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soxfanreggie
08-03-2008, 03:44 PM
What is everyone's thoughts on backloaded contracts instead of spreading the money out evenly. I am of the school of thinking that if you backload too many contracts that you are handcuffing yourself for the future if you have more of a set budget.

The reason I was thinking about this is from a discussion I had with someone at work who was a Cubs fan. We were talking about the teams the next couple of years and what the future looked like. I think we found that the Cubs payroll would balloon from approx. $120 million to over $145 million, and that is without raises for Wood and Dempster if they want to keep them and then replacements for Eyre, Howry, and maybe Cotts.

For the Cubs to keep the same team, it will likely cost them into the $150 million range, if not $160 million. Edmonds isn't likely to play for the minimum again, and Dempster is going to command $10 million+ for multiple years. Wood will also look for a raise of a couple million per.

I need to look at other teams who have done this, but I'm wondering how this would impact a team that has more of a fixed budget. My guess is negatively.

munchman33
08-03-2008, 03:48 PM
I couldn't disagree more. Backloaded contracts are the best thing you can do.

1.) you save money now
2.) inflation
3.) increased revenue of that player helping your team win in future years
4.) you can always trade the contract, giving you the players better years at a bigger bargain

Boondock Saint
08-03-2008, 03:52 PM
I think it's just the business side of the game. Players want to make the most money that they possibly can, while GM's/owners want to win/draw fans for the smallest possible amount. One way to even that out is by offering heavily backloaded contracts. Management wins by having a player for a relatively cheap price at first, with the option to keep him for the escalated pay or trade him away in his more expensive years. The player wins by having a guaranteed contract for what he thinks is fair value.

edit: at first I called it "a necessary evil". As I typed out my point, I came to realize that the system works out pretty well... *shrugs*

soxfanreggie
08-03-2008, 03:57 PM
I don't disagree that some aren't a good thing, but you have to look at it this way. I also don't disagree with the inflation thing.

1.) Teams will have to take on players who are making more than the average per year of their contract. Would you be able to find takers for everyone you want to dump? So I don't believe you can "always" trade them. If you're on a fixed budget, you're probably not going to be able to eat big chunks of a lot of contracts just to move guys. Then, you have the additional expense of paying the new guys.

2.) Who says this player is going to help you win in future years? That is a risk every team takes when signing a player, especially for long-term deals, but it isn't a guarantee.

On a side note, looks like the Yankees could have about $50-60 million or more to spend on free agents if they pay their current payroll again. If a Steinbrenner wasn't running the team, this could be an opportunity for them to dump about $70-80 million in payroll over the next 2 seasons. With contracts expiring for Mussina, Pettitte, Pavano, Giambi, and Abreu, there could be some huge net savings for the Yankees. They could try to re-sign some of these guys, but look for them to be a major player (aren't they always though?) in the free agent market if they decide to keep their current payroll.

FedEx227
08-03-2008, 04:08 PM
It's a risk, no doubt. I'd say it depends on how the player looks and how well the scouts have read him. A deal like Longorias from TB could be one of the best deals we've ever seen, because he'll be payed mid-level and could be putting up MVP numbers.

My school of thought though are they are bad... because you can bet your ass that if Longoria puts up MVP numbers he'll be complaining about his pay. We saw what happened with Mr. Child Support Urlacher as well, sign a long-term deal, inflation plus playing ability... you out-perform so you bitch and moan and end up getting it restructured anyway.

That's my thought. In a vacuum where athletes or agents never talk or care, they are wonderful if you've done a great scouting job, but that's not the case anymore.

It's Dankerific
08-03-2008, 04:23 PM
My school of thought though are they are bad... because you can bet your ass that if Longoria puts up MVP numbers he'll be complaining about his pay. We saw what happened with Mr. Child Support Urlacher as well, sign a long-term deal, inflation plus playing ability... you out-perform so you bitch and moan and end up getting it restructured anyway.


Huge difference between Baseball and Football. Evan would play out his contract, at worst he'll just tell them if he doesn't get extended, he'd just say he guarantees he wont sign another contract with them.

Daver
08-03-2008, 04:29 PM
Comparing contracts between football and baseball is kind of pointless, a football contract can say just about anything, but the money upfront is the only number that really matters, because the contract is not guaranteed.

soxfanreggie
08-03-2008, 04:44 PM
You're right Daver. I was listening to a discussiong on SNR last night about the strength of the baseball player's union vs the football player's union. They were also discussing signing bonuses and guaranteed money for football players. Baseball has a much stronger union, and it shows in the amounts of guaranteed money. I don't really feel sorry though for football players who are signing $50 million contracts with $25 million in signing bonuses.

Just like I would have done if my current employer would have offered me a very low deal, athletes who don't like their deals should just look somewhere else.

