Explaining A-Rod’s out clauses
Posted by: Peter Abraham - Posted in Misc on Mar 22, 2007 
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There seems to be some confusion regarding Alex’s contract. To put it simply:
He can void it after 2007.
He can void it after 2008 or 2009 unless the team increases his 2009-2010 salary by $5 million a year OR $1 million more than the highest-paid MLB position player.
So he has out clauses at the end of 2007, 2008 and 2009. The Yankees also cannot offer arbitration after 2010.
I checked this out with Brian Cashman a few weeks ago just to make sure.
Hope that clears up any questions.
Pete,
Thanks for the real deal on the A-rod contract.
Do you think that Cashman is sincere when he says that he wants Alex to stick around, or would he be just as happy to be rid of the terrible tail-end of Alex’s contract?
The contract doesn’t seem to provide much security (peace of mind) for the club with the “opt-out” looming every year. It seems like Cashman doesn’t want to be held hostage by it. It portends drama, drama, drama until the end of the contract or opt-out, whichever occurs first.
Also, if Alex leaves within the next year, where do you think the club will turn to in order to replace his bat and glove? You’ve got to think that Cashman has a Plan B and Plan C.
Thanks.
Pete, a number of sites (Blogs mostly) including mlbtraderumors.com are “reporting” that the framework of a deal for Arod is in place with Anaheim. Of course, in order for the deal to be consumated, there are a number of factors to be delt with in order for it to go down including Arod’s no trade clause as well as his opt out. Have you heard any of these rumors, and if so, what are your thoughts?
I usually don’t put a lot of weight on information from blogs, but mlbtraderumors.com usually does a pretty good job of sourcing their stuff.
“He can void it after 2008 or 2009 unless the team increases his 2009-2010 salary by $5 million a year OR $1 million more than the highest-paid MLB position player.”
What triggers the ‘OR’ language? If ARod is the highest paid player in MLB under his current contract in ’08 is he due a $1M raise, $5M raise, or no raise? If Arod is still the highest paid player does that void clause not activate? When Scott Boras put that ’01 contract together he likely anticipated a continued uptick in the market, not a regression. I’m still not clear on how the void language gets triggered.
If the Yankees must pay an increase (either $1 or $5 M) in ’08 and refuse what will the market be more than $27 million per year – ARod’s current salary? By my calculation ARod will still make about 30% more than the next highest paid player in baseball in ’08.
The source of the mlbtraderumors story about Alex is just a blogger with “sources”. In the not to distant past everyone was worked up into a froth about a blog rumor about Melky going to Pittburgh for Mike Gonzalez. Never happened as is the case for most of these rumors.
And the package being offered in that rumor for Arod is horrible, an unproven Weaver brother, crappy backup catcher and a medicore starter/reliver. Yich!
Alex will opt out, go to the Devil Rays and win 8 consecutive world series rings. He will then retire, call Jeter a little girl and offer Lou Pinella a retirement cottage in his back yard in Miami.
Soon after Alex Rodriguez will enroll in the University of Miami and take advanced pottery classes.
Isn’t that a great story?
My take is either Alex is happy with his current contract/salary, or he can go elsewhere. I don’t care what kind of season he is having, for him to then turn to the Yankees and say I want a contract extention or I am gone, than Brian shuld hold a farewell party for him. Also does he really need to increase his salary to 28 million or 32?? He makes in 2 ab what I make in an entire year!! It makes me sick just to think about it.
Cash should start thinking about who will replace Alex after this year, cause I don’t see him staying.
I’m still having a problem seeing the big picture here. To match the payout under the remainder of his current contract, ARod would need to get about $30 million annually for 2008, 2009, and 2010. In 2011, he will be 35. Presumably any team that want to sign him will have to give him at least some additional annual salary and tack on at least a couple of extra years as well. Let’s say at a bare minimum they’ll have to pay $33 million a year for five years. Maybe it’s me, but that sounds like an awful lot of money for any team to take on for a guy who has never won a WS. Is the demand really there for ARod at those prices? Opting out solely for financial gain just doesn’t seem to make much sense.
On the other hand, if ARod has laready decided he wants out of NY, why wouldn’t he just acquiesce to a trade?
I do think, fundamentally, ARod feels he deserves to play someplace where he is loved. I imagine he is really envious of what Jeter has in NY, especially since he has much better numbers than Derek. So maybe he’s decided to give it another year to see whether things get better in NY, and if they don’t, he’ll move on even if it means playing for less money.
