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September 20, 2010

Contractual Matters

Kind of a Big Deal

by Jeff Euston

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Most every player taken early in the First Year Player Draft comes with high expectations and comparables, established players at the same position, similar in size, mechanics, ability, or makeup. Comps begin as a sort of descriptive shorthand for anyone who has not yet seen a young player perform. But once attached, the comparisons become something of a yardstick, and not always in a good way. J.D. Drew has not morphed into Mickey Mantle, for example, and it was never especially realistic or fair to entertain the idea that he might.

High-ceiling draft picks also come with a price tag, and for those select few amateurs who sign major-league contracts, the expectations are particularly high. Since the Royals lured Heisman Trophy winner Bo Jackson away from the NFL with a big league deal in 1986, 43 more draftees have agreed to major-league contracts. Another standout on the college gridiron, Jeff Samardzija, received a similar deal after only 30 innings in the minors when he agreed to give up football.

An amateur doesn’t command a major-league deal without an unusual amount of leverage—a consensus ranking as the top talent available, the ability to forgo a pro baseball career in favor of college or another sport, an agent (say, Scott Boras) willing to set the market by demanding a big-league contract, or a combination of all three. In fact, Boras has represented 21 players who signed major-league deals as amateurs, accounting for nearly half the total. The benefits for the player are clear: more guaranteed money and often a quicker path to the majors.

The risk for the club, however, is significant. The total financial cost is generally higher than the straight up-front bonus given to most draft picks, although the club may spread out a signing bonus over the life of major-league contract. The player also takes a spot on the 40-man roster, limiting his team’s flexibility if the front office needs space or wants to protect another player in the organization from the Rule 5 draft in December. Finally, the club must immediately begin using the player’s option years while evaluating him at the minor-league level. Though amateurs signing big-league deals may qualify for a fourth option year, the possibility remains that he might run out of options before establishing himself in the majors.

Despite the drawbacks, the deals can pay off. Drew, a Boras client who signed a four-year, $7 million contract with St. Louis in 1998, delivered a four-year WARP of 11.5 (annual totals of 1.2, 0.9, 3.6 and 5.8) over the life of his first deal with the Cardinals. Though short of the Mantle standard, the big-league deal paid off for St. Louis, even if you factor in the $2 million in additional bonuses the contract included.

Drew’s quick ascension to the majors—he played just 70 games in the minors during his first two years after signing—helped the contract pay off. He is one of 19 amateurs who proved to be worth the gamble. Drew and six others—Alex Rodriguez, John Olerud, Pat Burrell, Josh Beckett, Mark Teixeira, and Justin Verlander—quickly became bargains for the clubs who selected them. Among the others who at least justified the cost are Ben McDonaldMark Prior, Rickie Weeks, and Stephen Drew.

Difficulty arises when a player does not progress so rapidly. Right-hander pitcher Chad Hutchinson, who followed J.D. Drew as the Cardinals’ second-round selection in 1998, likewise signed a major-league contract worth $3.4 million. But he struggled in four seasons in the minors and got a four-game cup of coffee with the Cardinals in 2001 before quitting baseball to pursue a short-lived career as an NFL quarterback. But Hutchinson is not alone. At least eight other players who received big-league deals failed to make an impact in the majors: Todd Van Poppel, David Espinosa, Eric Munson, Dane Sardinha, Jace Brewer, Dewon Brazelton, Adam Loewen, and Philip Humber. The jury is still out for a younger group that includes Samardzija, Craig Hansen, Andrew Miller, Luke Hochevar, Andrew Brackman, Pedro Alvarez, and Yonder Alonso.

Because of the option-year crunch, even a player who eventually becomes a contributor in the majors can find himself in a transactional squeeze. One example is Jeremy Guthrie, who signed a $4.5 million big-league contract with Cleveland in 2002 and spent the 2003-06 seasons burning his option years in Akron and Buffalo. The Indians’ gamble got them 37 innings and a WARP of 0.2 at the major-league level. Out of options after the 2006 season, Guthrie landed in Baltimore on a waiver claim. In the four seasons since, he has given the Orioles 119 starts at a total WARP of 14.1—for a cost of $4.8 million, only $300,000 more than Cleveland’s initial investment.

The August 15 signing deadline, first put into place for the 2007 draft, gives teams a small loophole which can provide the organization more valuable evaluation time. St. Louis took advantage of the rule with its top pick in the 2010 draft, Zack Cox of Arkansas. After signing Cox to a four-year big-league contract worth $3.2 million, the Cardinals assigned him to their rookie-level Gulf Coast League club, which has the earliest season-end date among the St. Louis affiliates. Once the GCL season was done, the Cardinals recalled him, which had the effect of “undoing” the option because it came within 20 days of his initial option. The “promotion” was made only for procedural purposes, as Cox will report to the Arizona Fall League rather than the big-league club.

Despite the risk, the cost and the procedural hoops, a major-league contract can pay off—for the right player.

Jeff Euston is an author of Baseball Prospectus. 
Click here to see Jeff's other articles. You can contact Jeff by clicking here

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