Miguel Cabrera: Detroit and High Finance

The Tigers have made the biggest moves of the 2014 off-season. Late 2013, they swapped Prince Fielder for Ian Kinsler, to the latter’s delight, given his recent comments on Texas GM Jon Daniels. Detroit gained substantial salary relief – $76M over Fielder’s contract – enough to consider extensions offers to Max Scherzer and Miguel Cabrera.

Scherzer was reported to have turned down $24M for 6 years. $144 million to a soon-to-be 30 year old pitcher is no small offer. Though, given the $155M Masahiro Tanaka contract, and Kershaw’s megabucks of $215M, it wasn’t top dollar for this Scott Boras client. After the statements made by Detroit, it seems pretty difficult to see Scherzer hanging around.

But no one could have projected the Cabrera extension. Seemingly, the biggest overpay ever, Robinson Cano not far off this basic, money-crazy path. As Dave Cameron stated:

“This isn’t a young player with breakout potential whose cost could dramatically increase as he gets closer to free agency. In reality, Cabrera’s value can only really go down, given that even he likely can’t put up another 192 wRC+ season. The Tigers already paid for the rights to his 2014 and 2015 seasons, and while Cabrera might have wanted a long term commitment, they didn’t have to give him one now.”

But to be also fair, Cabrera’s enormous gain was Fielder’s and Scherzer’s loss as Detroit didn’t hurt themselves as much people think.

1) At a discount rate of 3.5%, Cabrera’s contract (excluding his prior deal and future options) is worth about $199M.

2) Scherzer’s potential 6-year contract would have been valued at $123M.

3) Scherzer will cost Detroit $15.5M in 2014. If Detroit does not get to the playoffs, or is not even close in July, Scherzer, hits the trade block. If they are playoff bound, he’ll pitch for his biggest payday ever. It very well behooves Detroit to trade him – certain to get a top 10 pitching prospect or 2 top bats –  if the right contending team is in the hunt. A team that has a closing window of opportunity (Baltimore – with Chris Davis) and might be close and has pitching prospects Detroit covets. Detroit may be better in 2015 with SS Iglesias back, and say another pitcher to plug into their rotation. Or rising OF prospect to plug into their lineup.

4) Fielder trade savings are at $64M for the duration, if Detroit buys out the final year of the Kinsler’s contract.

5) The biggest hit to the Detroit’s finances are long-term (greater than 7 years), not short (1-7 years).

6) The owner is not looking 7 years out, as Cameron reflected rightly, 84-year old men (Ilitch) are not worried about the overall sustainability of a baseball franchise. They have a billion reasons not to really care. Even if they lose $20-40 million, they won’t go broke. And they won’t lose 20-40 million…

7) TV deals to come are expected to provide more revenues than the cost of even this ONE contract. (Even if that market is changing too – in decline by 2018 or 19.)

The point is: Detroit could have been much more conservative with its offer. But, the money saved on the Fielder trade, and now, the unlikelihood of signing long-term Scherzer, makes this move a slight wash in red ink, not a gusher. Could Detroit have spent better? Sure. Has that been their calling card recently? Nope.

A further breakdown shows that if interest rates rise to more normal, historical levels (5-6%), the money will not be a substantial issue (see below). Sure, 31M is a whole lot of money for a certain decline in Miguel’s performance. But here’s a thought: will he be more productive than Alfonso Soriano and his 18M in 2014 (1 WAR); or will Miguel maintain 3-5 years all-star levels of performance which will lead to a Detroit World Championship, then fall completely apart??

Cameron thinks not, as this quote states: “As good as Miguel Cabrera is now, the history of big heavy guys in their mid-to-late 30s is almost universally awful. Guys the size of Miguel Cabrera just don’t age well, as their bodies begin to betray them and they spend significant periods of time on the disabled list.”

Albert Pujols. Matt Kemp. Carl Crawford. Ryan Howard. Alex Rodriguez…(aside from PEDs)

Lastly, while I think it is bad precedent to shell out $31M a year for any player (especially, over 30) in any sport, it is the nature of the beast. As long as millions of fans pay billions in cash to go to games, and enough multi-billion dollar television deals get made (though valuing rights for 25-30 years to me is pretty arbitrary, given NO ONE knows what landscape will exist), players will get their percentage of the revenues. Owners will spend $500M, or more, in an offseason, to secure name guys as both LA teams, Detroit, New York, Texas, and Philadelphia haven’t shown much restraint recently on doing this exact method.

So, why would that change, ever?

 

 

Calculated Cost of Extension of Miguel Cabrera

Calculated Cost of Extension of Miguel Cabrera

 

 

 

 

 

 

 

 

 

 

Advertisements
This entry was posted in Detroit Tigers, finance and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

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

WordPress.com Logo

You are commenting using your WordPress.com 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 )

Google+ photo

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

Connecting to %s