C.C. Sabathia Rumors

Another Bite At The Apple: Opt-Out Clauses In MLB

An opt-out clause is the ultimate safety net for an MLB player.  Typically employed with deals of least five guaranteed years, an opt-out clause is inserted in the middle of the term and allows the player to abandon the rest of his contract and become a free agent.  

Alex Rodriguez started the opt-out trend with his monster free agent deal with the Rangers in December 2000, and in total, ten players have received opt-out clauses.  Six of those clauses have come due, and only one of those players, Vernon Wells, didn't secure additional money at the time.  C.C. Sabathia leveraged his ability to opt out to add one year and $30MM to an already record-setting deal.  The others -- A-Rod, J.D. Drew, A.J. Burnett, and Rafael Soriano -- got to take another lucrative bite at the apple of free agency.  

A Deal-Making Idea

On the night before the 2005 Winter Meetings in Las Vegas, agent Darek Braunecker had a client in A.J. Burnett who he felt was on an island in terms of being the best pitcher available.  It was at that point Braunecker conceived of the idea of asking for an opt-out clause in Burnett's deal.  "I wanted to create something that might add additional value to the deal as opposed to just the monetary component of it," explained Braunecker in a January conversation.  

Burnett's five-year, $55MM deal with the Blue Jays came together quickly once the team agreed to include an opt-out clause after the third year.  "Quite honestly, it was a deal-maker for us," said Braunecker.  "I presented the idea to [Blue Jays GM] J.P. [Ricciardi] and told him that we had another club that had already agreed to that provision, and that if he was willing to do it that he would have a deal. So, really, no pushback to speak of. He obviously had to get approval from [club president] Paul Godfrey, and Paul gave his blessing on it almost immediately and that's essentially what concluded those negotiations."  Braunecker added, "It really wasn't much of a challenge, to be honest with you." 


Three years later, agent Greg Genske had the enjoyment of negotiating on behalf of the offseason's best available starting pitcher, C.C. Sabathia, and eventually landed a record-setting seven-year, $161MM deal with an opt-out clause after the third year.  There seems to be some disagreement about who proposed the clause.  Back in 2008, Matt Gagne of the New York Daily News quoted Yankees GM Brian Cashman saying, "I offered it. They never asked for it.  They never said they were afraid of New York, I never heard that....Just in case it was an issue, I went to their house and I said, 'I think you're going to love it here. But let me just throw this out there.'"  Genske disputed Cashman's account, telling me in January this year, "That's not true at all. That was a negotiated item that was difficult to get the Yankees to agree to. It was the last item agreed to."

The sheer rarity of opt-out clauses suggests they're not something teams are readily offering up.  Only ten opt-out clauses have been given out in total, though two of them came in January this year for Excel Sports Management clients Clayton Kershaw and Masahiro Tanaka.  According to Cot's Baseball Contracts, 52 MLB contracts have been worth $100MM or more.  Only seven of those included opt-out clauses.  Asked if he's surprised we've seen so many top of the market deals without opt-out clauses, Genske replied, "I don't think I'm surprised. It certainly is a big deal for a club. If a club's going to commit themselves to those kinds of dollars, then they don't get the benefit of the upside fully if the player has the right to opt out. I certainly understand clubs' resistance to do it."  

Agents Seek Another Bite At The Apple

For an agent, the motivation for an opt-out clause is obvious, and Genske says he'd ask for an opt-out for any top-tier free agent where he has the maximum amount of leverage.  "It's pretty unique that a player is going to put in all of the effort and all of the work to get to free agency, and have that ultimate leverage, and I think the opt-out provision is simply a player maintaining that control over their career that they've earned," says Genske.  Braunecker offered his thoughts, saying, "An opt-out adds almost unquantifiable value to a deal because the player gains a whole lot of leverage in the life of the deal as opposed to after the expiration of the deal." 

Indeed, the player can't lose with an opt-out clause.  The shot at free agency amounts to what one executive who worked on a deal with an opt-out described as "another bite at the apple, a chance to keep up with the market in case the market continues to run while he's performing over the course of time."  Look at the results of those extra bites so far.  Dodgers GM Paul DePodesta negotiated J.D. Drew's five-year, $55MM deal with agent Scott Boras in December 2004, and DePodesta's successor Ned Colletti seemed displeased and surprised when Drew opted out two years later.  Drew abandoned his remaining three years and $33MM and landed a five-year, $70MM deal with the Red Sox.

