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Friday, July 01, 2022

Why Juan Soto’s Reported Extension Offer Is Not As Outlandish As It Might Seem

According to Hector Gomez, “Talks are intensifying between the Nationals and Juan Soto regarding a second offer from the team to the star for a 13-years, $425 million extension, which will increase the initial $350 million offer by $75 million.”

If true, this would be the second-highest contract in MLB history, just falling behind Los Angeles Angel’s Mike Trout, who earned $426.5 million deal for the next 12-years.

Now, with Trout being universally expected as the greatest player in the sport, the deal did not receive a lot of backlash for being overpaid. In the trend of sport economics, lengthier contracts like Trout and potentially Soto’s are the new norm, as players prefer contract protection for the remainder of their careers over just AAV.

That being said, Soto is rumored to be signing the ‘Trout-esque’ contract heading into his age 24 season in 2023, as opposed to Trout at age 28.

So, by the end of his contract, Soto would be just 36-years old, a much more comfortable mark to still be paying over $30 million a year. Especially for a player of Soto’s makeup, who relies less of explosive athleticism and more-so on his pure offensive approach and power.

RoyalsRetro (AG#1F) Posted: July 01, 2022 at 09:49 AM | 25 comment(s) Login to Bookmark
  Tags: juan soto, nationals

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   1. The Duke Posted: July 01, 2022 at 10:42 AM (#6085119)
I wonder what the cost of an opt out is for Juan in a contract like this. You'd think you'd want at least two early in the deal so he can reset if he outperforms/market explodes. But doing so probably really drops the AAV.
   2. Never Give an Inge (Dave) Posted: July 01, 2022 at 11:05 AM (#6085125)

This deal would buy out several arb years, unlike Trout's--but those are also likely to be Soto's best years so maybe the equivalent $ makes sense.

Another thought - with inflation being a thing again, players may want to think twice about these really long deals.

That being said, if someone offers you a $425 million contract, you take it.
   3. Jose is Absurdly Correct but not Helpful Posted: July 01, 2022 at 11:39 AM (#6085134)
That being said, if someone offers you a $425 million contract, you take it.


This is my thought too. I'm fine with guys going to maximize their income but at some point I think you gotta just say #### it. Bird in the hand and all that.
   4. Ron J Posted: July 01, 2022 at 01:03 PM (#6085153)
#2 As Walt always points out, dollar amounts make headlines but it really matters how the deal is structured.

I mean a dollar a year until the heat death of the universe is a huge amount of money, but ...

And while money either side of 425 M will never impact anything close to a normal lifestyle there are hobbies that can burn through limitless amounts of money. What if Soto's life goals are to be sole owner of an F1 team? He'd be seriously underfunded.

What if he really wants to run a private army? Or ... well I'm sure people can come up with "needs more money" situations.

And this is complicated by the fact that if he hold out for free agency he's still going to make an awful lot of money in the interum. And then gets "full" control of where he plays. The "full" reflecting the reality that if his dream is to play in Milwaukee it's probably not happening.
   5. Jose is Absurdly Correct but not Helpful Posted: July 01, 2022 at 01:24 PM (#6085162)
4 - Yeah that's all true but the difference between that $425 and some reasonable number he might otherwise get if he waits is probably not worth the risk. He's not going to make private army or F1 money (I don't actually know what such things cost) but let's say by passing on the $425 he gives himself a chance at $600 (which is probably not the case but let's go with it). That doesn't really make a meaningful difference in his life I suspect and of course a fastball to the face tomorrow or a serious back injury Sunday good make that $425 a hell of a lot smaller.

And look, if he wants to take that chance I don't begrudge him that. He could do what Trevor Bauer did with his contract (not the other stuff) and sign shorter deals that give him bigger AAV and more control over where he plays. That's fine too. Assuming he likes it well enough in Washington though I don't think there is going to be a difference between $425 and whatever the Yankees/Dodgers/etc...might otherwise give him.
   6. Nasty Nate Posted: July 01, 2022 at 01:28 PM (#6085163)
And this is complicated by the fact that if he hold out for free agency he's still going to make an awful lot of money in the interum.
This part often gets overlooked. He's not literally guaranteed a ton of money for 2023 and 2024, but he's guaranteed a ton of money for 2023 and 2024.
   7. John DiFool2 Posted: July 01, 2022 at 01:38 PM (#6085167)
Especially for a player of Soto’s makeup, who relies less of explosive athleticism and more-so on his pure offensive approach and power.


Translation: he has old player skills already--thus would be expected to age more poorly.
   8. Ron J Posted: July 01, 2022 at 01:49 PM (#6085171)
#6 Of course the part I left out is the small chance of something like a Tony Conigliaro scenario. Yeah, Soto's better than Tony C. and yeah, there was an awful lot of bad luck there, but something like that will happen again and ... 425 M is an unfathomable amount of money to leave on the table even if the risk is low.

