Before he played a single Major League Baseball game, the Pittsburgh Pirates offered 22-year-old outfield prospect Gregory Polanco a contract that would pay him $75 million through 2024 if all three one-year options were picked up. It's a practice that is becoming more common in the world of baseball.
With players like Polanco, who ESPN's Keith Law rated as the 13th best prospect in all of baseball this off-season, the offering of long and lucrative contracts for players yet to taste big league ball provides a high amount of risk. It's become a necessary method, though, for the game's poorest teams to compete for long stretches of time.
The benefits of signing
If Polanco signed the contract, he would be guaranteed a portion of that salary over his first eight years in the big leagues that would give him financial security for the rest of his life. It would provide him a safety net if he got injured or failed to live up to his promise.
Not bad for a kid that grew the son of a police officer in the Dominican Republic and signed his first professional contract for just $75,000 – a rounding error in baseball circles.
In return, Polanco would delay his free agency by at least two years (baseball players are awarded free agency following six years of big league service) and perhaps more if the options were picked up.
If he lived up to his promise, Polanco could be leaving tens of millions of dollars on the table later in his career if he becomes one of the game's elite. By paying him more now and taking on that risk, the Pirates are making it so they have to pay him less later when he is at a point in his career when he would likely command more money than the traditionally cash-strapped Pirates can afford.
Risks for the team
It's not just the risk of him not performing up to expectations the Pirates are taking on. With a limited budget, there is an opportunity cost to take into account. Paying one player with a contract like this that fails means not being able to pay another. It also means more money being spent is going to unproven players across the league instead of those with track records of success, rewarding potential over production.
Finally, if a team like the Pirates fails expensively on a player like Polanco, they could hurt their team for years to come. With money tied up in an under-performing player, the team could struggle, see a drop in television ratings and attendance as winning teams tend to see a boost in those two areas. Simply put, there is a lot at stake in identifying the right players to spend millions on.
By saying no, Polanco is taking a multi-million gamble on himself to become one of the game's best players and avoid the numerous pitfalls that have befallen players with his promise in the past.
The economics of the game
This practice is nothing new in baseball. Back in 1992, the Cleveland Indians went on a spending spree, locking up young and relatively unproven talent -- including Kenny Lofton, Carlos Baerga, and Sandy Alomar Jr. -- in long-term deals. As the Tribe's director of player development, Dan O'Dowd told Sports Illustrated's Peter King back then, "If these guys turn out to be [expletive], we're the idiots. But this is the only way we had a chance to build a great team."
More recently, the Tampa Bay Rays in 2008 moved the starting line even earlier, signing third baseman Evan Longoria to a six-year, $17.5 million contract with three option years just six days into his big league career.
On June 2 of this year, the Houston Astros signed outfielder Jon Singleton to a 10-million contract that can be worth up to $35 million. He was called up to the big leagues on June 3.
By doing this, teams are hoping to have a paid-for discount down the road while the player gets that security now. For teams like the Yankees and the Dodgers with resources exponential to that of the Pirates, moves like this are hardly necessary. For the league's poorest teams, though, it's the new way of doing business.