Alex Rodriguez opted out of the largest deal in baseball history seven years in, only to top that with a $275MM contract with the Yankees.  Boras' terrible choice to announce A-Rod's decision during the final game of the 2007 World Series aside, the player abandoning three years and $72MM came as no surprise by that point.  Burnett's decision came due after the '08 campaign.  As Braunecker notes, timing was everything, and Burnett's 231 strikeouts in 221 1/3 innings for the Jays in '08 compelled him to discard the remaining two years and $24MM on his contract.  He ultimately landed a five-year, $82.5MM contract with the Yankees.  Though C.C. Sabathia did not technically opt out of the four years and $92MM remaining on his deal after 2011, the leverage of the fast-approaching clause allowed Genske to add one year and $30MM to the deal.  

Rafael Soriano's Yankees contract, signed in January 2011, was an odd situation.  Yankees owner Hal Steinbrenner and president Randy Levine did the deal with Boras, as GM Brian Cashman was opposed to the signing partially because signing the reliever required forfeiture of a draft pick.  Boras used the situation to demand opt-out clauses for Soriano after the first and second seasons of a three-year, $35MM deal.  Soriano chose not to opt out of two years and $25MM after a disappointing 2011 season.  After an excellent 2012, however, he took a $1.5MM buyout over a remaining one year and $14MM, signing a two-year, $28MM deal with deferred money with the Nationals.  Only Boras has achieved multiple opt-outs within one contract, with Elvis Andrus' 2013 eight-year, $120MM extension from last year allowing the shortstop to opt out after four or five years.     

Genske client Vernon Wells had three years and $63MM remaining when his clause came up.  After a disappointing 2011 campaign with the Angels, Wells made the obvious decision not to opt out.  Most MLB contracts are guaranteed, so the opt-out clause didn't end up adding value for Wells.  

The next opt-out due is Zack Greinke's after 2015, at which point he'll have $71MM remaining over three years.  He'll get the chance for another bite of the apple at age 32.  The remainder of Greinke's contract will equate to a $23.67MM average annual value.  Regardless of whether he can top that healthy AAV, he could extend his security by seeking a four or five-year deal.

Besides another shot at free agency, you will hear mention of other motivations.  Explained Genske, "Certainly with CC too, it was in part a comfort issue, being a California guy who envisioned going back to California who was going to go to New York, he wasn't sure how he'd like it. It turned out great, he likes it, but there was some uncertainty there which kind of necessitated the opt-out."

Braunecker expressed a similar geographic concern in Burnett's opt-out clause, but also questioned the direction of the Blue Jays.   "I wasn't completely certain particularly with Toronto where that organization was headed, and so rather than him being there for five years I wanted to give him the opportunity to shorten the deal in the event that he got up there in the event he didn't like it, living in Canada as opposed to the U.S., and also just I wasn't 100% certain which direction they were headed with things."

Why Teams Agree To Opt-Out Clauses

"Let's face it: free agent players are not coming to Toronto. That's just the way it is," professed former Blue Jays GM J.P. Ricciardi.  "Everything is great about Toronto, but it's still foreign to a lot of players. It's not so much the players, it's their families. When players are on the free agent market, the families have a big say in what happens, so a lot of them say they'd really rather not go to another country to play."  Ricciardi said he found he needed to do three things to bring a top free agent to Toronto: "overpay, overcommit, and be creative."   For A.J. Burnett, that meant a five-year deal when many suitors stopped at four, a strong salary of $11MM a year, and an opt-out clause.

Ricciardi expressed a sentiment we heard from multiple executives, explaining, "Maybe it's just simplistic on my part, but I don't mind the opt-out.  It's not that big a deal for me in the sense that if it comes down to either having the player or not having the player, I'd rather have the player."  Burnett ended up compiling a 3.94 ERA across 522 2/3 innings for the Blue Jays from 2006-08 before opting out.  Ricciardi was pleased with the outcome, saying, "We got probably his three best combined years, so for us it was great."  A team can potentially duck a player's decline phase, which is the baggage that comes with a typical long-term deal.  

