A bit about CC’s opt out option

Perusing Cot’s, the only current contractual obligations past 2013 are for CC, Alex Rodriguez and Mark Teixeira. AJ Burnett’s deal concludes in 2013. Derek Jeter has a modest player option in 2014 for $8M (and by “modest”, it could mean “expensive” in his age 40 year). In all likelihood, Robinson Cano will have signed an extension (or a new deal since the Yanks don’t normally extend players who are not free agents; something we should discuss another time). Curtis Granderson has a team option for $13M in 2013, so if he’s still doing what we think he can do, he will surely be under wraps for some time to come. Aside from those guys, there’s no telling who will still be with this team and what they might cost.  Guys like Phil Hughes will no longer be arbitration eligible and therefore likely a heck of a lot more costly, but Jesus Montero, if he’s not a Seattle Mariner by then, will still be arb eligible.

So while there aren’t many long term deals to really sweat right now, the three that are currently on the books look to be seriously problematic in 2014 and beyond. The group of Yankee fans who envision great things from ARod and Teixeira four years from now is a small party. There will be memorable home run records to be broken and great defense to be played, but their offensive production will no longer be at the levels it has been the last few years and more than likely not commesurate with their compensation levels.  Trends can be changed but, as of now, we’re all a bit concerned about the trajectory of these two. Add in CC and the natural concerns about workload and injury, and you now have approximately ~$70M locked up before any other considerations are taken.

Seventy million dollars. Three players. That might not seem all that much now for the Yankees and, given inflation, it might seem even less down the road, but to tie up approximately one-third of your on-field resources budget in just three players is a major red flag for me. Asset/resource allocation is an issue for every team, regardless of payroll. To hamstring your team with a few, large, unmovable, unproductive (or underproductive) players is a major risk.

Let’s remember what Joe Posnanski had to say, just about a year ago:

Then … there are some things that ALWAYS seems preposterously expensive no matter how many times you see the price. These I have decided to call: Texpensives. Yes, it’s my latest word. A texpensive (noun) means something (person, place, thing) that seems bizarrely, even comically, overpriced. […]

The word origin is pretty easy to explain. “Expensive” is obvious. The “Tex” part of it, can refer to state of Texas, where the state takes great pride in making everything absurdly large. But the real inspiration is Mark Teixeira. […]

Is Mark Teixeira the third-best player in baseball? No. Is he the best first baseman in baseball. No. That’s Albert Pujols. Is he second best? Third best? Fourth best? Maybe. But maybe not. After a while you look at the other best first basemen — and you realize a lot of them can hit about as well as Teixeira.

Yeah, the Yanks are getting* Texpensive and age won’t help. Father Time is a kick in the groin.

*should I have said: “have gotten Texpensive“, using my Posterisk.

Who knows what the Yanks payroll ceiling will be in 2015? It escalated from $107M in 2000 to $207M in 2011, per Cot’s. Of course, once the Yanks stopped winning four World Series in five years, their payroll hit the accelerator. If you prefer to look more closely to the current year’s payroll, the team’s payroll four years ago was roughly the same as it was this year. Perhaps you want to make the case that in four years from now, their payroll will be only marginally higher than it is now. And if it is, you still have one-third of the available resources locked up in what might be two vastly declined positional players and one very large starter.

All that said, this organization has the ability that none other have: the ability to choke down contractual mistakes and not have it impact their on-field product. Maybe ARod or Teix craters in the next few years.  The team can/will simply suck up the sunk costs and move on. That’s why keeping the DH role clear for these guys (and Jeter) is so terribly important and problematic. If one-third is spoken for, two-thirds, or roughly $140M can be spent on the other 22 guys on the roster. You can buy a lot of talent for $140M. Most teams in the game today do this with far less than this amount. There’s no reason the Yanks can’t, either, so long as they continue to develop players in the minors.

So without completely running off the rails (too late for that?) about long term contractual obligations for this financial powerhouse, let me go back and check what I said back in 2008, just for kicks, just after the CC deal was signed:

…if CC performs SO well that he wants to opt out of the remaining four years, that’d be great. Great that the Yanks got three great years. Great that they could be out of the balance of the deal which is where the risk lies…

And a follow-up posted two days later:

…I’ll take three kickass years from CC and then worry about replacing him, and not worrying about the last few years…

Back in 2008, there were a bunch of pitchers who I could imagine coming through the free agent merry-go-round, thereby giving the Yanks a chance to reload and replace rather than panic. Except that is no longer the case. Thanks to the Yanks excessive spending, the revenue sharing and luxury tax bills reaped by other teams has taken a number of potential aces off the possible free agent menu. Guys like Jered Weaver, for example. Or losing guys to injury like Brandon Webb. Now, looking at the 2012 free agent starting pitching availables, that view isn’t so rosy as it was in 2008.

