Monday, March 7, 2011
As Spring Training keeps moving on towards opening day, an interesting option looms for the Yankees' star pitcher CC Sabathia. Sabathia has a clause built into his current contract with the team that allows him to opt out of his contract at the end of the 2011 season and become a free agent. According to ESPN, by opting out, Sabathia would walk away from approximately $90 million in guaranteed salary. However, Sabathia has hinted at the idea after seeing Cliff Lee (age 32) sign a five- year, $120 million contract with the Phillies this past off season. Sabathia would be 31 at the end of the season and still able to command top dollar. However, if he waited until the end of his current contract, he would be 35 years old and may no longer have the bargaining leverage necessary to secure a long-term, high-salary contract.
If Sabathia decides to opt out of his contract at the end of the season, the decision could impact the rest of Major League Baseball and perhaps the entire sports industry. Prominent players may decide to ask for opt-out clauses in their contracts similar to Sabathia’s. Such clauses would enable star players to leave their teams if they were not happy with the atmosphere or the direction the team was going. It would also mean that players with opt-out clauses could choose to test the market if they think they could receive a higher salary on the free agent market after several years of solid performance. From the player’s perspective, such a clause is a win-win. The player has the option to stay with a guaranteed, long-term agreement or to seek a still richer payoff elsewhere.
If the opt-out clause becomes de rigueur among star players, the owners could respond by refusing to enter into long term contracts. If that were to happen, players would obviously be the big losers, as guaranteed, long-term contracts are an insurance policy against injury or Milton Bradley-like underperformance. In the alternative, the owners could demand a reciprocal opt-out option. Such an option could provide, for example, that if the player has not played a certain percentage of games during the first part of his contract due to injury, the team could opt out or could renegotiate the salary. It could also provide that if a player did not average certain statistical numbers over the first part of the contract, the team could opt out of the contract. This would get us closer to the pay for performance that this blog has explored in the past.
[Jared Vasiliauskas & JT]