FedEx227
08-03-2008, 04:49 PM
Huge difference between Baseball and Football. Evan would play out his contract, at worst he'll just tell them if he doesn't get extended, he'd just say he guarantees he wont sign another contract with them.

I think time will tell on Evan's though. This contract is a first of it's kind. We'll wait and see, I absolutely agree football and baseball is apples and oranges, but again, hold off and see. Fortunately though, they just cover his arbitration years, but I'm still not sure how he'll feel about getting paid 2.9 million in 2010.

Gavin
08-03-2008, 05:02 PM
Backloaded contracts are brilliant from a business standpoint.

Let's say you pay a guy 60/4, would you rather pay him 15 a year or structure it such that it is 10/12/18/20? Worst case scenario you end up paying him his 60 million in the end. Best case is you get a great player for 10/12 and dump the extra 38 million to another team.

Malgar 12
08-03-2008, 05:32 PM
I couldn't disagree more. Backloaded contracts are the best thing you can do.

1.) you save money now
2.) inflation
3.) increased revenue of that player helping your team win in future years
4.) you can always trade the contract, giving you the players better years at a bigger bargain

yup... Time Value of money...basic finance 101...why do I know...finance 101 is as far as I got... and there is one more... 5) you can put that money to work now to make more money...

soxfanreggie
08-03-2008, 11:49 PM
I think the big thing here is my question was more about fixed budgets. If you have a fixed payroll of $80 million over a 4 year span, if you sign guys and don't win in the first year or two, you're handcuffing yourself for future years. 4 guys could occupy $30 million of that in year 1 and could be $50 million in years 3 and 4. If you don't win in that first year, you are likely not going to win as the salaries go up and your fixed pool stays about the same.

Another thing, do people think it's that easy to dump a huge contract of an underperforming player? I know some people referred to it as "best case", but is this realistic? If someone signs a 4 year deal that pays 6-8-12-14, yeah, that averages 10 mil a year, but it would be a lot more to take on years 3 and 4.

the1tab
08-04-2008, 08:57 AM
The first issue w/ some of the so-called bad back-loaded contracts is a lack of quality scouting and a naive, if not stupid, general manager. If you look at backloaded contracts from the past, like a number of players the Yankees are currently paying (Pavano for example), that was the Yankees overpaying for a questionable player and reaping the ill fortunes of picking a loser.

If you spread the money evenly, then you might be overpaying someone now and underpaying them in 4 years. Let's use somone local for example: Carlos Zambrano. I don't have the exact figures in front of me, so let's just use round numbers for the sake of argument. Let's say you pay him $12 million per year for 4 years. If right now the market indicates he's worth $10 million, you're overpaying him, and his ego is feeling OK about itself. But let's fastforward to 2012, when guys like Jon Lester, Scott Kazmir and Edinson Volquez are making $12 million and Zambrano thinks he's worth more than that. Well now you have an unhappy player making below what he thinks his market value is, and you get to deal w/ him whining in the media all winter about his cheap ownership and his bad contract. If you take the same $48 million over 4 years and give him $10 million the first two years and $14 million the second two years, then when he thinks he's worth $15 million per in 3 or 4 years it's not as big a deal.

Nobody can look into a crystal ball and predict the inflation of baseball contracts; but a good GM knows that superstars (and their agents) want to get paid... so if they make more later and you sign them for fair market in today's dollars, you're hedging against a climbing market in advance and trying to avoid a headache from a needy star.

Frater Perdurabo
08-04-2008, 09:42 AM
The first issue w/ some of the so-called bad back-loaded contracts is a lack of quality scouting and a naive, if not stupid, general manager. If you look at backloaded contracts from the past, like a number of players the Yankees are currently paying (Pavano for example), that was the Yankees overpaying for a questionable player and reaping the ill fortunes of picking a loser.

If you spread the money evenly, then you might be overpaying someone now and underpaying them in 4 years. Let's use somone local for example: Carlos Zambrano. I don't have the exact figures in front of me, so let's just use round numbers for the sake of argument. Let's say you pay him $12 million per year for 4 years. If right now the market indicates he's worth $10 million, you're overpaying him, and his ego is feeling OK about itself. But let's fastforward to 2012, when guys like Jon Lester, Scott Kazmir and Edinson Volquez are making $12 million and Zambrano thinks he's worth more than that. Well now you have an unhappy player making below what he thinks his market value is, and you get to deal w/ him whining in the media all winter about his cheap ownership and his bad contract. If you take the same $48 million over 4 years and give him $10 million the first two years and $14 million the second two years, then when he thinks he's worth $15 million per in 3 or 4 years it's not as big a deal.

Nobody can look into a crystal ball and predict the inflation of baseball contracts; but a good GM knows that superstars (and their agents) want to get paid... so if they make more later and you sign them for fair market in today's dollars, you're hedging against a climbing market in advance and trying to avoid a headache from a needy star.

