Why Opt Out?

Rob Manfred is complaining about opt-out clauses:

“The logic of opt-out clauses for the club escapes me,” Manfred told FOX Sports on Thursday night. “You make an eight-year agreement with a player. He plays well, and he opts out after three. You either pay the player again or you lose him.

“Conversely, if the player performs poorly, he doesn’t opt out and gets the benefit of the eight-year agreement. That doesn’t strike me as a very good deal. Personally, I don’t see the logic of it. But clubs do what they do.”

Opt-outs should lower the value of the contract, so in a way it’s good for the team in the long run. I also suspect the real reason is that neither teams nor players are willing to offer or take very high salary, short term contracts. When thinking of signing a player around 30 years old, teams know they are going to pay for a long decline if they go more than four or five years. Most of the value of the player will be realized in the first three or four years. So why not offer a lot more money for a shorter period of time. In other words, why not pay Jason Heyward $120 million for four years? The team locks in his prime, and someone else pays for the decline?

Players like the long-term security, since they believe they’ll be great forever. MLB likes the long term contracts keeping the average yearly salary lower. It’s been 15 years since the Alex Rodriguez contract. We should be brimming with $40 million a year players. Instead, we’re just breaking $30 million a year. Since the A-Rod contract, owners and their GMs learned to game the free agent system to their advantage (as the players union had before that). Opt-outs, especially ones that are front loaded, are one way of dealing with that.

from baseballmusings.com http://ift.tt/22d88gB