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December 13, 2010

Contractual Matters

Bruce'd Up

by Jeff Euston

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The Reds’ $51 million extension with Jay Bruce should become official Tuesday. The deal locks the right fielder in the middle of the Cincinnati lineup affordably for the foreseeable future and secures the right fielder financially for life. So what’s not to like?

For a club of limited resources like the Reds, an outlay of $51 million is a significant risk, even when the money is spread over six seasons. Bruce’s contract comes within $250,000 of matching Arizona’s March 2010 extension for Justin Upton, the largest deal in history of an outfielder with two-plus years of experience in the majors. Among two-plus players at any position, only Hanley Ramirez ($70 million) and David Wright ($55 million) received more.

But Bruce figures to be worth the risk after hitting 25 home runs and posting a .297 TAv and a 6.7 WARP in 2010. Still just 23 years old—he turns 24 in April—Bruce qualified for arbitration this winter as a Super Two, which put him in line for a raise from his $440,000 salary into the $3 million range and no doubt spurred the Reds to explore a long-term deal.

To say the deal provides the Reds with good value would be an understatement. Using MORP (Marginal Value Over Replacement Player), Bruce’s value on the free-agent market over the next six seasons is $113 million ($19.2 million in 2011, $18.7 million in 2012, $20 million in 2013, $19.3 million in 2014, $18.3 million in both 2015 and 2016). That’s a full $62 million more than his contract calls for.

Even discounting the first four seasons for the fact that Bruce is only eligible for arbitration and not on the open market, he projects to be worth $75 million through 2016—$24 million more than the amount he’ll actually earn. Assuming Bruce could command salaries in arbitration at roughly 20, 40, 60, and 80 percent of market value for the deal’s first four years, the values break down as follows: $3.8 million in 2011, $7.5 million in 2012, 12 million in 2013, $15.4 million in in 2014, $18.3 million in both 2015 and 2016.

For Bruce, the motivation in signing a multi-year deal is not complicated. He already has about $3 million in career earnings to this point, and he has made no secret of his wish to remain with the Reds long-term. The $51 million guarantee avoids the headache of arbitration and locks him in with Cincinnati through his age-29 season while ensuring him financial security for a lifetime.

The contract’s obvious advantages do not come without a cost. Had he and agent Matt Sosnick elected to go year-to-year, Bruce would hit the free-agent market after the 2014 season, at the relatively young age of 28. But after allowing Cincinnati to buy out his first two years of free agency, he now won’t reach the open market any sooner than October 2016, when he’s 30 years old.

Bruce also gave Cincinnati a $13 million club option for 2017, giving the Reds control of his rights for a third season of free agency, when his MORP projects to be $16.2 million. Factor that season into the equation, and Jocketty is paying $63 million over seven years for a value of $130 million, or $91 million when discounted for Bruce’s arbitration years.

Without the leverage of the open market, a young player seeking a long-term commitment from his club usually must agree to delay his free-agent timetable by at least one season. A front office often has itself a club-friendly deal if a multi-year extension allows a team to buy back two years of free agency. For the Reds, control over Bruce’s third free-agent year sets the deal apart.

By way of comparison, Arizona’s extension with Upton bought out two years of free agency—with no option for a third year. Unlike Bruce, Upton was not yet arbitration-eligible last spring when former Diamondbacks GM Josh Byrnes signed him to a six-year deal. And the $13 million price of Bruce’s 2017 option still falls short of the salaries for Upton’s two free-agent years ($14.25 million in 2014 and $14.5 million in 2015).

Before Upton’s extension, the most lucrative deal for an outfielder with two-plus years in the majors was Philadelphia’s six-year, $50 million contract with Pat Burrell. In that deal, the Phils bought out Burrell’s first two years of free agency for $13 million and $14 million respectively. Bruce’s $13 million option for 2017 looks appealing in comparison today, given the spike in the price for corner outfielders brought on by recent deals for Jayson Werth ($18 million AAV) and Carl Crawford ($20.28 million AAV).

Bruce can’t be expected to continue to eclipse his 90th-percentile WARP projections (as he did in 2010). But if he stays healthy and continues delivering production from the middle of the Cincinnati order, the option year has the potential to transform the deal from a nice bargain to a flat-out steal for the Reds.

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

Related Content:  Deal,  Jay Bruce

7 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links

Lou Doench

I've had nightmares that featured Jay Bruce in a Yankee's uniform. Now I can rest easy for a few years. Now to deal with the one with Joey Votto in an Angels Uni...

Dec 13, 2010 07:00 AM
rating: 0
 
meanwhoogean

I'm always surprised when players decide to sign away their free agent years. I don't think players should be solely focused on money, but giving up, in a case like this, 20-30 million dollars, just seems insane. Though, I am not a man prone to risk, and would consider the guaranteed money. Happy for the Reds.

Dec 13, 2010 10:35 AM
rating: 0
 
RedsManRick

I think we tend to under-estimate the risk the player bears in going year to year. Dave Cameron at Fangraphs just did a good analysis of contracts signed in the 2006 offseason. I won't spoil the article, it's worth a full read, but in long term contracts, teams paid players nearly twice what they produced.

The concept of marginal utility is really important here. Generally speaking, every additional dollar is worth just a little bit less to the player based on what it means to his life. Even assuming he doesn't have a career threatening/ending injury, what if he just puts up an 800ish OPS for the next 3 or 4 years. What kind of money would he make?

While, as a Reds, I love the notion of Bruce putting up 5 wins a year over the course of the deal, I think we should be cognizant of the down side as well. It would be interesting to see this deal analyzed using a set of projections that includes a high-med-low track. It's hard to fully appreciate both the value and risk when looking at just the mean projections.

Dec 13, 2010 11:10 AM
rating: 2
 
ostrowj1

To continue RedsManRicks post, the contract is a hedge. If he does deliver 70+ million in "worth" for the Reds, then by the time the contract ends he would likely be in line for Carl Crawford / Jason Werth money (and years). Yes, he might be out $20 million, but lifetime baseball earnings, in that case, could still be over 200 million. At that point, is an extra 20 million worth the risk that you get hurt in a year or two and only make $5 million (lifetime)?

Dec 13, 2010 13:50 PM
rating: 2
 
BurrRutledge

This is an exceptional point. Good move for Bruce via the "in hand" vs. "2 in the bush" persective. And if he really is worth what the projection says down the road, then he'll be making plenty more when it's time to re-up. A true win-win for both parties.

The only thing that remains a head-scratcher to me is the club-option.

Dec 13, 2010 18:18 PM
rating: 0
 
Lespaul1

Really nice article Jeff. You made it very easy to see the perceived benefits from both the player and team point of view.

I'd love to see an article that examines seemingly promising young players of the past, and how buying out arbitration years did/would have worked out. (I remember when Austin Kearns might have been seen as a candidate for an early contract, among many others)

Dec 13, 2010 17:39 PM
rating: 0
 
BurrRutledge

When you compare Bruce's contract to Evan Longoria's, it sure looks like Bruce did very very well...

http://www.baseball-reference.com/players/l/longoev01.shtml#contracts

Dec 13, 2010 18:24 PM
rating: 0
 
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