Look at the Yankees and Sabathia.  In the first three years of his deal, he provided the team with a 3.18 ERA in 705 regular season innings, finishing no lower than fourth in the Cy Young voting from 2009-11.  Had Sabathia signed elsewhere after 2011, the Yankees would have missed out on a strong 2012 campaign, but also would have avoided owing him a large amount of money for his age 32-35 seasons.  Ricciardi summed it up best: "I guess the old adage that you'd rather trade a guy a year too early than a year too late, maybe that applies with the opt-out."

A Potential Trend

Is the opt-out clause a growing trend in baseball?  From 2000-08, there were five opt-out clauses.  There were none in 2009-10, and then five from 2011 to present.  Of the last five, two were done by Boras and three by Excel Sports Management.  Excel's deals were for starting pitchers Greinke, Kershaw, and Tanaka, with two of those hurlers landing with the Dodgers.

Opt-out clauses seem more likely for large market teams, with the Yankees, Dodgers, and Rangers accounting for eight of the ten.  Ricciardi, who went against the grain by doing opt-out clauses with mid-level payrolls, feels large market teams don't have to be as desperate.  "I think if you're the Yankees and the Red Sox, there's a little bit more finances behind you, and you probably don't have to be as risk-taking in the sense of being open-minded about having stuff like this."  So far, the Yankees have given opt-out clauses to Sabathia, Soriano, and Tanaka, and also traded for A-Rod.  The Red Sox have never given a player an opt-out clause, so there's more to it than market size.  Sometimes the decision is philosophical.  The Cubs, for example, refused to offer the clause to Tanaka out of concern that he could leave shortly after their window of contention opens, according to Ken Rosenthal of FOX Sports.

Alex Rodriguez earned the first opt-out clause through a combination of nearly every factor that can drive a contract into uncharted waters.  He was a superstar at a premium position, he was atypically young at 25, he was the best available free agent, and he had a precedent-setting agent in Boras.  In 2008, a 28-year Sabathia brought many of the same factors together; he was "the top free agent on the market and had all the leverage in the world," according to Genske.  Kershaw had A-Rod's youth and superstar talent, plus the precedent of teammate Greinke, creating enough leverage to get an opt-out a year prior to free agency.  Other times, being the best available free agent is the key driver of the opt-out clause, which applied to Burnett, Greinke, Tanaka, and Soriano.  Certainly youth played a role with Tanaka and Andrus.

These days, an opt-out clause is part of every agent's arsenal for premium clients who meet some of the above criteria, and that might not have been the case a decade ago.  Still, asking is not the same as receiving, and huge contracts for Albert Pujols, Robinson Cano, Joey Votto, Prince Fielder, and many others lack an opt-out clause.  While it's difficult to picture a Mike Trout megadeal without an opt-out, the opportunity for a player to take another bite at the apple midway through a long-term contract is likely to remain a rarity in MLB.


Photo courtesy of Greg M. Cooper of USA Today Sports Images.

CC Sabathia Joins Roc Nation Sports

7:39pm: Liz Mullen of Sports Business Journal tweets that Sabathia will now be represented by Jay-Z and agent Juan Perez after "formerly" being represented by the Legacy Agency, which indicates that Sabathia has likely cut ties with the Legacy Agency.

7:27pm: Jay-Z's agency, Roc Nation Sports, has added another high-profile client to its ranks. Yankees lefty CC Sabathia tweeted a picture of himself signing a contract with Jay-Z along with the caption: "#RocNationSports La Familia." Roc Nation also tweeted a welcome message to Sabathia.

It's been a huge year for Jay-Z's new sports agency, as he (along with CAA's Brodie Van Wagenen) negotiated a 10-year, $240MM contract between the Mariners and Robinson Cano. Roc Nation Sports has also added the likes of NBA superstar Kevin Durant, WNBA star Skylar Diggins and NFL star wide receiver Victor Cruz.

It's unclear at this time if Sabathia's agents at the Legacy Agency will remain involved in his baseball dealings. As we saw with Robinson Cano, Roc Nation partnered with CAA in negotiating that deal. Roc Nation could be signing on to handle Sabathia's marketing efforts and brand management while serving as a partner in baseball negotiations, or they could simply be taking on every aspect of his representation.

