Major changes in sports contracts

Several years ago, in sports it made sense to sign players to long-term deals. It gave them a sense of security, which in theory would alleviate other personal concerns and improve their play (from fewer off-the-field issues); teams liked it because they wouldn’t be bidding on them every three to five years. However, recent events have changed that, with the following being key examples.

1. Alex Rodriguez, Albert Pujols (MLB)

A-Rod’s massive ten-year contract, coupled with his injuries and slump, will cost the Yankees a small fortune. Albert Pujols will cost the Angels a lot, and in both cases those contracts keep paying into the twilight years of their careers. In all seriousness, I wonder what the buyout options are for the two of them, since prospectively both the Yankees and Angels may have an interest in one day pursuing them.

The ripple effect though is apparent when you look at recent trends; the Red Sox didn’t sign one off-season deal more than three years, and few deals exceeded five, including those by the Yankees and Angels. Tony LaRussa, who managed Pujols in his final year before his retirement (coincidentally the last year Pujols was in St. Louis), stated he wouldn’t have signed Pujols to a ten year deal, whilst at the same time stating how much he respected Pujols ability.

The fact of the matter is this: for a young player, a seven year deal works, provided the team puts in a buyout clause. However, for older players, you don’t want them locked down as they enter their late thirties and early forties; it is a bad business move. In all seriousness, the Yankees should let A-Rod go when he had the arrogance to opt-out of this massive $25M a year contract; Pujols should have stuck in St. Louis for less money, where he would have made a ton in local endorsements. GMs in the other 28 teams received a free lesson care of the two aforementioned ball clubs: limit the duration of the contracts you deal out.

2. The NBPA fails to protect players fiscal interests

The now-ousted Billy Hunter will be eternally remembered as the man who failed to provide his players with player-centric salary cap reform. In fact, his desire to end the 2011 NBA lockout, which he apparently thought was in the best interest of the players at any cost, seemed to override the necessary aspects, such as reading the CBA.

Seriously, the luxury tax in the NBA is now brutal on any repeat offenders. You are not going to be seeing too many max deals, and few will dare to go for broke the way the Miami Heat have. What I’m alluding to is the extremely harsh increases that repeat offenders of the luxury tax need to pay, putting many teams, including the Heat and Lakers, into potentially deep holes.

How does this effect contracts? For starters, we’ve all already seen teams initiate trades for the purpose of saving cap space, or getting less over the cap; teams will want to commit less on the grounds of saving money, and if they’re paying a nasty luxury tax now, why offer more? Fewer offers means less leverage, and with lower leverage, players will be forced to settle for less after a while.

I’m not saying that Billy Hunter is the sole cause of the problem, others were involved, and you got the sense that the players were more desperate the get the season going than the owners; I’m saying that he was the executive director of the NBPA, and he should have known better.

3. Mark Sanchez and Tim Tebow (NFL)

These two bound the Jets so badly that the GM got fired, providing a free lesson to the other 31 teams that you never see a fully pre-guaranteed contract again… ever; okay, not never, but rarely. Seriously, they are stuck with Tebow, who would have to concede money in order to secure his release (although he may agree to do just that), and Sanchez, who was reportedly guaranteed over $8M regardless of whether or not he was on the Jets roster, and no one is going to pay someone to play against them.

Don’t get me wrong; Brady’s contract is nearly fully guaranteed and Peyton Manning’s is all guaranteed (he essentially gets paid one lump payment at the start of every season), but they are worth it. The lesson is that for a player who has had some success, but not a lot, you do not over-invest. You give them a small raise, perhaps, but not a giant, player-friendly contract.

4. The Rise of Super-Agents

If you ask any football fan, or baseball fan, to name a sports agent, they will name Drew Rosenhaus or Scott Boras, respectively. Each one has dozens of clients, big agencies, and are recognized for their craft in pushing for the best possible deals for who they represent. David Falk is a comparable example in the NBA. In a way, they are no longer just agents, but spokesman for their own brands. However, with the representation comes a reputation, and that can cause problems.

Many fans vilify super-agents, and regardless of whether it is fair or not, they are targets, like any brand that is the biggest and on top. Many coaches and executives are not happy to hear their star player is signed to one of them. Contract negotiations can either be quite friendly (Derek Jeter and the Yankees a few years back), really ugly (Terrell Owens vs. the 49ers, Eagles), or sometimes teams just don’t have patience and get rid of them sooner rather than later (Anquan Boldin to the 49ers this year). A player’s choice of representation can make a difference in how much they get; a player’s choice of mindset can determine if they land there.

Many agents often times have to work with their client, not only to ensure the client doesn’t inadvertently mess up negotiations, but sometimes to discuss what the client actually wants. If the client wants to play for a contender and win now, he may have to take less money, and the agent will have to broker that. If the client is on the brink of retiring and just wants to make as much as possible, the agent really has to earn his keep. Super agents are distinguished in that they have experience handling both, and a reputation they can use to get what they want.

However, super agents seemingly super abilities cost the fans, one reason they are so vilified; increased salaries, brought on by free agency and escalation in the 1990s, resulted in increased ticket prices and in many cases lower stadium attendance. It can also cost teams who have “soft” salary caps either a lot of money (i.e. MLB and NBA), or in the event of a hard cap, a chance to sign better players and contend (i.e. NHL and NFL).

Of late, the leagues are winning. The NBA’s brutal luxury tax, the NFL’s hard cap, and MLB’s stronger luxury tax (all of which were either installed or reaffirmed by their 2011 CBAs) give teams pause to sign long-term, big money contracts; short-term contracts, with smaller signing bonuses, are more in vogue, and agents, unable to dictate the price, have adjusted to the field as opposed to vice versa.

However, in the long haul, the salary caps will continue to rise, and provide room for increased salaries, and agents, including the supers, will move to fill the void.


About brettryanclu

I reside in California, and I am a graduate from California Lutheran University, where I received my Masters in Public Policy and Administration. I like to write, talk politics, and exchange comments and opinions.
This entry was posted in Sports and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s