“Also does he really need to increase his salary to 28 million or 32?? He makes in 2 ab what I make in an entire year!! It makes me sick just to think about it.”
who cares what you make? what does that have to do with anything? to sit here and pretend like you would turn down $5M no matter how much money you had is silly.
it’s $5M. even if he takes that $5M and gives it to charity, it’s in his contract and he should get it. IT BELONGS TO HIM. i’m sorry that the Rangers negotiated what is a horrible deal for them, but they did. and now Alex deserves every penny he was given.
this whole “he has enough money already!” canard is BS.
Alex also gives more money to charity than you will make in your life, so give it up.
people BENEFIT from A-Rod making money.
no one cares about your crappy job and salary, it’s completely irrelevant to the discussion.
What’s the free agent market look like for 3rd baseman next year? Or even better what does the farm have to offer? I know Duncan was a third baseman but he’s still far from being in the majors.
Here’s a riddle. What’s worse? A general partner arrested for DUI or a manager arrested for DUI?
I still can’t see the Yanks leaving open the possibility of A-Rod going to Boston. He might hit 80 HRs in Fenway, AND blast some holes right through that wall…..just sayin’
HMMM wake up on the wrong side of the bed? You don’t have to get nasty! Now go back to bed and try to wake up on the right side of the bed!
There isn’t a team in baseball that would open up ARod’s deal with 4 years left on it.
Two thumbs up to Brian Cashman from me. He’s a sensible guy. He’ll take reasonable steps to retain ARod, but he won’t go nuts over it. If ARod leaves, he leaves. It will be very difficult to replace that production, no doubt, but the Yankees will find a way.
Jered Weaver is starting the season on the DL. Yeah, trade A-Rod for a hurting Weaver.
Alex’s trade value is low, because whoever gets him will either: 1) have to negotiate an extremely pricey extension (with Scott Boras, noless) or 2) deal with the possibility of him leaving in each of the next three years. Yanks would take a bit hit in Win Shares value in such a trade.
Here’s an idea, why don’t we hope Alex has a great year and helps lead the Yankees to #27?
I hope Arod stays, but let’s not forget, the Yankees won four World Series without Arod, Giambi, or Matsui. The world won’t collapse. That said, I hope he stays.
hmmm, tis is fun i should do this very very very very often. Arod rocks.
Instead of rehashing the conventional wisdom of everyone else, I would be much more interested in a unique perspective. Here is mine:
Arod’s current contract calls for him to make $81mn from 2008 to 2010. Assuming he doesn’t opt out, that would make him a 35-year old free agent in November of 2010. Further assuming normal market inflation, the relevant question is what kind of contract could Arod get at that point?
It might not be the most scientific, but I think we can use Gary Sheffield’s contract as a worst case model. Sheffield, who is 38, just received a $14mn extension through his age 40-season. So, even if Arod has deteriorated into a slugging DH by his age-35 season, I think it is reasonable to think he could snag $64mn/4-year deal in the off-season of 2010 (and, if he reasonably maintains his overall ability, the dollars could be much higher).
Going on that low-case assumption, Arod’s current contract and expected 4-year deal in 2010 would amount to a $145mn/7-year deal. If you factor in the time value of forfeiting the large $27mn annual salary (which I’m sure Boras would do), that amounts to $21.5mn per year. Does anyone really think someone is going to give Arod such a contract at age 32? Perhaps, but I find it hard to believe that any team would be willing to make such as a commitment, not to mention go much higher.
In other words, I don’t think Arod’s opt out leverage is as much about money as it is about his wanting to stay in New York (which is exactly what he said).
Peter: Can the Yankees offer A-Rod arbitration after THIS year (assuming he opts out of the contract and leaves)?
Here is how I interpret the Arod contract language: If Arod is no longer the highest paid player in the game, the Yankees must either: (1) increase his salary by $5mn if the gap between his salary and the top man is more than that amount; (2) increase his salary by $1mn more than the top man if the gap is less than $5mn; or (3) do nothing if Arod is still the highest paid.
In other words, if Top Dollar was making $33mn, the Yankees would have to bump Arod from $27mn to $32mn. On the other hand, if Top Dollar was making $29mn, the Yankees would have to pay Arod $30mn.
To me, the language reads as the classic whichever comes first clause (kind of like a warranty: 7 years/70K miles).
I realize you spoke with Cashman, but I have also seen other reports more in line with my thinking. Maybe somethign was lost in translation (or perhaps in mine)?
William – My guess is you have the clauses reversed. If A-Rod is no longer the highest paid player and somebody passes him by $2 million, then he gets the $5 million bump. If somebody passes him by $6 million, then he gets a $6M + $1M bump.