If CC does opt out and leaves, the ability to backfill could already be gone, especially if the best available, C.J. Wilson, has already signed. Yu Darvish might be a possibility, whether CC opts out or not. Whether or not CC leaves, Darvish might be necessary anyway (at least to manage outsized expectations of ownership).

Like it or not, Sabathia is a must-have for the Yankees and he knows this. He deserves a deal in line with what Cliff Lee got last year which represents an increase in AAV from his current deal. Lee is going to earn, on average, $24M/year. CC earns $23M/year (2011-15). If the team gives CC a six year deal at $24M per, that’s $144M. The extra $1M per year is de minimis in the grand scheme of all things Yankee. The extra year simply increases the risk of having dead money on the roster.

What really scares me is if the team buckles and goes seven years at $24M per which works out to $168M. True, this is not much more than his $161M deal he signed in 2008, except that he will begin the last year of that contract in his age 38 season rather than his age 35 season. That’s a huge risk. Ginormous.

Can the Yanks absorb that if it doesn’t work out? Probably. Does that mean they should do it? Six years, fine. Seven scares me.

No matter what, I fully expect the team to do whatever it takes to keep the big man in pinstripes. The Yanks ability to not let some contracts seem too Texpensive cannot be understated. That doesn’t mean we can’t worry about it. We will just have to pray that CC can continue to stay healthy and pitch his 200 plus innings of ace-quality ball.

About @Jason_IIATMS

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23 thoughts on “A bit about CC’s opt out option

  1. You're right, on virtually every point. CC's contract was dangerously long when he signed; tacking on two more years doesn't make it the least bit safer.

    One would think, looking at the collective albatrosses that are A-Rod, Teix, and for a much shorter term, AJ's contracts, that SOMEONE in management would just stand up and say "No more years."

    But it won't happen. And just as we're stuck with two more years of a reliever nobody wanted, by January, we'll be stuck with a 400 pound behemoth for SEVEN more years. I liked your second quote when you made it at his signing:

    "…I’ll take three kickass years from CC and then worry about replacing him, and not worrying about the last few years…"

    After watching CC fade at the end of the season, I can think of nothing to invalidate your statement.

  2. At what point do the Yankees become wise about their signings, and rather than sign a player like Sabathia for $24M/6 yrs, they offer $30m/4 years. It seems mutually beneficial , as the largest concern for the Yankees is not the true dollars but the decrease in flexibility. The player, Sabathia in this case, now has the opportunity to exceed his total earnings, and is making a bet on himself at age 35 that he will be able to sign a contract worth $24M over the following 3 years to break even, with odds being he will exceed that provided health and even mediocre performance

    • interesting thought, although your math is off in that you are comparing a 6-year scenario to a 7-year scenario.

      but regardless, you could use the same principle to argue for the yankees wanting the long-term deal. because once they pay the $30M for the first 4 "prime" years, they'd almost certainly want to have a guy like CC at a significantly lower figure for those age 35-37 years (barring injury). especially when he'll most likely be pushing toward 300 career wins.

      it's all a matter of how you rationalize the breakdown in yearly salary.

  3. I am a Yankees fan and I was talking about the term “texpensive” with my friend, a Phillies fan. He thought about it a while and said “Your spending is arodiculous”, which I thought was pretty clever. Yes, it hurt to lose this year, and I was disappointed in Teixiera’s performance, since he is my favorite. But in the meantime, I am patiently waiting for opening day. Just want to let you know that I appreciate this blog and its fairness.

  4. Perfect article. I know this contract is going to look very ugly when its all said and done, the best im hoping for is a 6 year deal (5 please? Ha) for something around 25 million a year. As a Yankees fan the only thing that scares me is length of contracts, not the amount. So when fans say "ARod is overpayed," I really dont care. I do care that hes here for 6 more years. I mean unless CC goes to the Cubs or Angels which according to two sources, he is "a lock" to go.

  5. I think the Yankees have to sign him for whatever he'll sign for. He's way too valuable a commodity that can't be replaced (at least in the short term). I would, however, add some incentives to lose some weight for gosh sakes. People seem to poo-poo the weight thing whenever I bring it up, but it has to affect him long-term and long-term is what we are talking about here.

    • Its funny, how one can even choose pictures to prove one's point. Above, we get CC head on, hand over his head – and he looks almost svelte.

      OTOH, I just finished reading Sherman's "advice" to the team, along with veiled hints that maybe it would be ok to let CC walk. The picture that appeared in the Post showed CC at about 8-9 months pregnant. Here's the link to just the pic –

      Ya know – there, he looks downright awful. Kinda the way he pitched September. Five years, more money, or let him walk. Considering how much freedom it will allow the team in other deals, I'd be up for it.