Sabathia's current deal, negotiated by the Legacy Agency, guarantees him at least $76MM through the 2016 season. He struggled through the worst season of his career in 2013, posting a 4.78 ERA with 7.5 K/9 and 2.8 BB/9 in 211 innings with the Yankees as his fastball velocity dipped to a career-low 91.1 mph.

New York Notes: Cashman, Santana, Pelfrey, Ibanez

It has been a busy week in the Big Apple with the Yankees losing Robinson Cano to the Mariners and coming to terms with Jacoby Ellsbury, Carlos Beltran, and Hiroki Kuroda. The Mets meanwhile were able to sign Curtis Granderson away from the Pinstripes. Here's the latest on the New York teams:

  • Yankees GM Brian Cashman told reporters, including Anthony McCarron of the New York Daily News, he's not done making moves. "I've got work to do," Cashman said. "I need a starter, bullpen, second base. We’ve still got work." Cashman also addressed a report Cano had reservations about playing for manager Joe Girardi. "I'm not aware of that. You'd have to ask Robbie, I guess. It's never been an issue that I'm aware of."
  • The Mets are one of seven or eight teams who have inquired about Johan Santana, sources tell The Star-Ledger's Jorge Castillo. Michael Baron of Metsblog.com doubts any team will offer Santana more than a minor league deal because of his shoulder issues. The Mets opted for a $5.5MM buyout of Santana's $25MM club option in November making the 34-year-old left-hander a free agent.
  • The Yankees have checked on free agent right-hander Mike Pelfrey, tweets CBSSports.com's Jon Heyman.
  • The Yankees are interested in a reunion with Raul Ibanez but he isn't a top priority for them, tweets the New York Post's Joel Sherman. Ibanez, despite being 41, is being courted by teams in both leagues including the Rockies, Braves, Mariners, and Rangers, Sherman tweets
  • The focus of both the Yankees and Mets will be on the trade market rather than free agents during the Winter Meetings, tweets Andy Martino of the New York Daily News.
  • Martino adds, in a separate tweet, the Mets were never in on Scott Feldman and don't seem to be in play for mid-rotation help. 
  • CC Sabathia was surprised by Cano's decision because he did not expect the Yankees to allow Cano to leave, and he did not expect Cano to actually go, reports Andy McCullough of The Star-Ledger. "Just a player like that, putting on the pinstripes, and being able to play your whole career in New York means something – to me, obviously," Sabathia said. "It didn't mean that much to him. It's a difficult choice being a free agent. And he made a tough choice. I know he's happy with his decision, and his family's happy. So that's good."

Yankees Rumors: Hughes, Jeter, Cano, Sabathia

There was talk earlier this year of the Yankees giving Phil Hughes a qualifying offer at the end of the season in order to either retain him or secure a draft pick in the event that he signed elsewhere.  However, that ship has pretty much sailed at this point.  "They may make a qualifying offer. And I may run for president," a rival GM told Jon Heyman of CBSSports.com last week.  Here's more out of the Bronx..

  • Many in baseball speculated that Derek Jeter would decline his $9.5MM option for 2014 and force the Yankees to give him a new deal, but a friend of the shortstop told Mark Feinsand of the New York Daily News that he thinks he'll exercise the option and return with a sense of purpose. Feinsand notes that Jeter probably wouldn't have the public on his side as he did three years ago and, more importantly, no one is clamoring to give a 39-year-old shortstop more than $9.5MM.
  • The Yankees want Robinson Cano back in pinstripes next season, but team president Randy Levine made it clear there's a limit as to how far they'll go.  “[Cano] is a great player,” Levine told Bloomberg Television, according to Feinsand. “We will sit down and talk to him. Hopefully he’s a Yankee. Nobody is a re-sign at all costs, but we want him back and we feel good about negotiating something with him. But nobody is a re-sign at any cost.
  • Joel Sherman of the New York Post writes that the Yankees can ill-afford to see CC Sabathia's regression to No. 4 starter come when he has at least three years and $76MM on his contract. The Yankees anticipated such an occurence might happen toward the end of his New York tenure but thought they'd have capable replacements in Michael Pineda, Dellin Betances and Manny Banuelos, but none have panned out. Their dearth of pitching talent clouds their goal of staying under the $189MM luxury tax threshhold, Sherman adds.
Steve Adams contributed to this post.

