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Tuesday, June 17, 2014

Contextualizing The Jon Singleton Extension – MLB Trade Rumors

Here’s a great look at the Singleton extension.

If anything, perhaps, the Singleton extension really marks the latest instance of a general trend away from formulaic contractual models. His deal opens new doors, especially, for players who did not have the opportunity to capture downside protection at their point of entry into the professional ranks, at which time they immediately become subject to the limitations of the reserve clause (as expressed in the collectively bargained Basic Agreement). There are potentially other, yet more creative options as well, such as private insurance (assuming it could be had by a prospect at a reasonable rate) or even public investment. But all players and teams will not pursue such a path; indeed, several of Singleton’s teammates (and others) have declined the opportunity, while some (if not most) clubs will remain largely uninterested in making such early commitments.

History teaches us that, even at his relatively exalted place in the eyes of the game as a top-100 prospect, Singleton was not assured of cashing in on his talent until he decided to forego the chance of becoming the next Fielder. That he chose to do so should have relatively minimal impact on those other players who have the means and desire to bear the inherent risk of transitioning from top prospect to established major league player.

Jim Furtado Posted: June 17, 2014 at 06:44 AM | 7 comment(s) Login to Bookmark
  Tags: astros, contract extensions, contracts, economics, jon singleton

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   1. RMc's Unenviable Situation Posted: June 17, 2014 at 09:20 AM (#4728243)
The Jon Singleton Extension

Hey, I used to watch that!
   2. I Helped Patrick McGoohan Escape Posted: June 17, 2014 at 11:31 AM (#4728383)
The Jon Singleton Extension

Hey, I used to listen to that!
   3. kthejoker Posted: June 17, 2014 at 02:23 PM (#4728594)
The Jon Singleton Extension

Hey, I read that!
   4. Walt Davis Posted: June 17, 2014 at 06:44 PM (#4728840)
What makes this any different than Longoria-Rays?

It certainly seems like a heavily team-friendly deal but it doesn't seem radical in any particular regard and it's not clear to me that such a deal has a substantial advantage compared with the standard buyout that waits until the guy has a couple of years under his belt -- presumably you save money when the guy turns out good but you lose money the other times.

The question is how often you can sucker a real star like Longoria (or better yet Trout) into taking this sort of deal. I don't expect Singleton to become a real star (not that I'm an expert in these things) ... and of course I thought the Fielder contract was silly.

And there are differences. Fielder was an FA after age 27, Singleton was already in a situation where he wasn't going to be an FA until after age 28 and that's only if the Astros called him up before this time next year. His buyout pushes his FA out by only one year even if all options are exercised so he's still on the open market before his age 30 season. if he does develop into Fielder.

Fielder made a ton in his arb years ($33 M) but that's because he had become a star (although I'm still surprised he did that well).

I had expected to see more of these types of deals after Longoria and had been thinking that the reason we hadn't was because the Rays had been so bald-faced about it (agree or we won't call you up) that the Union had made it clear that this was not kosher. The Astros have been even more bald-faced about it now.

Note the Union issue is not about the money per se -- I think they're fine with seeing young players bought out even at seemingly team-friendly prices. They're still good money, players get to make decisions about their own risk profiles, whether this is the city they want to play in long-term and either they still become FA at reasonably young ages or they get a second extension at something close to market rate.

I think the Union issue is around "agree or we won't call you up." That is clearly a violation of the spirit of the CBA even if it would be difficult to codify. The necessary blind spot in the CBA is that teams obviously need to be able to make the right "baseball decision" but it is relatively easy to hide financial/labor decisions behind "baseball decision." Things have generally ticked along fine with teams rarely trying to hide major financial decisions behind baseball reasons and the Union rarely getting worked up about the borderline cases.

But for teams to (essentially) openly say "yes, you're ready for the majors but we won't let you play until you agree" is rather obviously a move that works counter to their baseball success to achieve financial rewards at the expense of the player.

Teams already had it pretty good with guys signing team-friendly extensions through their first 1-2 FA years. They just got rid of draft picks signing ML contracts. Pushing it to its extreme in rather blatant ways seems like asking for trouble to me.

I think the Union really needs to get min salaries up to something like a 1/2/3 M scale.
   5. bjhanke Posted: June 17, 2014 at 08:50 PM (#4728910)
If I were a MLB prospect, I'd take the deal in a heartbeat. In fact, if the team didn't offer it, I'd ask for it. If you're a normal MLB prospect (meaning you're not a genius at particle physics or something), you have exactly one way to earn enough money to live in upper-class comfort for the rest of your life: playing MLB baseball. Ten million will do that, as long as you realize that you have to set it aside in VERY safe investments and not go on a spending spree. You look at the ten mill like that. Then, if you prove to be a real MLB player, the extra money you get is for toys and spending sprees. But that solid base of ten mill keeps you from going anywhere near broke. Take it and sweat becoming a super millionaire when that chance occurs. And NEVER buy anything that you cannot afford to buy for cash. - Brock Hanke
   6. jobu Posted: June 18, 2014 at 12:09 AM (#4728995)
I do not understand the controversy over Singleton's contract at all. At the time he signed, he had zero MLB track record. Furthermore, he put up a pretty disappointing MiLB season in 2013.

These pre-arb lockup contract are all about both sides assessing expected value, protecting upside (for the team) and protecting downside (for the player). Sometimes they work great, sometimes you sign a 25-year-old catcher with 1/2 a good season to a 5+2 contract that looks like an overpay before the next all-star break. I look at this as a great deal for Singleton to sign at the time he did--could be meat, could be cake.
   7. Walt Davis Posted: June 18, 2014 at 12:16 AM (#4728999)
In expected value terms, it's difficult to tell. Ike Davis is sitting on $7.5 M already although it's not clear he's in line for much more. Eric Hosmer is making $3.6 M in his first arb year and is pretty much guaranteed at least $3 M next year even though he's having a pretty lousy season. Smoak is making $2.8 M. Singleton signed for something close to "disappointing prospect" money. Of course, he will probably end up making a ton more than Jesus Montero who he could easily turn into.

I'm not so concerned about teams using the leverage of "you're gonna make 'lousy' money for three years then take your chances or you can sign this deal that might work out better for you, might work out better for us." The Union signed on for that with the whole salary structure -- good or bad, that's the way it's supposed to work. If a player after a year wants to sign a deal like that, fine with me.

But "sign this or your career won't start" is a different matter. I wonder how long the Astros were willing to hurt themselves at the ML level before bringing him up without a deal.

Maybe stuff like this will just end up being the equivalent of giving draftees an MLB deal. After the draft, Samardzija signed a 5/$10 deal with two option (arb) years. Singleton's deal is a lot worse than that -- Samrdzija is at $21 M with another year before FA -- and he's closer to MLB-ready at the time of signing, but the intent is roughly similar. If that's how it goes, I think I'm OK with that.

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