Update: HOLLIDAY A CARD 7yr/120 million, p178

[Socnorb11]

That risk is a given though, if you want to sign a player of Holliday's caliber. The same risk applies if you extend Albert Pujols. But you can't really reap the rewards if you're not willing to take a risk.

That's fine. No one's saying it's not a good risk (well, maybe someone did, but I didn't notice). We're saying that it's silly to imply that a player opt-out is a good thing for the team.

Well, it *could* be a good thing for the team. If he plays well for 4 years, opts out, and then stinks up the joint for the next 3 years, then you could conclude that it worked out well for the team.

[jim]

I understand that the risk is not opting out ... so hypothetical question. Which contract is better from the team's point of view for a currently aged 30 player:

A. 7/120
B. 7/120 with an opt-out for year 7.


In theory I see the problem, in practice not so much I don't think.

[jagtrader]

I would think his opting out of the contract would probably only come into play if we're not a competitive team over the next number of years.

Or it could happen if he decides he can make a nickel more elsewhere. Holliday has held the organization hostage for two months basically negotiating between $16 and $17 million a year because he's only interested in himself. That's his prerogative, of course. Let's just not pretend winning and stability or anything else holds a high priority for him. This is a money grab.

[Bo Hart]

How is that different from 7 years at $17 mil per year? If he plays poorly, the Cardinals lose. I don't see how throwing in the opt-out makes it any riskier for the Cardinals.

I look at it like this. Four years from now, the free agent market could be in a handful of different stages...

a) The market could have dropped.
Let's say that teams are more tight-fisted with their money. Suddenly, teams are paying less per win. Holliday has no incentive to opt out, because he signed his deal with teams were playing more per win.
Holliday: he wins. He's being payed more than he's worth, by market standards. He'll make more than if he were a free agent.
Cardinals: Cardinals lose. But they would have lost even without an opt-out clause.

b) The market could have stayed the same.
If, four years from now, players are being payed about what they are now, and Holliday still opts out, that means he's given you a hell of a four years. If he's going to turn down the remaining 3 years and $51 million guaranteed, we can logically conclude he's played at an extremely high level. That means his perceived worth would be even higher than the $17 million he's being paid a year.
Holliday: he wins, because he's going to get more money than he would have originally.
Cardinals: we'll call this a win. This means that St. Louis likely received great value from Holliday.

c) The market could have risen.
Let's say teams are throwing money around even more wildly than before. You see stuff like this happen all the time, where a deal looks outrageously large at the time, but then, in hindsight, doesn't look all so bad. A great example of this would be A.J. Burnett. Remember how massive his 5 year, $55 million deal with the Blue Jays looked at the time? By today's standards, that's a bargain. He then went on to sign for 5 more years with the Yankees for $82 million.
Holliday: he wins. He can cash in on an even bigger average-annual-value payday.
Cardinals: they lose, big time. The market has exploded and teams are suddenly paying much more per win. Instead of having Holliday as a relative bargain (a la the Blue Jays with Burnett), they are either forced to re-sign him at a much higher rate (Yanks didn't have market the Blue Jays did), or are forced to find an alternative. And remember, the market in this scenario isn't what it used to be, so $17 million a year isn't going to get you a Matt Holliday, it's going to get you a lesser player.

And then of course, let me throw this in there: all of these scenarios assume that Holliday plays well. Even he plays poorly, the Cardinals are still on the hook. But if he plays poorly, he's going to stay with the Cardinals and the $17 million-per-year salary they're paying him whether he has an opt-out or not.

To me it makes a lot of sense. Maybe my model was ridiculous and inaccurate, or maybe I'm really exaggerating things. But in the end, it's crystal-clear to me that an opt-out clause has zero downside to Holliday, and big downside to the team (especially scenario 'c').

[Socnorb11]

Re: Scenario "C"

The Cardinals still had Holliday for 4 years, at a good price. And if Holliday's production starts to decline after 4 years (as he hits his mid-30's, that's entirely possible, especially defensively), then the Cardinals "win" because they don't have to pay Holliday for those last few years when his production is declining. It's very possible that the Cardinals could "win" this scenario, as well. They certainly don't lose, because no matter what, they had Holliday for 4 years at a reasonable price..... possibly even below market value, if the market is steadily rising over those first 4 years.

[phins]

It seems pretty self explanatory that allowing the option lowers the risk/reward ratio for the Cardinals, but it doesn't seem to increase the risk of the deal, as they are on the hook for the amount of the deal with or without the clause.

So, for me, it only lowers the rate of return possible for the deal, rather than increasing the risk.

[Richie Allen]

Yeah, but you've lost the upside of a favorable contract. The only way you get 7/119 is if he disappoints. Opt-out clauses are a huge benefit to the player at the expense of the team.

Or he's happy playing/winning in St. Louis.

Plus, a contract doesn't have to be considered a "bargain" to be smart for the team. Theoretically, yes, it's nice but the bottom line is we want (at least) two good bats in the lineup and we're going to have to pay to get it.

Does the opt out typically give the team the opportunity to renegotiate with the player?

[Michael]

I understand we'll to have to pay for Holiday. My only point is an opt-out is a significant concession that reduces the potential upside of the contract.

With Boras as his agent you better believe he'll exercise that option if he's playing well.

[Richie Allen]

It seems pretty self explanatory that allowing the option lowers the risk/reward ratio for the Cardinals, but it doesn't seem to increase the risk of the deal, as they are on the hook for the amount of the deal with or without the clause.

So, for me, it only lowers the rate of return possible for the deal, rather than increasing the risk.

I think that's what was confusing me. I've heard nothing but excitement about the prospect of signing Holliday and I've assumed that 7 or 8 years was a given...now the opt out seems to have quite a few in an uproar. The idea of having Holliday for 4 or 5 seasons and then potentially off the hook has me even more excited. The idea that we may have him for an additional year or 2 doesn't at all make me tentative.

[Socnorb11]

I understand we'll to have to pay for Holiday. My only point is an opt-out is a significant concession that reduces the potential upside of the contract.

With Boras as his agent you better believe he'll exercise that option if he's playing well.

Again, you don't see the benefit to the Cardinals if he opts out, and his production declines after 4 years? It *could* play out quite favorably for the Cardinals.