives that reward players for doing well, they should prohibit opt out clauses that allow players to make more money if they exceed the value of their contract.

Opt out contracts usually end up like the St. Louis Rams stadium deal. Giving players a contract with an opt out in it is just kicking the can down the road a little farther. But someday there are going to be big problems when the day of reckoning comes.

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