      • I really dont think he will sign up for 5 more years. Why dont we do what the Sox do and put TEAM options in these deals instead of player options? You know…smart negotiating? Because if I am CC's agent im sitting down at the table and saying 7 years. His agent has already started negotiating with the Yankees through the press (Bobby V and Harold Baines comments which if you think about them, are absolutely ridiculous), so I expect these negotiations to get ugly.

  6. Ignoring the financial considerations, shouldn't we be worried about the roster spots these guys will be taking. If 3 years from now, all these guys are just average performers or even worse, the Yankees won't realistically be able to release them. That's several roster spots – not just one Giambi – for several years that won't be producing. The Yankees will need several stars to offset the bad performance these guys. I don't see them finding them easily and it would mean a payroll ballooning to hard-to-imagine proportions.

    • Unless the Yankees start realistically trying to use their farm system to supplement the big league level, and not in trades, in actually players, the team cant keep signing players. You think the CC contract is going to be bad? Wait till after next year when we have to sign Cano and Granderson. How much money do you think is going to be tied up in them and for how long? Without a few hopefully star cost controlled players like a Montero, the Yankees can't keep absorbing these contracts. Tex and Arod have 5 and 6 years left. Jeter 3 (do you really think he wont pick up his player option at 40?) Now throw in the soon to be absurdly large contracts for Granderson and Cano (they gave Tex 8 years 180 mill what do you figure Cano will earn) Now you have aging vets at every spot, and all that wealth will not save you from having an inflexible team. Its scary to think of

  7. CC's a horse, not a great inning for inning pitcher

    That's why I didn't want him coming into game 5 from the bullpen, and once again I (and many others) said this BEFORE he came in and gave up what turned out to be the crucial run

    Resign him, give him his money, throw him out there 35 times for 220 innings, but don't ask him to be taking over playoff series by pitching brilliantly multiple times because that's not his forte

  8. Jason, great post, even if I can take a few issues with it.

    My biggest problem with your post is that you are comparing free agent starting pitchers (like CC, assuming that he does opt out) with free agent first basemen. That's not a good comparison, as quality free agents are more abundant at certain positions. I looked at that here last year, see http://bit.ly/apTEtH. If you're looking for a player that can produce at significantly above replacement value, the toughest position to fill in free agency is catcher, followed by shortstop. First base is one of the easiest positions to fill. Year after year, there are quality first basemen available in free agency.

    Top of the rotation starters appear less frequently in free agency. Last year there was Cliff Lee; this year there's CJ Wilson, who by all measures is a considerable step down from Lee. A team that needs to pick up a top starter in free agency can do so infrequently, but it takes patience, determination and big bucks to build a top rotation this way (see the Phillies as an example).

    It's also misleading to project out Cot's and get too worked up over big dollars committed long term to a few players. Simply because a contract is structured at $x per year does not mean that we should value a player that way. CC was paid around $23 million this year for around $35 million of value (at the prevailing rate of around $5 million per win above replacement). If CC were to pass on his opt-out, we might figure that in 3 years he'd produce maybe $15 million in value for that same $23 million a year. We get a bargain one year, we pay too much another year; it's all good if it averages out OK. Think of it like deferred salary: A-Rod probably earned something like $40 million (gulp!) in 2009, with some portion of that salary paid in 2009, and some to be paid in 2015. Sorry people, but the salaries already on the books for 2014 are largely amounts the Yankees have agreed to pay THEN for performance the team has already received.

    Eric Seidman at FanGraphs figures that CC is worth a new seven year contract at between $175-$185 million. Sounds right to me. If the Yankees can put together a winning starting rotation without CC, like (for example) the Rays can do, then of course the Yanks should bid CC a fond goodbye. Let's put a couple of "killer Bs" in the 2012 starting rotation along with ace AJ Burnett, #2 starter Ivan Nova, and Phil Hughes (if he's healthy enough) or Freddy Garcia (if Hughes is not healthy enough). That should be worth an 85 win season, and Yankee fans are patient enough to wait the few years it should take for that young pitching to learn on the job and become MLB worthy. We won't mind if the Red Sox pick up CC and dominate the AL East for a while, since we'll know that come 2014 they'll have a ton of deadweight contracts on their books.

    Or maybe we'll just have to deal with 2014 when it comes.

