The seven-year, $210 million contract Max Scherzer signed with the Washington Nationals isn't quite as impressive as it sounds due to the deferred money. Then again, the deferrals are somewhat staggering in their own right.
That $210 million will be paid out in equal installments over 14 years -- or, as Dave Cameron put it, Scherzer signed two seven-year, $105 million contracts, but he only has to pitch for D.C. during the first one. There are a couple reasons why the Nationals found it palatable:
No. 1: Inflation. Cameron did the math and estimated that the Scherzer contract has a Net Present Value of $131 million when treated as a 14-year commitment. If he were paid a flat $30 million over seven years, it would carry an NPV of $161 million.
No. 2: Luxury tax. Acccording to Ken Rosenthal, anyway.
So, luxury-tax salaries for Scherzer likely will be in $26M-$27M range rather than $30M for each of his seven years in deal with #Nationals.— Ken Rosenthal (@Ken_Rosenthal) January 19, 2015
There are a few ways to consider Scherzer's annual earnings/cost to the Nationals. In annual terms, he definitely isn't a $30 million pitcher (although Scott Boras might argue differently), but it's a little misleading to call him a $15 million pitcher.
What's great: He'll be way ahead of Chris Sale either way, at least through the first three years of his deal.
Back in March 2013, Sale signed a five-year, $32.5 million extension with two club options that took care of his first three years of free agency. Assuming Sale remains a White Sox for the duration of the contract, he won't make $15 million in a season until the very last option -- and that's only because of his third-place finish in the Cy Young race, which gave that 2019 salary a $1.5 million boost.
Here's how their annual salaries stack up from their third year of service time to the end of Sale's current deal ($ in millions):
And this is while giving Scherzer the least charitable interpretation of his contract. Cameron also lays out the contract's NPV equivalent of a flat seven-year deal, and that's when you really see how much the Sox stand to save:
Watching John Danks bypass the early extension Gavin Floyd signed, we saw how much money adds up when a player capitalizes on his year-to-year value through arbitration. When a guy like Scherzer sees that success all the way through to his earliest free agency opportunity, we see how much it benefits a team to wrest control of even one post-arb year. Three is a jackpot.
So Sale saved the Sox a veritable buttload of money, but he's not sharing a sense of loss. He told Scott Merkin, "I don't want the payday. I want the celebration."
"I was very well aware of what I was doing when I was doing it. I knew what I signed up for," said Sale, adding that he received excellent advice from his agents on all the possibilities and permutations before agreeing to the deal during Spring Training in 2013. "If I had to do it again, I would do it exactly the same.
"Not one ounce of me thinks I'm getting [ripped off]. I'm not going to sit here and talk about what I'm making, but I'm more than appreciative. Let's not shy away from the fact I'm playing baseball, a game I love, and getting paid what I'm getting paid."
That's awesome, and it's great for Sox fans that Sale and Jose Quintana are locked in for the long haul.
But it's also fascinating when a player bets on himself. Danks and Scherzer each played it perfectly for their own careers, and considering payrolls occupy a decreasing share of baseball's revenues, the industry can absorb the "blow" if the trend of early extensions eases or reverses.
We'll probably see one of those cases up close if the Sox can't pull a Jedi Mind Trick on Jeff Samardzija this season. Down the road, Carlos Rodon's future will be carefully managed to balance team needs while maxing out the all-important first seven years of a Boras client's career. One can simultaneously appreciate the confidence and talent it takes to eschew early security for maximum career control, and also appreciate when guys like Sale and Quintana save the home team some headaches. The latter probably comes more naturally.