Tuesday, November 18, 2008

The Politics of Early Deals

The Players' Association is not all that happy with the long term deals young players are signing these days:
The MLB Players Association is now requiring agents to consult with the union before they negotiate contracts for arbitration-eligible players . . . The move comes as some veteran agents have complained privately that other agents have agreed to long-term, below-market deals in order to secure client fees for themselves.

Some top agents are worried about a trend of multiyear deals for arbitration-eligible and pre-arbitration players that take them through their arbitration years and, in some cases, through their first few years of free agency. Some of those deals have included multiple club options, in which the club, not the player, decides whether to extend the deal at a prearranged price.

I don't suppose there's any reason why the union can't require agents to consult with it prior to signing an early deal. What the union can actually do about it is another matter. Not much, I guess, as whether the next Evan Longoria or Ryan Braun signs an early extension is ultimately up to the next Evan Longoria or Ryan Braun.

Not that the pros and cons of these deals shouldn't be debated a bit. As I've written before, I'm a bit of a risk averse guy who has a hard time wrapping my mind around the concept of saying no to an employer who wants to give me tens of millions of dollars a couple of weeks or months after I start working. I could get hit by a bus next week! I could suddenly lose my skills! Where do I sign?!

But it is exactly because I and, presumably, a lot of young players think that way that good representation is so important. Instead signing quickly because I'm worrying about getting hit by a bus, maybe I'd be better off signing a big insurance policy to cover the risk. Instead of focusing solely on that $60M my club is offering me now, maybe I need to focus on the $100M I might be worth if I wait a year or two to sign my deal. Man, that stuff is hard to know, and if this new policy provides a means for young players to get some greater insight into where they stand in the grand scheme of things, the better.

Of course, even with this level of insight, a young player is going to have a lot to figure out. Like, is my current agent -- the guy I've known since I was 18 -- trying to secure my future, or his? Or, is that slick, high profile agent honest when he tells me I'll make $50M more going with him and holding out until year-6, or is he just trying to steal me away from the only representation I've ever known? Those are some tough determinations for anyone to make, let alone a kid in his early 20s and, in all likelihood, nothing more than a high school education.

Obviously whether Evan Longoria or whoever leaves tens of millions on the table after making tens of millions is not the sort of problem we should lose a lot of sleep over. But it is an issue all of the young stars we spend so much time obsessing over, well, obsess over, and to that end it's something I think about a lot.

(thanks to Pete Toms for the link)


bigcatasroma said...

Seeing that most lawyers are risk adverse (because risk is all that they are taught to avoid in school) and since many (most?) agents are lawyers, how is anyone going to tell them *not* to sign players early, and avoid the *risk* of not playing to that one huge FA contract?

Craig Calcaterra said...

Scott Boras is a lawyer, and he's certainly not risk averse. Moreover, given that as far as the legal profession goes, going out and representing athletes is a pretty risky endeavor (compared to what else we lawyers can do), I think you'll find that the lawyer/agents are far less risk averse than I am.

Ultimately, however, a good lawyer plays to his client's level of risk, not his own. I am a very different person when I am negotiating something for my client than I am when I'm negotiating something for myself.

mooseinohio said...

If the monies that Evan Longoria gets earlier in his career is invested wisely then the difference in dollar values of contracts may not so great. Not that it will completely make up for the difference but it make the bird in the hand/risk adverse argument make some more sense.

Of course this would require the player to get sound investment advice, not to give his monies away to his family, friends, wanna be friends that include the ever so dangerous attrative, female wannabe friends and live somewhat modestly even for a millionaire. Otherwise he will be trying to sell books, sign up for reality television shows and destroy whatever limited credibility and dignity he ever had.

Jimmy P said...

If someone wants to guarantee me $60 million now when I may, MAY, be worth $100 million later, I'll take the 60. I think if you're 23, you'd have to be brain dead NOT to take $60 million.

Daniel said...

I guess the question I have is: what is the difference, in real-life terms, between $60 and $100 million? I guess I'm a pretty simple guy - I need a house for my family, I need food on the table, and some key perks wouldn't hurt.

But seriously, even with a $60 million contract, conservatively netting you $30 million after taxes, you could give away $18 million and be set for an extremely comfortable life, even if you only invested in a money market!

My naivete goes only so far - I realize that I have no idea what all goes into these decisions. But count me among those who would take the $60 million (or $30 million or $20 million) and be the happiest man on earth.

Pete Toms said...

The PA is in a real pickle here...

We all understand why they don't like this, a rising tide lifts all boats post salary arb ( and salary arb has been a good thing, it ended holdouts ). So the agents all know that these deals have a negative impact on their less valuable clients and consequently the agents' commissions but....on the other hand, if you counsel your client not to take the big deal early on and he switches agents before he cashes in big...well, you lost out....

Maybe Miller needs to come back and unite the workers in the struggle!