Just to back up my earlier point, Jerry Crasick of ESPN wrote the following (in an article for which he spoke to Scott Boras):
“The $252 million contract that Rodriguez signed with Texas six years ago is stunning for its magnitude and noteworthy for agent Scott Boras’ foresight. It includes a clause giving Rodriguez the freedom to opt out after the 2007 season for any reason, and again in 2008 or 2009 if he’s not earning $1 million more than the second highest-paid position player in the game.”
I am not sure joe, joe. It certainly could be that way, but until I see a direct quote from Boras or Cashman addressing the terms, I don’t think anyone can be sure.
Here’s how Cot’s Baseball Contracts describes the clause:
“Rodriguez may void after 2008 or 2009 unless club increases 2009-10 salary by $5M/year or $1M more than highest-paid MLB position player”
http://mlbcontracts.blogspot.com/
I know if a regular free agent is offered arbitration and signs with another team, his previous team gets a compensation draft pick. Can someone please tell me – If a player with an out clause on his contract (like JD Drew had and Arod has) decides to exercise that option and become a free agent, does the team he is leaving get a draft pick when the player signs with another team? does it work like normal free agency where the original team gets a chance to offer arbitration? Anyone know? Thanks!
William
I agree with your assessment. If ARod opts out he’s going to be losing money long run, short run and in every run.
This is not about money – it’s about quality of life.
Has anyone here actually listened to Arod’s recent radio interview and the one earlier in the spring about Jeter, etc.? If you listen to him you get a totally different feel for the situation than you get from reading accounts of it in the media. They are trying to create controversy. From listening to the interviews, I got the feeling that he isn’t going anywhere–unless the Yankees tell him they don’t want him. He will be in NY next year and probably for several years after that. Listen to the man, not to the spin that you read/hear.
If A-Rod has a bad year, he will blame the NY fans/media and leave. If he has a good year, he will take the credit and stay.
If he has a bad year, none of the fans will want him anyway.
Its a win-win.
People worry too much. Everyone is already worried about next year and this year hasn’t even started yet. Just sit back, watch how the season unfolds and relax, please.
And for everyone that is worried about how much money he makes, get over it. He is a professional ballplayer, they all make tons of cash. In the grand scheme of the entertainment world his pay is low. That dope Simon Cowell makes over $100 mil per year and I am pretty sure that Katie Couric on CBS is making over $50 mil per year. So get over the money issue. It isn’t your money that is being spent anyway.
the Dodgers did NOT get draft pick compensation from JD Drew.
i would guess that A-Rod’s contract specifies that the Yankees are not allowed to offer him arbitration.
even crazier than the opt out provisions in the contract are all the performance incentives in the contract. like $1M for an MVP and $$ for finishing in the top 5 of voting. uhh, if you didn’t think Alex would be in the top 5 almost every year, you wouldn’t be giving him this contract anyway….
Boras really bent Hicks over a barrel.
Per opt-out clauses, the Dodgers did not get draft pick compensation for Drew b/c they did not offer him arbitration after he opted out. They would have gotten pick(s)if they had offered him arb. Pete’s post states that NYY cannot offer him arb. after ’10 but can they if he opts out this year? That would be small compensation for losing his bat, but compensation none the less.
Oh, and think about his salary escalation clauses as a Boras guarantee that Alex will remain the highest paid payer in the game. At the very least he gets 5mil/per more a year. If he is not the highest paid player, he gets the difference to the highest salary plus one mill.
Maybe I can get Boras to rep me after I get out of grad school?!
hmmm and rbizzler
Thanks for the info! Appreciate it
The contract opt-out language gives ARod the GREATER of a $5 million raise or a raise that would make him the highest paid player by $1 million. In other words, the “default” is that ARod can opt out after 2008 and 2009, just as he could have walked after 2007. However, with respect to these two years, the team has the right to block him from exercising his opt-out. But to block him from re-entering free agency, they have to pay at least an extra $5 million, and possible more in the event salaries have ballooned and even $32 million is not enough to keep him as the highest paid player.
Agreed Tar Heel…to further back up your point, consider this:
Judge Judy makes $25mn per year!!!
Chief Justice Roberts makes about 200k!
When people whine about how much athletes earn, it makes me wonder what planet they are from.
Drew’s contract didn’t allow the Dodgers to offer arbitration- they had no choice
“Maybe I can get Boras to rep me after I get out of grad school?!”
that would be nice.
one thing i don’t understand is why people ascribe some sort of moral issue to what Boras does.
his JOB is to get the MOST money for his client, and he is VERY good at that. and he is getting this money from owners who are billionaires.
so i don’t understand how Boras is “evil” or “greedy” or a “pig”.
his takes money from billionaires and gets it for his clients. that’s all he does.
its sports, not government or war.
Not quite hmmmm, Boras is taking the money from the people who go to watch the games and buy the merchandise predominantly – as indeed are the billionaires.
