The Pittsburgh Pirates should look to exploit an emerging market inefficiency: the three-year opt-out.
In 1978 Pittsburgh Pirates’ right fielder, Dave Parker became the first player in Major League Baseball history to have a $1 million contract. An amount that was considered completely ludicrous at the time. Since that era, baseball has gotten more popular and TV deals have caused player contracts to grow to 200 times more valuable. Baseball, unlike the other sports, has fully guaranteed contracts. When David Price signs for seven years and $217 million, he is guaranteed all of that money. However, a relatively recent trend has come into play and that is the early-contract player opt-outs.
David Price’s deal with the Boston Red Sox includes a third year opt-out, so if Price feels compelled, he could opt out of his deal and attempt to sign a new deal. If he is under-performing, he can also choose not to opt out and keep getting paid like an elite player.
Options are nothing new in Major League Baseball, as player and team options have been included in contracts for years. However, they used to be at the end of contracts, but recently as contracts have gotten bigger, options are now in the middle of the deals. You recently saw Zack Greinke opt out of his six-year, $147 million contract with the Los Angeles Dodgers after the third season to see if he could sign an even bigger deal, which he did when he signed with the Arizona Diamondbacks for six years and $206.5 million.
These player opt-outs favor the player completely and while that isn’t a bad thing, it raises an interesting question about the future of these mega deals and what they actually mean for the Pittsburgh Pirates.
It’s no secret that the Pittsburgh Pirates are a small market team that specializes in finding market inefficiencies and exploiting them to field a competitive baseball club. Because of their small market status, the Pirates have not given out a long-term post-arbitration contract in a long time.
They’ve given out extensions to Andrew McCutchen and Starling Marte, but both of those deals bought out arbitration years and a few free agent years. This is how the Pirates do long-term contracts because they’re buying out a player’s prime years. The Pirates don’t generally give out long-term deals to players over 30, and as you saw with Neil Walker, they aren’t afraid of trading even a local-born player rather than giving him a long-term contract after the age of 30.
The Pirates haven’t given out a long-term contract to a player over 30 in a long time. It simply isn’t in the best interest of small market teams to pay for past performance. There are a plethora of fans that refer to this practice as cheap, but to paraphrase Chris Stewart, “It’s not cheap, it’s economical.” But is there a way for the Pirates to take advantage of player opt-outs?
Contracts are getting bigger and not just for superstar-type players. Jeff Samardzija recently got $90 million for being a league-average starting pitcher for most of his career. That is the value of starting pitching in today’s baseball economy. If league-average pitchers are getting such exuberant contracts, that is not good for the Pirates as they have made their living recently on signing low-cost pitchers and getting max value from them. If opt-outs are going to continue being a trend, it is something the Pirates can use to their advantage.
You can start signing players to larger deals, but for shorter years. Then, just let the player walk in free agency. If pitchers are going to start demanding three-year opt-outs, then just sign second tier-level starting pitchers to larger annual value contracts, but for just three seasons. You don’t end up paying for the player’s declining years, but you still get premium-level starting pitching. I am not saying pay $200 million for any one starting pitcher, but going slightly above market value for a shorter period of time could entice plenty of quality arms to come to the Pittsburgh Pirates.
The Pittsburgh Pirates can still exploit a current trend and take advantage of a market inefficiency. Let the Boston Red Sox and Los Angeles Dodgers of the world pay for a pitcher’s declining years. The Pirates can absolutely start increasing payroll, but in an intelligent and productive way. Three-year opt-outs have radically changed how pitchers are going to get paid and for the large market Boston Red Sox, there isn’t a huge risk in David Price getting paid $32 million as a 35-year-old, for the Pirates that could be financially crippling. It’s in the Pirates’ best interest to go against the opt-out trend and simply offer slightly more expensive, but shorter-term contracts.
The Pirates have prided themselves on being economical (or cheap if you ask some fans), but sometimes to be economical you have to go outside of your comfort zone and for the Pirates that is going completely against the direction of long-term deals with three-year opt outs and going for more expensive but shorter-term deals for pitchers. You can continue to go after the same type of pitchers, but avoid having to go longer-term deals.
Jeff Samardzija getting five years and $90 million has completely changed the game and like it or not it’s going to set the market for league average starting pitchers. Jeff Samardzija has a career 4.09 ERA/3.84 FIP and an ERA+ of 96. He is by almost all definitions, league-average. If pitchers like that are getting nearly $20 million per season, then the Pirates need to find the next great market inefficiency and I truly believe that will be by paying a larger annual value for a shorter-term deals.
The Pirates have always claimed that being economical does not make them cheap and to prove this I think they must start spending more money in the short-term. Sports have always been trend-based and this is especially true when sports agents are involved. Three-year opt-outs aren’t going anywhere and this is not good for the Pirates. They must work around them and get creative. I truly believe that the next great small market exploit will be offering larger value three-year deals. Let’s be honest, if David Price is performing at the same level in 2018, he is going to opt out and go for max value again.
Small market teams have always been good at finding ways to work around the unfair landscape that is Major League Baseball and the paradigm has shifted again. They must now work around the latest unfair trend and that is deals with three-year opt-outs. It’s time for the Pirates to be economical by spending a little extra money.
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