John Hart still remembers the puzzled reaction of colleagues around Major League Baseball when, as general manager of the Cleveland Indians in the early 1990s, he signed more than a dozen young players to lengthy contract extensions long before they were eligible for free agency.
“I remember getting calls from Fred Claire (then the Los Angeles Dodgers’ general manager) and others,” Hart said. “They were, like, ‘What are you doing?’”
Hart was doing then what Braves general manager Frank Wren did recently: protecting a talented young team by signing key players to long-term extensions before salary arbitration and free agency increased their leverage and perhaps priced them out of reach.
In a spending spree that altered perceptions of the Braves’ economic competitiveness, Wren last month signed first baseman Freddie Freeman, shortstop Andrelton Simmons, starting pitcher Julio Teheran and closer Craig Kimbrel to extensions ranging from four to eight years and totaling a guaranteed $267.4 million. Hart, now working for the Braves as senior advisor, loved it.
While the players got what should be lifetime financial security, Wren’s signings also will pay off for the organization — as Hart’s did for the Indians two decades ago — if the players stay healthy and if they perform as projected. But those are big ifs, making the strategy risky for teams, as Hart’s colleagues were quick to tell him when he pioneered the practice in the early 1990s.
“I knew there was risk and danger,” Hart said. “But we weren’t the Dodgers, and I couldn’t go out and compete on the market, so our (approach) had to be different.”
The Indians at the time were a low-revenue team and a perennial loser that had assembled a remarkable collection of up-and-coming talent, including Sandy Alomar Jr., Carlos Baerga, Albert Belle, Kenny Lofton, Manny Ramirez and Jim Thome. After he was promoted to GM in September 1991, Hart signed all of those players and more to long-term contracts in an attempt to avoid the type of departures that decimated another low-revenue team, the Pittsburgh Pirates, after a brief run of success in the early ’90s.
“We did about 10 players in the first year and, over a two-year period, did 15 or 16 of those deals,” Hart said. “No one had ever done it before. It caught the union and some agents by surprise.”
The strategy paid off as the players developed and the Indians, boosted by a move into a new stadium, won six division titles in seven seasons from 1995-2001 and reached the World Series in 1995 and 1997 (losing to the Braves and Marlins, respectively). Hart left Cleveland after the 2001 season and spent the next 12 with the Texas Rangers, first as general manager and then as special advisor. He also works as an on-air analyst for MLB Network.
In recent years, the Tampa Bay Rays have successfully borrowed Hart’s Cleveland strategy. And the Braves had their plan in place even before Hart, 65, joined them in November.
“We started discussing it early last year from the standpoint of identifying the guys that we saw as a long-term core,” Wren said. “We actually approached a couple of players in spring of 2013, but couldn’t quite get together on terms.
“We put it on the backburner during last season and started talking about it internally again in September, coming up with a strategy on how to approach it. Then one of the real triggers for us was the way the free-agent market exploded this offseason. Looking at players somewhat similar to our guys and seeing what they were getting, we knew that if we were going to hold on to our players beyond free agency, we were going to have to be intentional in our attempts to get them signed.”
Wren opened negotiations in the third week of January and within a month signed Freeman (eight years, $135 million), Simmons (seven years, $58 million), Kimbrel (four years, $42 million) and Teheran (six years, $32.4 million). The contracts cover all of the players’ arbitration-eligible seasons, giving the Braves cost-certainty during that period, while also buying out five free-agent years from Freeman and two free-agent years from each of the others (assuming the team exercises options in the Kimbrel and Teheran deals).
The Braves were emboldened in negotiations by several developments: the plan for a lucrative new Cobb County stadium, slated to open in 2017, before 72 percent of the money in the contracts is due; a reworked local TV deal, which accounted for the bulk of the team’s hefty $36 million increase in revenue last year; and MLB’s rich new national TV deals, which take effect this season.
“We’re able to play at the bigger table now because our revenue streams have increased,” Braves president John Schuerholz said.
The Braves also signed right fielder Jason Heyward to a two-year, $13.3 million contract last month, but that deal is different because it doesn’t extend into Heyward’s free-agent eligibility. It basically defers a decision on a longer, richer commitment to a player who has been hampered by injuries.
“We both needed more time to put a value on where he would be in the future,” Wren said. “It didn’t preclude us from extending him at some time in the future.”
The other extensions are examples of how timing drives value.
Because Freeman was arbitration-eligible and within three years of free agency, the Braves got little discount in a contract that will pay him more than $20 million in each of its final five seasons.
But because Simmons and Teheran weren’t arbitration-eligible and were five years from free agency, their deals are potentially friendliest to the team. They also might be riskiest because the players have only one full season of big-league experience. Many teams prefer a longer track record by which to judge players before doing multiyear deals.
“It’s one way to manage the impact of the continued salary escalation,” Schuerholz said of early extensions. “But you have to be correct in your presumptions, analysis and projections — obviously we think we are — and be lucky that the players stay healthy.”
A player’s injury history is “a big factor” in determining whether to offer a long-term deal, Wren said.
The Braves, like other teams, mitigate the risk by insuring multiyear contracts against injury. “We get as much coverage as possible,” Schuerholz said. But full coverage is never available.
If a player stays healthy and performs as the team projected, an early extension can cover his prime seasons. The Braves prefer that to the free-agent market, which often produces contracts that pay older players premium prices for some past-their-prime years of declining performance. Wren relishes that Teheran, Simmons, Kimbrel and Freeman will range in age from 29 to 31 in their contracts’ final seasons.
“We thought they were very solid deals when we did them,” Wren said. “But we think they have a chance to be even better when they play out.”
Schuerholz thinks the strategy will become more common among teams, and Wren said the Braves could sign other players to long-term extensions in the next year or so.
“If we’re going to retain our own,” Wren said, “we need to do it as early as possible before they get so close to free agency that it’s worth the wait to them.”
Because of two decades of salary inflation, the dollar figures are much larger than those Hart negotiated in Cleveland. But the risk-reward calculation basically is the same.
“Believe me, there absolutely is risk for the club (in early extensions). It is a leap of faith,” said Hart, who was inducted into the Indians Hall of Fame last summer.
“But the Braves have done such a phenomenal job of assembling this group of young players, and (without extensions), a lot of these guys would be hitting free agency right at their prime. All it takes then is one team to make an offer so big you can’t keep a player. Clubs can write checks to mask over inefficiencies in their system.”
