Baseball Toaster Cub Town
Aramis Contract Redux: Rebuttal Edition
2005-04-06 12:08
by Derek Smart

Difficult as it may be to believe, there are occasions when people don't completely agree with Alex or I, despite our flawless logic, natural charm, and rapier wit. In this case, Rich Lederer of the always excellent Baseball Analysts has a bone to pick with my latest assessment of the Ramirez deal, and when a man as smart, talented, and just plain nice as Rich takes the time to thoughtfully disagree…well, it deserves its own post. So what follows is Rich's response to my latest Ramirez missive, reprinted with his permission.

There is no doubt Ramirez is one of the top half dozen or so third basemen in baseball. He might even be the Cubs best position player. What do you pay for that?

Well, based on the Chavez contract last spring and the Beltre and Glaus deals this winter, I would think he is worth about $10M - $12M per year. Call it $11M if you'd like.

OK, with that as a baseline, how much do you subtract for two conditions that favor Ramirez and Ramirez only?

1. The opt out clause is a huge advantage for Ramirez. He is guaranteed the $42M but has an opportunity to make even more than that. The Cubs are guaranteed to pay him at least $42M and may have little or no say in whether he stays beyond 2006.

2. Let's not kid ourselves here. 2009 is NOT a mutual option. Ramirez is guaranteed another $11M if he averages 135 games in 2007 and 2008. It doesn't matter how well he performs, only how many games he plays.

To my knowledge, Chavez, Beltre, and Glaus do not have similar conditions. Therefore, comparing Ramirez's contract (without factoring in the opt out and the auto extension) to theirs is apples and oranges. No way he should get the same guaranteed money AND have the luxury of leaving for greener pastures after 2006 (or forcing the Cubs to pay an even higher salary) plus have the right to bind the Cubs for an extra year at $11M when, in fact, he may not be worth it at that point.

With respect to the latter point, if Ramirez is worth $11M or more per year, you can rest assured that he will get whatever the market will bear at that point. If he is not worth $11M, you can also rest assured that the Cubs will be stuck paying him just that.

Like JD Drew, Ramirez is an outstanding player. However, like Drew, the club is taking virtually all the risk and not getting anything in return.

You wanna opt out after 2006, fine, that'll cost you a $1M per. You want us to guarantee your salary should you play 270 games (big deal, btw) in 2007 and 2008, fine, that'll cost you another $1M per.

The bottom line is that contracts need to be a two-way street. Either the players should be willing to accept less money or absorb some of the risks. I don't think they should be able to have it both ways, if you will.

The Cubs may or may not get the shaft here, but you can be sure that teams are going to get hurt if these types of contracts become the norm.

2005-04-06 07:47:17
1.   Cubdom Byron
Like JD Drew, Ramirez is an outstanding player. However, like Drew, the club is taking virtually all the risk and not getting anything in return.

Well, except the fact that he'll be playing for them... one of those things that player contracts usually result in.

I understand your (Rich, Alex, & Derek's) concern about Risk, but I felt that this contract, on its face, is a few million under market value. I would argue that the only reason the Cubs were willing to do this deal is they felt that they had been compensated for those risks.

My guess is, Ramirez will play the six years for the Cubs and everybody will be happy.

2005-04-06 22:01:24
2.   Rich Lederer
"Well, except the fact that he'll be playing for them... one of those things that player contracts usually result in."

He's playing for them and they are paying him to play for them. That should be an even risk and reward rather than one sided so I don't see the fact that Ramirez is "playing for them" as benefiting the team per se.

2005-04-07 06:50:20
3.   Tom
I don't know how the LA Dodgers of LA signed that deal with Drew, which virtually guarentees the team will eventually get screwed, especially since it seems like Drew was being overpaid to begin with.

That being said, I don't think the A-ram deal is as bad. This might just be because the Cubbies are my home team, and I am happy to see them get the deal done.

Does anyone know the mechanics of how this option works? Does the player opt out and then go on the market, or is he free to entertain other offers without officially cancelling his old deal?

2005-04-07 07:06:09
4.   Stevens
Interesting points on this, gents. Thanks for the perspectives. Having read them, I think Rich's concerns are a little overblown.

First, if Ramirez will get 10-12 on the open market, he's worth 12 to the Cubs, maybe more. That is, players are worth a little more (and will make a little more) on large-market teams. Thus, I also think the Cubs got a per-year discount, perhaps in exchange for the out clause.

Second, the out clause. Is this so awful? The Cubs might have signed a 2-year deal at $20 million and I would have been happy. It's not as if the Cubs get nothing in return if Aramis walks. They get $11MM for the next year and up to $33MM over three years with which to better the team. And no option buy-out to boot. If Aramis is worth his asking price then, they can afford to renegotiate a deal with him. Or they can give the money to the now expensive starting staff and fill the hole with a stud 3B prospect they get when they trade away a stud pitching prospect. Given that GMs seem to love flexibility when it comes to contracts, the out clause almost helps the Cubs more than Ramirez.

Finally, as I mentioned, I really don't think this contract is unfair to either side, but just for argument's sake, why do contracts need to be a two-way street? Are they ever fair? After all, it's not what you're worth, it's what you can negotiate.

2005-04-07 07:16:05
5.   Alex Ciepley
Hey Tom, if Aramis wanted to opt out of his contract, he'd have to do so before talking with any other teams--you can't talk to other teams about contracts and the like while you're still under contract (unless you get permission from the commish--and even then, that would almost always be for a contract extension when you're being traded).

Stevens, I'd rather have just the 2-year deal for $10M/year, no question. The problem for me isn't so much that Aramis can opt out and go elsewhere after 2 years if he's brilliant (I mean, that's a problem, but isn't the biggest problem), it's that he's the only one with that option. If Aramis falls apart, the Cubs are stuck with him. Fairer would have been the two-year deal, when both sides can revisit the dollars and years.

I still would guess that it'll all work out in the end, and that Aramis will stay and play well. I just don't think the Cubs negotiated a very good deal, and don't like that contracts are starting to be put together this way.

2005-04-07 08:20:54
6.   Stevens
"If Aramis falls apart, the Cubs are stuck with him."

As you noted, this would have been the case with any standard 4- or 5-year deal.

"The problem for me...[is]...that he's the only one with that option."

I understand, and I agree that Ramirez's agent did some astute bargaining for his client. But given that the Cubs are assuming no more risk than they would have in a standard deal, didn't have to guarantee a fifth year, and put to rest the Santo woes at third base, I think it's fine contract on all sides.

2005-04-08 04:43:48
7.   studes
I can't get over how many people express the attitude that the out clause almost seems to help the Cubs more than Ramirez. When a player is in control of the situation, the club has no flexibility. And if the player walks, that means the market has gone up significantly, which means it will be more expensive for the club to replace his production.

Don't forget that an option is not just an option on how well the player does, but on what happens in the market. And this current player market appears to be going up.

I don't think there's anything inherently "wrong" with these types of deals. It's just that clubs need to make sure they've fully valued them during their negotiations.

My personal guess would be that this type of clause raises the value of a deal 15% to 20%, based on financial research I've seen in the past. Options contingent on playing time generally have about a 5% impact on overall value, according to the study.

Speaking roughly, that would make Ramirez a $13 to $14 million player. And I don't think he's worth that.

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