Teams, as we know, are not dying to give out dollars to free agents. That requires essentially portioning money you “didn’t have” before and giving it to a new player. Buying out arbitration years, however, has become the new time-honored tradition that is more popular than signings themselves. Today’s example is Whit Merrifield, who agreed to a four-year, $16.25 million dollar deal with a 2023 club option worth $10.5 million.
For Merrifield, there’s an obvious win here: he’s now a millionaire. He was signed for just $100,000 out of the University of South Carolina, and didn’t finally find his major league niche until the age of 27. Now, he has, in his words, money that changes his “family’s life for the rest of our lives.”
For his agent, the L. Warner Companies, and like many agents these days, the calculus has to look a little different. According to fellow writer Patrick Brennan and his rough arbitration figures, Merrifield will sacrifice something like $4 million in value for his now-guaranteed deal:
Very rough evaluation of this Whit Merrrifield extension, but it does look like the Royals gained a little surplus value here, perhaps upping his trade value a little. pic.twitter.com/pe6U2G8tJW— Patrick Brennan (@paintingcorner) January 28, 2019
From either side that doesn’t seem like a whole lot, but on a percentage basis that is still something like 20% of expected value that’s being tossed over to the team side. Which is why I bring up why this is such a tough choice for an agent, as I’m sure you can agree that it is still life-changing money.
Craig Edwards at FanGraphs wrote a nice piece on this earlier this month. What if players who had early extensions were instead free agents right now? The market would also include: Corey Kluber, who had three free agents seasons bought out; Andrelton Simmons, who lost two; Anthony Rizzo, who lost three; and Julio Teheran and Jose Quintana who also lost two apiece. If you include the other players he has in his piece, there was something like $245 million in surplus value being left on the table.
In many cases, like an extension for Chris Sale or Madison Bumgarner or Rizzo, this works out for the team, and the player still becomes pretty darn wealthy. Sometimes it just works for the player, like when the Astros gave an extension to Jon Singleton, who was basically given $10 million to smoke weed.
And sometimes the player and agent are in fact a bit more clever, like when George Springer turned down a seven-year, $23 million deal before he was called up to the big leagues. By the end of 2019 he will have made $28.9 million with another year of arbitration to go.
Ultimately, for Merrifield himself, this is a fine deal for both sides, with that discount more operating in the background and in context of everything I’ve laid out here. In terms of raw performance, Merrifield has been one of the better second basemen in the game, putting up a whopping 5.2 fWAR season in 2018 with a 120 wRC+. Odds are he doesn’t put up another five-win season and it’s more like three, but if he continues to produce then you can guarantee that his deal will be trade-able as the Royals continue on their next rebuild; it would make him one of the more valuable surplus value players on the club.
That universe would hold a net loss for Merrifield and for his agent, who is still hoping to receive the maximum benefit for his client. Arbitration won’t necessarily be kind to him, especially with teams’ new tactic of file-and-trial, but there has been no worse trend for arbitration prices than never walking through the door.
One can understand wanting to get the guaranteed money at an older age, but someone like Tony Clark should look at this deal, and all deals like it, with an eye of extreme skepticism as they look to alter the arbitration structure in the next CBA. Because as long as teams are capable of holding the carrot of early extensions alongside the stick of the threat of a non-tender before hitting the last arbitration year, then this cycle will continue.