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How new contract structures can help the Yankees

Creative contracts have been the key to new free agent signings, it seems

Divisional Round - New York Yankees v Boston Red Sox - Game Two Photo by Elsa/Getty Images

Free agency hasn’t been quite as slow as it was last winter, but it’s still been a far cry from the annual sweepstakes we seem to expect. Aside from the general trend away from free agents, though, the other thing that’s caught my eye is the changing structure of deals.

Once upon a time free agent contracts were pretty simple, you had a term and a dollar figure, maybe some incentives, and possibly a no-trade clause. Over the last two winters we’ve seen a dramatic rise in opt-outs, lowering the guaranteed money totals while providing flexibility to players.

A single opt out isn’t a new concept either, Alex Rodriguez and CC Sabathia are just two players that have benefited from their inclusion in contracts. What is new is the number of opt outs and their triggers.

Take JD Martinez, for example. Last year he signed with the Boston Red Sox for five years and $110 million. Sounds straightforward, until you factor in the three opt outs included, which means 2019 is the last guaranteed year for Martinez in Boston. He can opt out of his contract after years two, three and four.

This winter we’ve seen this attitude explode, as creative opt out ideas were key in Yusei Kikuchi landing in Seattle and the Yankees retaining the services of Zach Britton. Kikuchi is guaranteed four years by the Mariners, but he can opt out after year three. If he doesn’t, the Mariners can opt in to another three years of control, meaning Kikuchi could be in Seattle for seven seasons. The onus is on Kikuchi to measure the risk of an uncertain free agent market against the possibility of being locked up long term, albeit at likely a below-market rate.

The Britton deal is similar, but the onus is moved to the team. The Yankees can exercise a fourth year option after year two, but if they don’t, Britton can opt out that same offseason. This is probably a little more team-friendly, since the Yankees’ internal projections for that fourth season will drive the decision about whether to opt in.

All of this is part of a growing pattern of changes in how teams approach the offseason, for a couple of reasons. Buried or locked-in contracts are rapidly becoming the least-desirable element of payroll, and creative option structures help to alleviate that. As we approach the expiration of the current collective bargaining agreement after the 2021 season, teams are going to be especially careful since we don’t know how levels of player control and distribution of revenue will work out, or even if there will be a 2022 season.

Meanwhile, for the player, these kind of structures hedge against a complete collapse, the bane of every player’s career. Let’s use Britton as an example. If the Yankees believe that he’ll be productive in year four, they opt in and Zach’s guaranteed that money. If his elbow explodes or something similarly catastrophic, he still gets that fourth year money. Conversely, if Britton isn’t good enough to risk opting out but the Yankees don’t like his odds of positive performance in year four, Britton still gets the third year money negotiated for.

At press time Bryce Harper and Manny Machado are still on the market. There’s already speculation Machado will use a similar structuring on a long term deal, and both players are almost guaranteed to have multiple opt outs built it. This is just another example of a changing free agent landscape, but unlike most, it actually helps both sides.