Still, as a group young professional athletes are not risk adverse. To put it mildly.
   9. snapper (history's 42nd greatest monster) Posted: July 01, 2022 at 01:53 PM (#6085174)
It's almost impossible a deal like this in the current inflationary environment. What's inflation going to average over the next 15 years? 8% a year? 6%? 4%? Makes a huge difference. A 2% change in you discount rate changes the NPV by 10% (assuming 13 equal annual payments)
   10. Nasty Nate Posted: July 01, 2022 at 01:57 PM (#6085178)
#6 Of course the part I left out is the small chance of something like a Tony Conigliaro scenario. Yeah, Soto's better than Tony C. and yeah, there was an awful lot of bad luck there, but something like that will happen again and ... 425 M is an unfathomable amount of money to leave on the table even if the risk is low.
But it's worth noting that even Tony C played for a few seasons and made money after his injury.
   11. Obo Posted: July 01, 2022 at 01:57 PM (#6085179)
Yeah, if I had $425 million to spend and I had to choose between "explosive athleticism" and a "pure offensive approach" I think I know which of the two would be more likely to be worth the money. You could probably find some decent offensive approaches at a BBTF Central Park softball game.
   12. JimMusComp misses old primer... Posted: July 01, 2022 at 02:01 PM (#6085183)
“Universally EXPECTED”!

Nope. That guy loses his ability to write for any outlet from now on.

Expected! Come on.
   13. Nasty Nate Posted: July 01, 2022 at 02:03 PM (#6085184)
Yeah, if I had $425 million to spend and I had to choose between "explosive athleticism" and a "pure offensive approach" I think I know which of the two would be more likely to be worth the money. You could probably find some decent offensive approaches at a BBTF Central Park softball game.
You're not paying for the "approach."
   14. Misirlou cut his hair and moved to Rome Posted: July 01, 2022 at 02:33 PM (#6085194)
Yeah, if I had $425 million to spend and I had to choose between "explosive athleticism" and a "pure offensive approach" I think I know which of the two would be more likely to be worth the money. You could probably find some decent offensive approaches at a BBTF Central Park softball game.


Look, it's not like he is Adam Dunn. He hits for a good average (not this year so far I'll grant), he'll steal a base or 2. It's not all about home runs and walks.
   15. Obo Posted: July 01, 2022 at 02:36 PM (#6085198)
You're not paying for the "approach."

The excerpt suggests otherwise, in particular with regard to whether the tail end of the contract will be a good value for the team.
   16. Walt Davis Posted: July 01, 2022 at 02:36 PM (#6085199)
I think Juan Soto's hobby should be sending $1 M a year to an adorably cute, aging American living in New Zealand. For less than $3,000 a day, you can help me keep myself housed, clothed and fed.

But every donation helps. For a mere $10 a day, you too can help rescue me from this socialist poverty and I'll be sure to send you a smiling picture.

Now, I believe some of us (that might include me) made many of the same points about passing up $350 M yet here we are just a couple of weeks later with an offer nearly 20% higher. I'm reasonably confident he'll take this one or something close to it. He's not gonna beat this deal by enough to make the risk worth it. And to paraphrase Mike Trout on his first extension (essentially paraphrasing Krusty) "when somebody offers you over $30 M a year, it's very hard to say no." (But yes, if half the money is deferred or paid in NZ$ then he might want to wait.)
   17. Walt Davis Posted: July 01, 2022 at 02:57 PM (#6085204)
Opt-outs ... not generally worth all that much, a few million, substantially less than 1 (FA) year on the contract. Leaving aside freak contracts like Bauer's and Correa's which I've never really thought about.

It certainly wouldn't be surprising for the final contract here to have an option or two for Soto. But they'll come after 5-6 years because for this much money, the Nats want a guarantee for Soto's prime years. When that time comes, assuming he's been productive, he could probably leverage the option into an extra year on the contract.

We really haven't seen many big contracts get opted out of. ARod of course but that one made no sense for either party ... he ended up getting the same extension he was asking for from the same team he was asking. JD Drew opted out once and got a better contract from the Red Sox but it wasn't massively better. Greinke was the big winner, opting out of his Dodgers contract to get a highly questionable 6/$200 offer from AZ which paid off reaasonably well (20 WAR).

What's been more common is that the player is not in a good position to opt out (usually due to injury or under-performance) or they have met expectations but are now also a few years older so they leverage the option into an extra year or turning an option at the end into a guarantee.

