The proliferation of long term deals in the MLB in 2022-2023.
Yesterday, the baseball world and more specifically the Houston fanbase was shocked to learn that Carlos Correa who is entering his 28 year season agreed to a 13- YEAR deal with the San Francisco Giants worth $350M.
This brought some fascinating responses locally
A majority of people who still respect and love Correa simply congratulated him on getting the payday he wanted
Some reflected their old wounds painting Correa as the greedy baseball player that they thought would never be a great player because he was just playing for the money. This thinking ignores the fact that Correa is already 5th among active players for WAR delivery at SS and only Turner has played in fewer games. (Lindor, Bogaerts, Andrus, Turner, Correa)
Some felt the need to celebrate that the Astros DID NOT spend that sort of money on Correa ignoring the fact that the Astros COULD have signed Correa long term BEFORE the 2021 and possibly the 2022 season to a ~$210-240M/7-8 yr deal. This would have required the deal to bank on Correa staying healthy (something many of us questioned at the time)
Some called the Giants idiots for signing Correa to 13 YEARS pointing out that this would take him to his year 41 season ignoring the fact that Boegarts (41) and Turner (40) had basically the same thing in their deals
Remember Carlos hears you.
I nodded and thought - hmmm seems long but I have seen this in the past few weeks. I was not surprised by the dollar figure at all and had been assuming Correa would get north of $320M. The only question I had is would teams still want a discount for back issues in his past that had not really been a factor for the past three seasons- they didn't.
The Business of Baseball is a curious one. It is a world where people who make less than $200K sometimes rightly question the moves of teams with owners who have Billions of dollars. Rich people do not often do dumb things with their money, but in this world we all tend to think most of what the rich people are doing is dumb. This includes me and this website,
So why was my response more muted and less snarky to the Giants? This website is about data so let's look at some.
Here are the 25 contracts (as of today) that are EIGHT YEARS or LONGER sorted by contract length.
Does Correa seem out of place in this group? He fits right in to me.
Here is another interesting view of that same data sorted by the FIRST YEAR OF THE DEAL.
Now we can see of the 25 deals, EIGHT of them START in 2023. Another FIVE started in 2022. There have been more of these types of deals than ever. WHY?
We are in a wave of GREAT YOUNG talent that has reached the MLB early in life and for some like Franco and Rodriguez and others on this list their teams are locking them up almost IMMEDIATELY to long term deals to maximize their value. Waiting until Free Agency would mean they just would cost too much.
Now you should say, OK Larry that trend does not apply to Correa, I think the logic behind these deals to young superstars holds- they will just cost more later. However, there has to be something else happening.
So let's look at part of this data- the long term deals that have been given to players 28 or older. These are Correa's peers financially,
This is sorted by the first year of the contract. Notice that FIVE of these NINE contract were negotiated in THIS OFF-SEASON.
Also notice Correa, Turner, and Bogaerts are ALL THREE signed through their age 40 system.
If you have been on spaces with me you already know why.
It is all about the AAV and the CBT.
The Giants are not stupid. They DO NOT expect Correa to play until he is 41-years old.
Correa and his team PROBABLY wanted a $350M/10 yr deal so that Correa could say he is the highest paid infielder in the MLB. The Giants said can we make that into a 13-year deal?
- $350M/ 10 yr deal - $35M AAV
- $350M/ 13 yr deal - $26.9M AAV
That means that for the next ten years the Giants will pay Correa around $8M less than he really wanted and they can use that $8M on other players or to stay under the CBT.
The CURRENT owner of the Giants or of any team that does these deals may NOT CARE if the deal causes them to pay almost $27M in years 11-13 because they may no longer be the owner then and the CBT rules might be drastically different.
In summary, the Correa deal exemplifies a current trend on the Free Agent contract market and something we need to adjust to. What I mean by adjust to (because that is already angry responses) is that THIS is where the market is headed for the elite teams. do you want to be in that group or not? The application of this trend to Kyle Tucker is most worrisome and amplifies the need to extend Tucker BEFORE he is a free agent. Can Jim Crane keep his demand to no lengthy contracts? We will see.
I will also say I THINK Crane intends to remain the owner of this team for decades and pass that ownership to his children. HE does care what long term financial obligations these types of deals enable.
Is it stupid now? You tell me. Just so you don't think I am just making this up this issue was discussed on mlbtraderumors with regard to the Padre's attempts to sign Aaron Judge.
I am going to quote the most critical paragraphs but I STRONGLY urge you to read their article.
"If we assume the Padres’ prepared offer was for exactly $400MM over 14 years, the deal would’ve come with an AAV around $28.57MM. That’s true no matter if the money were evenly distributed, frontloaded or backloaded. A $400MM guarantee would have handily topped the $365MM Mookie Betts received on his Dodgers extension and the $360MM in new money on the Mike Trout deal, establishing itself as the largest guarantee in MLB history. Distributing it over a 14-year term, however, would put the $28.57MM average yearly salary outside the top 20 in history.
A lower-payroll team may prefer to stretch a deal an extra season or two to lower their annual payment, but MLB’s concern is the Padres’ offer would’ve been done specifically as a means of circumventing the luxury tax. The Padres have paid the CBT in each of the last two years, and they’re certain to do so again in 2023. The Padres entered the week with their CBT number for 2023 hovering right around the $233MM base threshold. San Diego is responsible for a 50% tax on their first $20MM above the threshold and 62% of their next $20MM in overages, with further penalties thereafter.
Offering something like the nine-year, $360MM deal to which Judge actually agreed with the Yankees would’ve come with a $40MM AAV that stuck the Friars with approximately $22.4MM in taxes. Conversely, a 14-year, $400MM offer would’ve come with an additional tax bill around $15.3MM. The lower number on that contract would’ve also come into play if San Diego had made further additions to the payroll, with the Friars starting at a lesser CBT figure when calculating the tax hit associated with their subsequent pickups."
Folks, listen to me now and hear me later. The Bogaertz, Turner, Correa, and Nimmo contracts have ALL been structured to reduce their AAV to reduce their CBT tax. Some of these MLB owners don't care about ramifications that might not ever happen if the CBT rules are revised.
Also, we may find out there is language in these deals that if the player retires the remaining contract money is to be paid differently (deferred) or perhaps a fraction of the total. Stay tuned.
So, I will ask again. Do you STILL think the Correa deal is dumb or does it make more sense now? Let me know what you think.
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