A-Rod’s not going anywhere until he proves he can win in New York. If he leaves before doing so, it will follow him for the rest of his career.
~ The Knuckler, http://blogs.msg.com/the_knuck.....istra.html
I don’t think I agree with what you’re saying, Englishyankee. Yes, the owners do get a sizeable chunk of change from gate receipts and things, but they get FAR more money out of the cable systems (which are going to pay the money whether we watch or not)and advertising than they do from us.
Scott Boras is an absolutely brilliant agent who does his job to an unprecedented level. Nobody has EVER been as good as he is at procuring baseball contracts for the most money. Disliking him because one is jealous of the insane salaries is a little shallow and petty.
(After all, I’d assume that those people who hate A-Rod because of his salary do not go to movies starring George Clooney, Jim Carey or the like, who are all making 25 million dollars or so per picture.)
If they were to trade A-Rod, which I think is the right move at the deadline if Cashman feels he is as good as gone, they definately have to get a third base prospect back. Any chance the Dodgers would have interest? They have loads of young guys, and Andy Laroche could center any prospective deal.
“Not quite hmmmm, Boras is taking the money from the people who go to watch the games and buy the merchandise predominantly”
again, we are talking about sports. buying merchandise and baseball tickets is not exactly the same as buying food and medicine.
it is completely up to you to spend your money on those things knowing perfectly well where it goes.
if you don’t like that athletes make a ton of money, don’t spend your money on those things.
again, there is no MORAL issue here.
Whoever wrote that’s about quality of life, thanks. That made me smile.
It’s always about money. Always, always, always. The only way Alex decides to stick with his current deal is if none of the other 29 teams offer $1 more. There are 15 great agents out there who will be glad to make a deal. There is one agent who always takes his guys on the market and gets the highest price and that is Scott Boras.
That is Alex’s right, it’s in his contract. The Yankees traded for him and they knew this clause would come eventually.
Pete, do you have any insight on how the contract is affected if Alex is still the highest paid MLB position player?
Pete…I don’t think anyone is saying it is explicitly about quality of life. Instead, I, and others, do not agree with the convention wisdom that says it is an economic slam dunk that Arod would make more money over the next 7 years if he opts out. In fact, I presented a scenario that shows how he could make more money if he doesn’t opt out. I am sure Scott Boras will do a thorough analysis of all the possibilities. If his conclusion is similar to mine, then I think Arod’s decision will ultimately come down to where he’d rather play.
Finally, of course, it’s always about money. Anyone here who says they wouldn’t exercise contractual demands for millions of dollars is probably a flat out liar.
Peter: Thanks for asking about the contract options straight from the Cashman’s mouth. I’m a little disappointed http://www.mlb4u.com and dugoutdollars were both wrong; it’s the closest thing I know of to an authoritative source which is publicly available.
Hey, can we heap the blame where it’s due?
Tom Hicks agreed to this crazy contract – and it was almost $80-100 million more than A-Rod was gonna get anywhere else (I think).
If Hicks kept his head, there would be no $252 million contract with all these wacky clauses. (Granted, without the crazy contract, the Rangers wouldn’t have probably traded A-Rod to the Yanks, but that’s neither here nor there.)
I still think if A-Rod opted out he would make less money, he only gains security. If he only cares about money, he should stay, if he only cares about winning, he should stay. There is no way that 2008-2010 willgive him the same 27 million average anual salary. Instead of making 81 over the next three years he could make 63 or 66 at an anual average of 21-22.
If he stays with the Yankees for the contract, he will get to 600 homers and will be near 700 by 2011. What team, specially the Yankees with Steinbreners desire for records would not be willing to pay a star third baseman about to chase Mays, Ruth, Aaron and Bonds? Plus the market in 2011 would probably mean more of an anual value he gets now. The yankees probalby offer a 3 year contract in 2011-13, cementing A-Rod as a Yankee for the hall of fame, cementing the Yankees as the team with which he became homerun king.
All in all, I believe if he stays, he will make more money and win. If he leaves, all he gets is contractual security, which for an all-star, possible homerun king and one of the best players of all time really isn´t that important, because his talent will always swecure his future.
FYI from MLBtraderumors.com:
“Braves Sign McCann For Six Years
McCann will be a Brave through 2012, with a $12MM club option for 2013. I’m not sure where this leaves Jarrod Saltalamacchia. Maybe as the team’s best trade bait, if he bounces back this year.�
How about a trade to the Yankees for Nieves and Whelan?
“How about a trade to the Yankees for Nieves and Whelan?”
i’m going to assume you are joking, correct?
Joe Crede on third base in 2008 after A-Rod opts out.
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