Now that the time has come to think seriously about contract extensions, a little further explanation on how this works.
The idea is quite simple - lock in a player for another year (or more) based on his salary this season.
There are three primary advantages to this:
- You can sign successful rookies or other young players for significantly less money than they might make next season. Often, you can lock them in for several years at a reduced rate.
- Established players coming off a bad season or two (and thus a reduced salary) may also see a significant rise in salary if they play at their normal level again this season. Now's your chance to grab him again for a low price.
- You use this year's money to pay future salaries, theoretically giving you more money to work with next year. In reality, you're not going to have any money taken away from you in the off-season (unless you're over the limit in April)...and all teams get the same amount of cash in November. So if you don't spend a million bucks now, you'll still have it in December when you want to re-sign the same player for next year (however, you'll be spending that cash on the new 2010 salary, not the 2009 level). But by spending a lot less cash on a rising player now, you'll be able to better afford higher-priced players over the winter.
The basic formula is that you can re-sign any player for next year for the exact same salary he makes this year. The only caveat to that is the minimum contract is for 250, so those rookies you've got making 100 this year will cost you 250 to sign for next year.
For additional seasons, figure a 33% rise in salary each year after the first. The minimums go up significantly in successive years. For example, the minimum salary for the second year of a contract is 1250.
You must complete the contracts by the last transaction date in July. You must have the available cash at that time to sign the player.
If you trade a player, the contract goes with him. You don't get any rebate for any future years. However, you can use this as a bargaining chip in your trade negotiations (a cheap player signed for multiple years suddenly has more value).
And now the risks -
- Contracts are fully guaranteed. If you cut a player next season, you don't get any of that money back. If you cut him later this year, you don't get any future money back, but will get a rebate for this season's salary, if applicable (assuming that you paid his salary for the current season). Once a player is back in the free agent pool, the contract is gone.
- Another aspect of "fully guaranteed" is that during the off season period, you cannot expose your player in the Redistribution Draft - he must be one of the 28 players that you retain in December. Once the draft is complete, you can cut him if you want.
- You must pay the full amount of the contract immediately. Unlike real life, the money is not paid out over time. You must have the cash on hand for the full contract and it is subtracted from your balance right away. The risk here is that you could leave yourself short for late-season transactions or - if you have chosen contracts unwisely - you may limit your possible moves over the winter.
- Be careful of signing too early. If you sign a player in early June and he goes out for the rest of the season a few days after that, you may have ended up paying too much for him for the next season (a lot of a player's salary is based on at bats or innings pitched). You have until the end of July to extend contracts - it may be wise to wait until then.
- Your risk increases with the length of the contract. On multiyear deals, there's always the chance that you make out in the first year, but if that season is bad (or if he is out of baseball), you may have ended up overpaying for the later years.
- Extending minor league prospects gets you nothing. If they don't play in the majors this year, or only in September callups, or only with limited success, you're going to spend 250 on a player that will be making only 100 or slightly more next year - plus you are obligated to keep them during the Redistribution Draft.
Let me say this again - clearly - once you pay the money for future seasons in a contract you will never - ever - get that money back.
However, the multiyear contract can be an effective tool for building your team in the future. You can use them to turn around a dismal franchise or turn your team into a perennial title contender.