Bad Contracts

How is it possible that Franklin Gutierrez, Miguel Olivo, Jason Vargas, Brandon League, Dustin Ackley, Brendan Ryan, Jamey Wright, Adam Kennedy, Doug Fister, Aaron Laffey, David Pauley, Justin Smoak, and Michael Pineda will COMBINE to make LESS money than Jason Bay alone this year? Well, MLB contracts are a funny thing. Superstars will always be paid, and probably over-paid, but A-Rod and Pujols aren’t usually the bad contract culprits. Bad contracts are lousy players being paid like good players, good players being paid like superstars, and the worst, when lousy players are paid like superstars, which is quite a phenomenon. Any of these, in my opinion, qualifies as a bad contract.

I should mention that determining bad contracts can be easy, like in the case of Barry Zito, but sometimes it is quite subjective. For starters, some teams, including the Mariners, often are forced to over-pay for free agents, because it can be tough to lure big names to South Alaska. This has to be taken into account, and also, it’s easy to view a player’s salary for one year and call it an awful contract. For example, Torii Hunter and Ichiro are both making roughly $18,000,000 this year, and it does not appear that they will produce enough to justify that kind of dough. But you have to assess the deal in its entirety, not year by year. Both guys signed 5 year/$90 million deals back in ’08, and both guys were top 10 outfielders in the AL for the first 3 years of their deals. In the case of Ichiro, he’s played like a guy worthy of $20 million or more for the past 3 years, leading AL outfielders in batting average, 2nd in WAR, and 3rd in stolen bases. So in my mind, that kind of production is worth about $65-75 million, and I would expect him to easily produce at a clip worthy of the remaining $15-25 million due through 2012.

It isn’t an exact science, and sometimes you don’t know a bad contract until it expires, but a safe formula is to look at what a full contract pays a player, and if his production is only worthy of 50% or less of the deal, it’s a bad contract. For example, Chone Figgins will be paid $36 million from ’10-’13, and if I am to project his production, I can’t see it being worthy of even $18 million, thus it is a no good, bad, awful contract. It’s sunken cost my friends, and it sucks.

But bad contracts are a part of MLB, because the money is guaranteed, but the production is not. Teams try their darndest to avoid locking up players who don’t live up to their contract, and yet almost every team has a lousy contract, or two, or three. Everyone knows you have to pay for big time production, so you can’t hide like the Pirates and never throw money around. The key is to minimize these contract mistakes, which often effect wins and losses, because unless money is no obstacle like with the Yankees or Red Sox, it becomes difficult to cover your mistakes when a bunch of your payroll is tied up in sunken costs. This is a sticky situation the Mariners know all to well for the past 5 years—

2011: payroll: $94.62; bad contracts: $29.33 (Bradley, Figgins, Silva, Betancourt) = 31% bad $
2010: payroll: $91.14; bad contracts: $27.78 (Bradley, Figgins, Snell, Silva, Betancourt) = 30% bad $
2009: payroll: $98.9; bad contracts: $42.48 (Silva, Washburn, Batista, Johjima, Betancourt) = 43% bad $
2008: payroll: $117.66; bad contracts: $46.1 (Sexson, Washburn, Batista, Silva, Wilkerson) = 39% bad $
2007: payroll: $106.46; bad contracts: $49.83 (Sexson, Washburn, Weaver, Vidro, Batista, Ramirez) = 47% bad $

The good news going forward is that the only bad $ on the books past 2011, assuming Jack doesn’t ink someone to a bad contract, is the $18,000,000 still owed to Figgins through 2012-13. What this means is bad contracts should only eat up 10% of next years payroll, rather than 30-40% like the team has dealt with since 2007. This is a ratio the M’s can live with, and hopefully money well spent translates to contention on the field.

As for the teams whose future is littered with bad contracts, top 5, according to my subjective analysis, are the White Sox, Mets, Cubs, Angels, and Giants. We can whine about the Figgy deal all we want, but clearly things could be worse—

-Dan

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