This offseason, the opt-out clause has garnered a lot of attention and has been included in an increasingly amount of contracts.
The opt-out clause defines itself. At the end of a specific year in a player's contract, he has the option to stay with his current deal or opt-out and become a free agent, in hopes that he gets more money than what is currently guaranteed in his deal.
The clause had really been a rarity around the Major Leagues. It existed, but was just uncommon.
Then came along a pitcher named Zack Greinke.
Greinke signed a six-year, $147 million deal with the Dodgers after the 2012 season. His contract included said opt-out clause after the 2015 season. Greinke's contract would have expired after the 2018 season, making him a free agent at age 35. The deal he signed with Los Angeles was considered to be his one large payday.
Greinke was paid $70 million from 2013 to 2015, good for a modest $23.3 million salary per year. This past season, Greinke led the NL in ERA (1.66) and pitched like a top pitcher in baseball.
So, in hopes that he would get more money in free agency, Grienke turned down $77 million over the remaining three seasons ($25.67 million per year) to go elsewhere.
He cashed in quite nicely. Greinke signed a six-year, $206.5 million contract with the Arizona Diamondbacks, good for over $34 million per season. He made a $9 million salary increase per year just by opting out.
And if Greinke hadn't pitched like an ace or got hurt? Then he wouldn't have opted out and the Dodgers would still be paying him a cool $25.67 million per year. It's a no-lose scenario for the player.
Baseball is a copycat industry, and after seeing the success Greinke had with the clause, David Price, Jason Heyward, and Johnny Cueto each followed with opt-out clauses of their own. Heyward, considering he's just 26, got two.
But I'm not here just to tell you about how good opt-out clauses are for the player. There's an argument to be made that they could be good for the team, too, but just with a much higher risk.
Using Greinke as an example once again, what happens if he declines quickly? Perhaps he only has one more good year and then he just starts to break down. Then, the Diamondbacks are on the hook. The Dodgers are old news. They paid Greinke top-tier money for seasons he was a top-tier pitcher. The Diamondbacks could be paying Grienke top-tier money for seasons he isn't a top-tier pitcher.
While that's the risk a team takes in any contract, it is especially true for the pitchers out on the market.
Take Price, for instance. He's 30 and can opt-out after 2018. If he pitches exceptionally well over the next three years, it's quite likely he does opt-out to earn more as a free agent again. Greinke did it at 32; who's to say Price won't be able to do it at 33, especially since contracts will continue to go up over the next three years?
If the Red Sox don't re-sign Price in free agency the year he opts-out, then they get three really good years from him without having to pay him for his decline. I'd bet that there are some in the Red Sox's front office that are hoping Price chooses to opt-out in 2018. If he doesn't, he's Boston's problem through age 36.
Obviously, since the team does not have the power to make the decision, there's more risk associated with contracts that inlcude opt-outs. Injuries, early declines, and other factors can all cause a player to not opt-out. But if they can maintain their performance, which also is pretty likely, they can opt-out.
As the business of baseball constantly changes, one thing that we are going to continually see in its business model is the inclusion of opt-out clauses in contracts.
Happy Holidays, everyone.