Thursday, December 4, 2008

Dustin’s Deal

I blame the Cleveland Indians. In the late nineties, they had a load of young stars, and they signed them all to long-term deals early on. After a few years, teams started to notice that by doing that, they had the likes of Jim Thome, Manny Ramirez, and Albert Belle signed to cheap long term-deals that avoided nasty arbitration issues. After that, teams everywhere went around locking up their young talent. The players got a nice deal since they were able to get security against injury. They took a little risk that if they performed well they’d become underpaid. But, at the millions that the deals are worth, it wouldn’t sting too badly. Plus, if they got that good, the free agent paycheck would surely make up for the slight. (You’ll notice that the three players I mentioned above did exactly that just as soon as they could. Didn’t seem to hurt them.) From the team’s perspective, if the player performed well they would get a bargain. If, however, the player went down the tubes or got hurt, the team could be a big loser. I see the reasoning for a team like the Rays to lock up a player on the cheap, and take the risk. It’s the only way they’d ever be able to afford Evan Longoria. But, for a team like the Sox, is it worth the risk?

The Pedroia deal is worth in the $40 million range for 6 years. The first few years are pretty low, in the $1.5 mil range. The last few jack up towards double digits. Is that a good deal for Dustin? I’d say so. His arbitration values would be pretty low for a few more years, so the $1.5 million is pretty good. At the end, he’s assured a pretty good salary no matter how he does. So, what’s his downside? If he goes out and wins the next 6 MVP awards, he’ll be underpaid at $10 million. But, if he does that I’m guessing a 30-year old 7-time MVP will do just fine in free agency. His upside? If he breaks his leg tomorrow and never plays again, he gets $40 million he wouldn’t get.

It seems to me that in long-term deals like this, all the risk is by the team. They have the most to lose by gambling that Dustin will be a star. For a team with limited funds, it’s probably worth the risk since it’s the only chance they have. Are the Sox a team with limited funds?

Congratulations Dustin on your payday!

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