Wednesday, August 27, 2014
Inquirer Daily News

The cost of doing business

SAN FRANCISCO -- At this point, you're almost tired of hearing about Ryan Howard's five-year, $125 million contract extension. Almost. First, the links from Tuesday's Inquirer: The news: Phils' Howard gets megadeal Bob Brookover goes Inside the Phillies: After Howard's extension, eyes turn to Werth, Rollins Phil Sheridan: Phils' Howard brings more than big numbers Now, one more take: Will the Phillies regret this deal in a few seasons? Absolutely. There is no question. But go ahead and name to me the baseball contracts that were universally free of regret. There aren't many. It's called the cost of doing business. Now, in this case, it's a steep price. The Phillies will be paying Howard $25 million per season when he is 34, 35 and 36 years old. Will he be a shell of his former self by then? No one knows. But we can say with great certainty that Howard will not be performing at the high rate he currently is -- let alone at a rate worth $25 million annually. Howard's contract is effectively immovable. He has a limited no-trade clause that permits him to pick nine teams every year he would accept a trade to. In 2015, he will become a 10-and-5 man, meaning he has 10 years of service time in the majors and five with one club. At that point, he holds full veto rights to any trade. Consider the hefty salary in 2014-16 as paying for past performance. Should contracts do that? No. Is that an acceptable business model? No. Is it possible to do a deal without paying for past performance? Usually not. So why, on some level, is this deal OK for the Phillies? The Phillies get Howard from 2012-13 (and 2011 if you want to include the final year of his old deal) at $20 million per season. He was a late bloomer. (In fact, Howard laughed Monday at the idea of beginning his current training regimen at age 25. If he had done that, the pay day would have come much sooner.) So Howard's peak still has at least a few years to play out. We think. Phillies GM Ruben Amaro Jr. said he only entertained the idea of pursuing a long-term deal with Howard after he saw what his first baseman did off the field in his conditioning program. He's in better shape than he ever has been and beginning in 2009, Howard's defensive play matured significantly. Early in 2010, he has been very impressive at first. From 2011-13, Howard's earnings are suitable for the Phillies. Howard didn't take an immediate raise in yearly salary, meaning the Phillies have a tad bit more flexibility (but not much) with the rest of their payroll. Make no mistake, the Phillies didn't receive any sort of discount from Howard, though. He will average $25 million per season from 2012-2016. Only one player in baseball is making more: Alex Rodriguez. But if the Phillies wanted to keep Ryan Howard, this is the deal they had to sign. His last contract was three years, $54 million. He wasn't signing another three-year deal. He wasn't taking a pay cut to stay. And, really, did the Phillies have any other option? They could have waited. Yes, they definitely could have. There was no need to set the market with this sort of deal. But who's to say the price doesn't go up later? Albert Pujols and Prince Fielder could be on the market. (The guess here is that whoever trades for Adrian Gonzalez will sign him before the end of the 2011 season.) If the Phillies let Howard walk, do they replace him with either Pujols or Fielder? No. Both of them are going to get similar dollars, if not more. Do they move Chase Utley to first base and find a second baseman? Possibly, but second base can be an even trickier hole to fill than first. The Phillies chose Howard and they paid for it. A lot. Will Ryan Howard be the next Mo Vaughn, Cecil Fielder or David Ortiz? It's quite possible. Even if he isn't, will the Phillies one day regret this deal? Likely yes. But if the Phillies wanted to keep Howard, this was the cost of doing business.

The cost of doing business

Ryan Howard´s extension guarantees him $125 million between the ages of 32-36. (Yong Kim / Staff Photographer)
Ryan Howard's extension guarantees him $125 million between the ages of 32-36. (Yong Kim / Staff Photographer)

SAN FRANCISCO -- At this point, you're almost tired of hearing about Ryan Howard's five-year, $125 million contract extension. Almost.

First, the links from Tuesday's Inquirer:

The news: Phils' Howard gets megadeal

Bob Brookover goes Inside the Phillies: After Howard's extension, eyes turn to Werth, Rollins

Phil Sheridan: Phils' Howard brings more than big numbers


Now, one more take:

Will the Phillies regret this deal in a few seasons? Absolutely. There is no question.

But go ahead and name to me the baseball contracts that were universally free of regret. There aren't many.

It's called the cost of doing business.

Now, in this case, it's a steep price. The Phillies will be paying Howard $25 million per season when he is 34, 35 and 36 years old. Will he be a shell of his former self by then? No one knows. But we can say with great certainty that Howard will not be performing at the high rate he currently is -- let alone at a rate worth $25 million annually.

Howard's contract is effectively immovable. He has a limited no-trade clause that permits him to pick nine teams every year he would accept a trade to. In 2015, he will become a 10-and-5 man, meaning he has 10 years of service time in the majors and five with one club. At that point, he holds full veto rights to any trade.

Consider the hefty salary in 2014-16 as paying for past performance. Should contracts do that? No. Is that an acceptable business model? No. Is it possible to do a deal without paying for past performance? Usually not.

So why, on some level, is this deal OK for the Phillies?

The Phillies get Howard from 2012-13 (and 2011 if you want to include the final year of his old deal) at $20 million per season. He was a late bloomer. (In fact, Howard laughed Monday at the idea of beginning his current training regimen at age 25. If he had done that, the pay day would have come much sooner.) So Howard's peak still has at least a few years to play out. We think.

Phillies GM Ruben Amaro Jr. said he only entertained the idea of pursuing a long-term deal with Howard after he saw what his first baseman did off the field in his conditioning program. He's in better shape than he ever has been and beginning in 2009, Howard's defensive play matured significantly. Early in 2010, he has been very impressive at first.

From 2011-13, Howard's earnings are suitable for the Phillies. Howard didn't take an immediate raise in yearly salary, meaning the Phillies have a tad bit more flexibility (but not much) with the rest of their payroll.

Make no mistake, the Phillies didn't receive any sort of discount from Howard, though. He will average $25 million per season from 2012-2016. Only one player in baseball is making more: Alex Rodriguez.

But if the Phillies wanted to keep Ryan Howard, this is the deal they had to sign. His last contract was three years, $54 million. He wasn't signing another three-year deal. He wasn't taking a pay cut to stay.

And, really, did the Phillies have any other option?

They could have waited. Yes, they definitely could have. There was no need to set the market with this sort of deal.

But who's to say the price doesn't go up later? Albert Pujols and Prince Fielder could be on the market. (The guess here is that whoever trades for Adrian Gonzalez will sign him before the end of the 2011 season.) If the Phillies let Howard walk, do they replace him with either Pujols or Fielder? No. Both of them are going to get similar dollars, if not more.

Do they move Chase Utley to first base and find a second baseman? Possibly, but second base can be an even trickier hole to fill than first.

The Phillies chose Howard and they paid for it. A lot.

Will Ryan Howard be the next Mo Vaughn, Cecil Fielder or David Ortiz? It's quite possible. Even if he isn't, will the Phillies one day regret this deal? Likely yes.

But if the Phillies wanted to keep Howard, this was the cost of doing business.

More coverage
 
High Cheese: Howard's deal and the Phils' philosophy
 
Graphic: How Howard's salary stacks up
 
Paul Hagen: Phillies' window of opportunity gets supersized
 
Gonzo: Howard deal spares us future grief
 
Sam Donnellon: Phillies step up to the plate
 
Phil Sheridan: Howard more than big numbers
Matt Gelb Inquirer Staff Writer
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