    Ultimately I agree with you: the team paid too much for both A-Rod and Teixeira, even though both players have been productive. That's not-so-ancient history at this point. The question is, can the team afford to have $75 million tied up in contracts for 3 players in 2014, when we expect to win 95 games in 2014 and those 3 players may contribute perhaps $45 million in value in 2014? I think the Yankees can well afford that. If they can't, then the dual questions are how the team can win 95 games in 2012 without CC, and whether the fan base would continue to fill the Stadium and watch Michael Kay in 2012 if the team flirts with .500 all season. All legit questions in my view, all raised quite nicely by your post. Great job my friend.

    • I saw the Seidman piece after mine was published and while I am sure he’s accurate in his estimates, it doesn’t mean it’s the right thing to do nor is it the right thing for every team. Yes, comparing SP to 1B is a stretch, but I keep getting worked up over asset allocations anyway.

      I waver back and forth on this. I don’t see re-signing CC for 7 years as a death blow, but it certainly is a major concern.

      I can’t claim I don’t want the Yanks to “be the Yankees” but I’m itching for a period when the team becomes more agile in its finances, rather than a “dumptruck of cash” in the market. Doesn’t mean spending less; means spending smarter.

      • as long as they keep making the playoffs every year (or 16 out of every 17 years) who cares?

        I honestly don't understand why fans get so worked up over player salaries… do you really think if the Yankees shave payroll those savings are being passed down to YOU, the yankee fan/customer??

        Of course not, it's going right into Hal and Hank's pockets…

        • Oh right, right… if the Yankees keep giving out high salaries… then… what? Eventually they are going to put themselves in a position where they can't spend more to win? Really? When they have a 5 billion dollar (Levine's estimate, not mine) overall business whose bottom line is TRULY influenced by the team's success on the field?

          Sorry, not buying it,,, the yankees will continue to have the highest payroll, continue to win, and some fans will continue to complain about it…

          hey, if rooting for goliath doesn't work for you, go root for the pirates or royals… seriously

      • Agreed 100% with your comment. I believe in a plan that provides for SUSTAINABLE winning baseball, and if signing CC now means the team sucks for the latter part of this decade, then I say no thanks. But the alternate questions remain. Can the team win 95 games in 2012 without CC? Could CJ Wilson really replace CC, and if so who is going to replace Colon and Garcia?

        Maybe this is the more pressing question: if we pass on CC, and come next July the team is 12 games out of first place, will we panic and trade away our future in the minor leagues for the likes of an Eric Bedard? Given the choice, I'd rather pay too much money in free agency over the winter than give up too much value in prospects over the next summer.

        • It was hard enough to sit thru 2008 and know it would be a rebuilding year. You want us to do a couple? Let's just sign cc and hope that we can make some trades that can help us have a decent rotation behind him. Jason great article and thanks for reminding us how desperate we get with cash. But we can't help it…we need time to develop our prospects!

      • "I'm itching for a period when the team becomes more agile in its finances"

        Take away A-Rod's contract and you're pretty much there.

  9. I really have mixed feelings on this. On the one hand, with the slim pickings available at starting pitching, I don't think the Yankees can afford to let C.C. go. On the other hand, looking at what he's done in the past two postseasons makes me a little worried (24 2/3 innings pitched, 32 hits, 16 earned runs, an ERA close to 6). Yeah I know it's a small sample size and he had knee issues last year, but still.

  10. Wouldn't it make sense to get a little creative and put significant performance milestones and create a "commission" based system? What if CC signed up for 10 million a year plus an additional 3M per WAR? He would have got paid a ridiculous 31M this year but he would have deserved it. If his performance were to dwindle, so would his salary.

    If he put up 1/2 the WAR, he would still be the "best" pitcher that the yankees had but would make 20.5M, and if he had an A.J. Burnett year he would get paid 14.5M… Maybe my numbers are a little high still, but it would seem that this could protect teams from their heavyweight (literally) players failing.

  11. If the Yankees were willing to "cut loose" these high paid players when they stopped producing (scratch them from the lineup and just send them a paycheck), I'd be more willing to hop on the CC resigning bandwagon. However, that is not what the Yankees do (and not what any other team would do). When AJ was floundering, we still marched him out there for his turn in the rotation, even though it seemed that his poor pitching simply would not end. The same deal with A-Rod, but to a lesser extent. Who else would play 3B in the playoffs? If no one else, why bat him 4th?

    Point is, it would be egg on ownership and managements' faces to take your 16M+/year players and bench them. And THAT's what has me concerned about the future. The odds that all these 36+ year-olds are going to perform well at that point is pretty small. If we are lucky, ONE of them will perform decently, but the rest will probably hover around league average.

    And since management will feel FORCED to play them, we'd have to turn the rest of the roster into a bunch of Canos and Grandersons to possibly counteract the gaping holes at 1B, 3B and SS.