Quick Hits: Sabathia, Red Sox, Indians, Cardinals

C.C. Sabathia's deal with the Yankees could turn out to be an ugly one, Wallace Matthews of ESPNNewYork.com writes. "That contract might not be a disaster of A-Rod-ian proportions, but unless Sabathia finds a way to turn it all round, it might turn out to be the next-worst thing," Matthews writes. Sabathia has three years left on his contract, plus a vesting option for 2017 that the Yankees can avoid only if Sabathia has a left shoulder injury. All told, the Yankees are likely to be on the hook for $96MM after this season. Sabathia's season arguably isn't as bad as his 4.81 ERA makes it look -- his peripherals are indicative of ERA about a run lower. But his declining velocity is a serious concern. Here are more notes from around the big leagues.

  • The Red Sox's huge trade of Adrian Gonzalez, Carl Crawford, Josh Beckett and Nick Punto to the Dodgers one year ago gave them the payroll flexibility to acquire Ryan Dempster, Shane Victorino, Mike Napoli, Stephen Drew, Koji Uehara, and Jonny Gomes, Scott Miller of CBS Sports writes. But that doesn't mean the Dodgers are unhappy with their end of the deal -- Miller notes that it "changed the path of both franchises." Miller also quotes Dodgers manager Don Mattingly noting that his team likely would have pursued Victorino (for whom they had traded in July 2012) as a free agent if they hadn't acquired Crawford.
  • The trade also gave the Sox the flexibility to acquire Jake Peavy, Brian MacPherson of the Providence Journal notes. Peavy's matchup against Chris Capuano on Sunday reminds MacPherson that the Red Sox made a "desperate attempt" to acquire Capuano from the Mets in 2011. The talent gap between Peavy and Capuano is significant, and MacPherson argues that the trade with the Dodgers made the difference in acquiring Peavy this time.
  • There will be interest in Asdrubal Cabrera and Chris Perez this offseason if the Indians want to trade them, Paul Hoynes of the Cleveland Plain Dealer writes. Cabrera has struggled this season, hitting .237/.292/.389, and he's set to make $10MM in the last year of his contract in 2014. Perez, meanwhile, is set to earn a raise in arbitration on his $7.3MM 2013 salary before becoming a free agent after 2014. His pitching hasn't been stellar in 2013 -- he has a 3.30 ERA with 8.2 K/9 and 3.1 BB/9. Hoynes may be right that the Indians could deal Perez if they wanted to. For example, the Red Sox's offseason trade for Joel Hanrahan, a pitcher with a similar salary and contract situation, perhaps shows that teams are always willing to deal for an established closer. But that deal also demonstrates just how volatile closers can be, and Perez has never been dominant in the way Hanrahan once was.
  • As the August trade deadline approaches, Cardinals GM John Mozeliak says that his team is unlikely to make a trade, Joe Strauss of the Post-Dispatch tweets. That makes it unlikely that the Cards will wind up with Dan Haren of the Nationals. The Cardinals recently lost Jake Westbrook to injury and have replaced him in the rotation with Tyler Lyons, at least for now.

Dodgers Inquired On Sabathia, Teixeira

The Dodgers called the Yankees to inquire about the possibility of trading for C.C. Sabathia and Mark Teixeira, Joel Sherman of the New York Post reports. The Yankees told the Dodgers they had no interest in moving either player despite their substantial contracts (four years and $99MM remain on Sabathia’s deal; four years and $90MM remain on Teixeira’s deal).

Los Angeles recently acquired Adrian Gonzalez, Josh Beckett, Carl Crawford and Nick Punto from Boston by agreeing to take on $260MM in future salaries. Dodgers officials weren’t inspired by the upcoming free agent class, so they explained to rival teams that they’re willing to take on substantial contracts. This gave the Dodgers the leverage to complete many deals -- few clubs could add substantial payroll midseason.

There are no signs the Dodgers were interested in Alex Rodriguez, Sherman writes. Some executives question Rodriguez’s ability to play third base every day at this stage in his career, and he might be best-suited for the American League. Furthermore. the Dodgers view Hanley Ramirez and Dee Gordon as solutions on the left side of the infield. 

