Red Sox: Commissioner not a fan of opt-out clauses


Major League Baseball Commissioner Rob Manfred isn’t a fan of opt-out clauses like the one that the Boston Red Sox included in David Price’s contract.

A common trend in the free agent contracts that teams have handed out this year has been the inclusion of an opt-out clause, which allows the player to forgo the remainder of his contract after a specified duration of the deal to dive back into free agency. The negotiating tactic is certainly nothing new in Major League Baseball, but it does seem to be more common for players that sign long-term deals.

That would not be the case if it were up to Commissioner Rob Manfred, who is apparently not a fan of opt-out clauses.

The Commissioner discussed the matter with Fox Sports’ Ken Rosenthal last week, explaining that the concept makes little sense from the perspective of the team.

"“The logic of opt-out clauses escapes me,” said Manfred. “You make an eight-year agreement with a player. He plays well, and he opts out after three. You either pay the player again or you lose him.“Conversely, if the player performs poorly, he doesn’t opt out and gets the benefit of the eight-year agreement. That doesn’t strike me as a very good deal. Personally, I don’t see the logic of it. But clubs do what they do.”"

Manfred is correct in that these clauses are extremely one-sided in the player’s favor, but he falls short of recognizing the reason why teams are willing to accept it. The bidding for the top free agents can be highly competitive, but sometimes it takes more than just money get ahead of the pack. Offering an opt-out clause is an additional perk that teams can offer as a way to separate themselves from the competition.

Three of the biggest free agent contracts given out this winter have included an opt-out clause, including the one that the Boston Red Sox gave to David Price. The new ace of the rotation signed a 7-year, $217 million deal, but Price will have the option to opt out after three years.

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The expectation is that Price will remain among the elite pitchers in the game over the next three years, in which case he is likely to test free agency again at the age of 33. Considering that Zack Greinke signed a 6-year, $206.5 million deal with the Arizona Diamondbacks earlier this month at the age of 32, it’s reasonable to expect that Price can still earn top dollar as long as he remains productive. It also needs to be noted that Greinke took advantage of a similar opt-out clause in his previous contract with the Los Angeles Dodgers, which allowed him to cash in.

The opt-out clause is a clear benefit to Price, but why can’t it also benefit the Red Sox? Price could end up making significantly more than the $217 million he signed for by exploiting this clause, but Boston doesn’t necessarily have to be the team to pay it. If Price does opt out, they have the option of letting him walk away, content with the three years of his prime that they already got from him, while avoiding the risk of paying a pitcher heading for his decline years.

Think of it this way – the Red Sox would be ecstatic if they were told that they could have their top free agent target for 3-years, $93 million. President of baseball operations Dave Dombrowski would be dancing like an NFL player celebrating their first touchdown if he managed to pull that off. Well, that’s essentially what they will have done if Price opts out and the Red Sox decide they’d rather not pay $30+ million per year for a pitcher that is 33 years old by that point.

The downside is that if Price suffers a catastrophic injury or hits his decline far earlier than expected then he won’t opt out, leaving the Red Sox on the hook for the final four years of his deal. That’s a risk they are willing to take and would have been the case anyway if there were no opt-out clause in the deal.

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Three years from now the Red Sox may be faced with the decision of either entering an even riskier deal to retain Price or letting him go. The Dodgers took the latter approach with Greinke, which is a clear step back for them in the short-term, but one they believe will turn out to be a wise decision in the long run. They know they have the resources to find a replacement, as will the Red Sox. We now have three years for the front office to prepare for this scenario, at which point they can re-evaluate based on how Price adapts to Boston and what the state of the rotation looks like in 2018.

Manfred may not like the inclusion of an opt-out clause, but it’s unlikely that he or the owners will make an issue of it in the next round of collective bargaining prior to when the current labor agreement expires next December. The Commissioner’s views on the subject are meant to protect the owners that he works for from themselves, but limiting a benefit that players can negotiate for themselves would likely be a non-starter with the union, according to Rosenthal.

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It also may not be necessary. While we have seen examples of teams renewing contracts of players that took advantage of an opt-out clause end in disastrous results, that doesn’t necessarily mean the Red Sox are in store for a similar fate with Price. Time will tell if it was the right decision or not, but we can at least envision a plausible scenario where Price opting out after three years could prove to be mutually beneficial for the player and team.