![]() ![]() The 10 year, $300M offer that the Nationals reportedly offered made to Harper is extremely interesting in its use of deferred compensation. This deal is both the longest (in terms of playing years) and most valuable by NPV of all of Harper’s offers, so while I’m not sure the Phillies necessarily entered “stupid money” territory as owner John Middleton suggested they were willing to do, it’s clear they are making a huge financial investment by bringing Harper into the organization. Note how the Yearly Present Value of his salary decreases over time - one good way to read this is to think: “In order to pay Bryce Harper’s 2031 salary of $22M, I only need to have $9.7M of capital invested to earn a 7% return - I don’t need the full $22M right now”. Harper’s deal with Philadelphia is slightly front-loaded, which a win from his perspective. This gives us the best way of making an apples-to-apples comparison of options (in this case, Harper’s contract offers) that pay out differing amounts of money over varying amounts of times. As such, we need to discount future cash flows by the rate we expect to earn in the market (7% again) to actually understand what the Present Value of all of those cash flows are today. Because of the ability to invest money today to pay for tomorrow’s bills, an equivalent amount of money today is always worth more than the same amount of money into the future. This concept is rooted in the fact that a dollar today is more valuable than a dollar next year, because we could have invested that dollar, earned a 7% return in the stock market (a common estimate for long-run earnings), and had $1.07 next year instead of $1. This approach reveals a lot more information than strictly focusing on yearly pay totals because of the time value of money. Let’s take a look at the value of the offers Harper had to make his decision on, and use Net Present Value as a lens to understand how contract length, annual value, and present value intersect. Furthermore, there’s even news that the Giants and Dodgers tried to splash the pot at the end with interesting offers of their own. There has been a lot of publicity in recent hours about the amount of deferred money which the Nationals including in their “10 year, $300M offer”, especially compared to the Phillies deal which included no deferred money at all and also pays a $20M signing bonus. Harper obviously plans to stay in Philadelphia for all 13 years, and this just adds extra protection so he can achieve that goal.īut in a world where there wasn’t a no-trade clause in Harper’s contract, the odds that the Phillies would have traded him before he reached his 10-and-5 rights seem to be minuscule, which would seem to suggest that Harper’s no-trade clause was mostly just a matter of form.Now that Bryce Harper has officially signed with the Philadelphia Phillies on a 13 year, $330M megadeal, it’s interesting to conduct a retrospective look at the different offers he had on the table when making his decision. ![]() This does not mean that Harper shouldn’t have tried to include a no-trade clause in his contract, however. They’d have no leverage, limited suitors, and an aging, expensive star. Of course, the Phillies could kick in some money, but if Harper was so undesirable that they felt it was necessary to dump him, it might not even be worth dealing him. In a world where he did not have a no-trade clause and the Phillies tried to trade him before reaching those rights, an acquiring team would be on the hook for eight years and $208 million. The yellow line designates the season in which Harper would have earned his 10-and-5 rights. And even if the Phillies wanted to trade him, they might have trouble trying to unload his contract either way. It’s only significant for the first five years of his contract, years during which the Phillies probably had no desire to trade him anyway. It’s something that he would have gained after his fifth season with the club. While people made a huge deal about Harper’s willingness to stay in Philadelphia for 13 years, the biggest indication of that willingness did not come through the no-trade clause at all. The contract of a Player with ten or more years of Major League service, the last five of which have been with one Club, shall not be assignable to another Major League Club without the Player’s written consent.īasically, what this is saying is that after a player has accrued 10 years of major league service time, while also spending at least five years with their current organization, they have full no-trade rights. I present to you Article XIX, Section A, Subsection (1) of the Collective Bargaining Agreement, otherwise known as the 10-and-5 rule: But as for the full no-trade clause, it’s not really as impactful as one might otherwise think. I’ll give them the latter the lack of opt-outs in Harper’s contract was indeed a surprise to many. ![]()
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