The Yankees would love to move Rodriguez for payroll reasons, according to Sherman. Yankees executives aim to avoid the $189MM luxury tax threshold for 2014, and Rodriguez’s contract limits their flexibility (five years and $114MM remain on Rodriguez's deal). However, Rodriguez has a no-trade provision, as do Sabathia and Teixeira.

Checking In On The Latest $100MM Contracts

Every year a few players join baseball’s exclusive $100MM club with free agent deals and mega-extensions. Last offseason was no different -- eight players signed nine figure deals. The contracts were all for five years or more, so it’s far too early to call them successes or failures. As the season approaches its halfway point, let’s check in on baseball’s newest $100MM contracts:

  • Albert Pujols, ten-year, $240MM contract - Pujols had a painfully slow start, but he has raised his batting line to a respectable .270/.332/.461. His last 40 games have been legitimately Pujols-like: 11 home runs and an OPS over 1.000.
  • Joey Votto, ten-year, $225MM extension - It's impossible to have a complete discussion about baseball's best hitters without considering Votto. The 28-year-old leads the National League in on-base percentage, slugging percentage, walks, doubles and wOBA, so this deal couldn't be going any better for the Reds.
  • Prince Fielder, nine-year, $214MM contract - Fielder continues to hit at an All-Star level, though he has a relatively modest total of 12 home runs. Unfortunately for Tigers fans Mike Ilitch's bold investment hasn't been enough to keep the team above .500.
  • Matt Kemp, eight-year, $160MM extension - Hamstring issues have sidelined Kemp, who was the best hitter in the National League for the first month of the season.
  • C.C. Sabathia, five-year, $122MM extension - Sabathia, now on the disabled list with a strained groin, is in the midst of yet another tremendous season. He has a 3.45 ERA with 8.8 K/9 and 2.4 BB/9 in 107 innings.
  • Matt Cain, five-year, $112.5MM extension - Cain's enjoying his best season as a Major Leaguer. He has a career-best ERA (2.27), strikeout rate (9.0 K/9) and walk rate (1.9 BB/9) through 107 innings. The Giants' decision to invest in Cain still looks like a good one.
  • Jose Reyes, six-year, $106MM extension - Reyes' offensive numbers have dropped off across the board this year, no thanks to a 60 point dip in batting average on balls in play.
  • Ryan Zimmerman, six-year, $100MM extension - Zimmerman's off to a slow start at the plate despite two home runs in his past three games. He missed two weeks with shoulder soreness earlier in the year and has just a .235/.297/.350 batting line.

Yankees Notes: Kuroda, Rodriguez, Sabathia, Cano

In the eyes of people like Derek Jeter, the season doesn't truly begin until the Yankees play their first home game. Here are some Yankees-related notes as the Bronx Bombers prepare to host their first game of the season...

Brian Cashman On Wilson, Pujols, Sabathia

Yankees GM Brian Cashman made an appearance on The Dan Patrick Show this morning, and Chad Jennings of The Journal News provided a recap. Let's round up the hot stove news...

  • "I'd say it's fair to say C.J. Wilson is probably the best pitcher on the marketplace right now since CC Sabathia's been taken out and retained here," said Cashman. "I don’t think it's a stretch to tell anybody that he’s the most attractive candidate."
  • Cashman cautioned that he's talking about Wilson in terms of talent and performance, not necessarily cost. "You have your priority list and how it looks," said Cashman. "But then it gets rearranged by cost analysis."
  • "I think he would be on anybody's wish list," said Cashman when asked about Albert Pujols. "In our circumstances, our roster, he doesn't fit. It's not an efficient way to try to allocate your resources."
  • Cashman said re-signing Sabathia "was not a layup," and admitted there were some nervous moments leading up to the deadline for his ace left-hander to opt-out. "That’s never a fun process, but the resolution we’re really happy with, and we know he is."
  • When asked if he sees himself getting fired or retiring, Cashman joked "I would say that normally you get fired. I think it’s a healthy way to look at it. I think at some point, they usually tell you to go."

AL East Notes: Red Sox, Oswalt, Sabathia

Red Sox GM Ben Cherington confirmed to reporters that the Red Sox and Cubs have obtained a one-week extension to work out compensation for former Boston GM Theo Epstein. Here are some more notes from the division, starting with the Red Sox...

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