OTOH, you have a case like that of Magglio Ordonez. His final contract with the Sox was back-loaded. He did make something like $14 million for his last year. Consequently, he was looking for even more money in his new contract.

I'm not saying that the back-loaded contract caused Maggs to leave. I am saying that the back-loaded contract gave him an inflated sense of his worth and may have been a factor in him choosing Scott Boras as his agent.

jabrch
08-04-2008, 09:48 AM
I have no problem with backloading a deal if you need to do it to stay with an operating budget as long as you know that you will be OK at the back end somehow. My problem is with longer term contracts in general - in particular for pitchers of for players in their mid 30s or later. I would backload a deal if it made sense for a 26 y/o OF signing them to an 8 year deal. I wouldn't do it for a 32 y/o.

jabrch
08-04-2008, 09:52 AM
The first issue w/ some of the so-called bad back-loaded contracts is a lack of quality scouting and a naive, if not stupid, general manager. If you look at backloaded contracts from the past, like a number of players the Yankees are currently paying (Pavano for example), that was the Yankees overpaying for a questionable player and reaping the ill fortunes of picking a loser.

Money is no obstacle for the yanks. I don't think there is anything naive or stupid about using it like toilet paper if it is that easy to get to. The Yanks went after the best players they could get (ARod) and they went after some more risky plays (Pavano). But none of the deals they made financially put them in a position where they couldn't make a subsequent BIG move.

My heart doesn't ache for the economic viability of the Yankee franchise.

And the "ill fortunes" they have reaped - 13 straight post season appearances...4 WS wins, 6 WS trips... I'd love to suffer more like that.

btrain929
08-04-2008, 10:30 AM
I've always wondered to myself why I don't see more front-loaded contracts, for a few reasons:

1) When you acquire a player, you're pretty sure what he'll bring to your team this year, and more likely the next one. It's hard to predict how a player will be 3-5 years down the road. So you're keeping the player happy with the big money up front, and he should in turn produce well for you immediately and in the near future.
2) If a player is producing early, but is injured/doesn't produce down the road of his contract, it will be that much easier to move him and his contract because the last year of the contract would be his cheapest year as supposed to his most expensive.
3) As someone brought up the future payroll of the Cubs, this would be a good way to control future payrolls if you have players on your team where their salary actually goes down year by year. That can help re-examine your budget and go after FA's or trade for big-money guys since you'll have a little bit of money to play with from that saved money.

UofCSoxFan
08-04-2008, 04:35 PM
Time value of money certainly is a factor, but usually when you give someone a backloaded contract, you have to give them more overall money to compensate for this. I.e. a smart agent/player would want 50 mil over 5 years if it was 10 a year, but say 55 or 60 million of it was 10%, 10%, 10% 30%, 40%.

Part of the reason I think it makes sense from a GM standpoint is that if they don't win now, they won't be around anyways....so they highly discount the future.

I think a prime example is with Hendry and the Cubs. The only way Hendry could bring in Soriano, Lily, Fukudome, etc... was to give them backloaded contracts. At the time, Hendry was on basically a 1 year deal. If he brings these players in and they failed, then he would be fired anyways and the budget constaints would be the next GM's problem. If it pays off (which its looking like it might) Hendry may have bought himself enough time to get through the few year peoriod where they can't bring in any free agents. This is especially true if they win a World Series.

Mohoney
08-05-2008, 03:02 PM
Just like I would have done if my current employer would have offered me a very low deal, athletes who don't like their deals should just look somewhere else.

There's a big difference, though. The corporation you work for doesn't control your rights for 6 years by "drafting" you.

fquaye149
08-05-2008, 03:13 PM
Backloaded contracts are a good idea, assuming you're planning on eating the entire deal...but if you're thinking that you might move a player, it makes him harder to move at the time when you're most gonna want to move him.

If I were a player, I wouldn't take a backloaded deal, though. That's for sure.

Aw hell, I probably would. Those sports dudes get paid a lot of cash!

Mohoney
08-05-2008, 03:46 PM
Backloaded contracts are a good idea, assuming you're planning on eating the entire deal...but if you're thinking that you might move a player, it makes him harder to move at the time when you're most gonna want to move him.

If I were a player, I wouldn't take a backloaded deal, though. That's for sure.

Aw hell, I probably would. Those sports dudes get paid a lot of cash!

Depending on the team you sign with, the backloaded deal could almost act as a no-trade clause, if you know that your team is unwilling to eat salary to move players.

fquaye149
08-05-2008, 04:07 PM
Depending on the team you sign with, the backloaded deal could almost act as a no-trade clause, if you know that your team is unwilling to eat salary to move players.

That's a good point. Plus it generally allows you to receive a more prestigious dollar value.

Then again, if you really want a no-trade clause, you could probably just get one