But sure, inflation and uncertainty, maybe we will see more Bauer/Correa type contracts. But still, the Nats know they have him for the next 2 years so even if they'd agree to that type of deal, it's still gonna be at least 5 years.
   18. Buck Coats Posted: July 01, 2022 at 05:38 PM (#6085262)
ARod of course but that one made no sense for either party ... he ended up getting the same extension he was asking for from the same team he was asking


But cost the team a lot more since the payments from Texas stopped with the opt-out...
   19. The Duke Posted: July 01, 2022 at 10:25 PM (#6085322)
I guess soto could give the Nats a few teams and say, I won't sign with you but I'm willing to sign an extension with the following X teams if you want to monetize me now OR I'll sign a huge deal but I want an early opt out so I can choose my future team if I still don't want to stay after a few more years

He's got to find a way to get a minimum guarantee so a Tony C doesn't happen and also get some "where do I want to play" flexibility. I guess he could also buy an insurance contract on himself that pays out $425 million in the event of a Tony C injury. May not cost that much given the low likelihood
   20. Howie Menckel Posted: July 01, 2022 at 11:54 PM (#6085324)
those under 50 may need the Tony Conigliaro SABR bio

"life is cruel" ain't even the half of it.

couldn't this have been one helluva movie? the lesser talented brother MLB OF only adds to the melodrama
   21. Hank Gillette Posted: July 02, 2022 at 06:47 PM (#6085397)
Of course the part I left out is the small chance of something like a Tony Conigliaro scenario. Yeah, Soto's better than Tony C. and yeah, there was an awful lot of bad luck there, but something like that will happen again and ...
Was it bad luck? Conigliaro was notorious for crowding the plate. He had already experienced a hairline fracture of the wrist and a broken arm before his devastating injury, but if two fractures didn’t inspire in him a sense of self-preservation, I think it was inevitable that he was going to receive a really serious injury sooner or later. Perhaps the bad luck was that it was sooner.

   22. Walt Davis Posted: July 03, 2022 at 03:56 PM (#6085459)
But it's worth noting that even Tony C played for a few seasons and made money after his injury.

Which in this scenario would likely mean that any insurance Soto had would not have to pay out. You can get a policy that covers a career-ending injury, I think he'd have a hard time finding a policy that will pay out if he can't produce better than a 700 OPS.

Conigliaro missed about 1.5 seasons. He came back for two full seasons with a 103 and 117 OPS+ then he stunk the next year. If this happened to Soto this year, the Nats would have to non-tender him this offseson, maybe getting him to agree to a small amount to retain his rights while rehabbing. He'd be back for his final year before FA, probably on some sort of incentive-laden deal. He'd put up that 103 and that would be it for Soto's fabled FA contract. The insurance doesn't pay out and Juan Soto loses out on probably over $400 M. That alternative would be to never play again while battling the insurance company over whether you were really physically incapable of playing MLB.

That's why you don't bet $425 M in the hopes of winning $450 M. At a minimum, if Soto is set on going FA, he should instruct Boras to get him something like 2/$45-50 for 2023-24 (the rest of his arb period ... essentially self-insuring). And yes, get an option in the long-term deal if he cares that much about the extra $25 M he might leave on the table.

Was it bad luck?

From the SABR bio linked at b-r:

On the 17th, Tony’s partner in the music business, Ed Penney, was visiting his sons at the Ted Williams Baseball Camp in Lakeville, Massachusetts. Ted warned Penney, “Tell Tony that he’s crowding the plate. Tell him to back off.” He said, “It’s getting too serious now with the Red Sox.” Penney remembered, “I told him I would. I’d see him the next night. When we were walking across the field to get the kids, and Ted was going up to the stands to make some kind of talk, he turned around and yelled over to me and said, ‘Don’t forget what I told you to tell Tony. Back off, because they’ll be throwing at him.’”8 Penney did tell Tony, before the game the very next night. Tony was in a slump at the time, and told his brother Billy he couldn’t back off the plate or pitchers wouldn’t take him seriously. If anything, he was going to dig in a little closer.
   23. Nasty Nate Posted: July 03, 2022 at 08:39 PM (#6085474)
Conigliaro missed about 1.5 seasons. He came back for two full seasons with a 103 and 117 OPS+ then he stunk the next year. If this happened to Soto this year, the Nats would have to non-tender him this offseson, maybe getting him to agree to a small amount to retain his rights while rehabbing.
No, he wouldn't get non-tendered. Or if he did, he'd still get $20-30m guaranteed total from some other team for those 2 years.
   24. ReggieThomasLives Posted: July 03, 2022 at 09:56 PM (#6085478)
If I was Trout, I would have required an opt-out after every losing season.
   25. Adam Starblind Posted: July 04, 2022 at 12:05 PM (#6085498)
Is there anyone who thinks 425/13 is outlandish for Soto? Dumb headline.

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