The Fascinating Jason Heyward Contract

On Friday, the Cubs won the bidding for Jason Heyward, convincing the outfielder to come to Chicago despite offers for more guaranteed money from the Nationals, the Cardinals, and reportedly one other team, perhaps the Angels. While Chicago’s offer of $184 million over eight years is certainly a substantial amount, he apparently could have taken $200 million guaranteed by going with one of the other offers. Instead he chose the Cubs, and along with putting him on baseball’s best team in 2016, the fascinating structure of the contract Chicago gave him may end up making this deal a big win for both sides.

The case for the contract being a big win for the Cubs is easy; Heyward is a very good player who will be paid like a decent one during his time in Chicago. To this point, Heyward has put up +28 WAR in six years in the majors; for the Cubs to break even on the total guaranteed money in this deal, Heyward would have to only put up about +20 WAR over the next eight years. This is essentially the kind of performance the Cubs are paying for with this deal.

Jason Heyward’s Contract Estimate — 8 yr / $181.9 M

Year	Age	WAR	$/WAR	Est. Value
2016	26	3.3	$8.0 M	$26.4 M
2017	27	3.5	$8.4 M	$29.8 M
2018	28	3.3	$8.8 M	$29.1 M
2019	29	3.0	$9.3 M	$28.2 M
2020	30	2.8	$9.7 M	$27.2 M
2021	31	2.0	$10.2 M	$20.9 M
2022	32	1.3	$10.7 M	$13.9 M
2023	33	0.5	$11.3 M	$6.2 M
Totals		19.9		$181.9 M

Assumptions
Value: $8M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), -0.25 WAR/yr (28-30),-0.75 WAR/yr (31-37),-1 WAR/yr (> 37)

To get that number out of the contract estimating tool, I had to start Heyward at +3.3 WAR and choose the pessimistic aging curve, and that’s about as dim a view as one could possibly have of his overall value. Even if you eliminated 100% of his defensive value, projecting him as an average defensive right fielder going forward, he’d still project as a +3.5 WAR player, given his offensive production and quality baserunning. Forget regressing defensive value; for him to be worth only $184 million over the next eight years requires the type of analysis that concludes that defense is completely irrelevant beyond the position a player takes on the field.

Of course, that’s not a particularly rational belief, and every piece of available information suggests that Heyward adds a good amount of value in the field. Based on what they’re paying him, the Cubs are basically getting that value for free, and barring an injury, they’re very likely to come out with a significant bargain during the time Heyward is in Chicago. $23 million a year for a player of Heyward’s value is a very nice value, especially for a team in a competitive division, where the value of adding marginal wins is very high.

But, of course, this contract isn’t a straight eight year, $184 million commitment from both sides. That’s the amount the Cubs guaranteed Heyward as a floor, but because his representatives at Excel negotiated two opt-out clauses into the deal, the likely outcome is that he’s going to end up getting a much better deal than that over the long-term. It was long assumed that Heyward would get an opt-out clause in whatever contract he ended up signing — Excel has a history of getting them included for their clients, and Heyward is the kind of player where getting another crack at free agency has the most upside — with most speculation suggesting it would come halfway through the expected nine or ten year deal he would sign.

Instead, Heyward took a slightly shorter contract, and in doing so, moved up his chances to get back on the market. Since the Cubs gave him opt-outs after the 2018 and 2019 seasons, from his perspective, this is really a three year contract with a one year player option, followed by a four year player option after that. Assuming a normal payout structure with a slight increase in salaries over the life of the deal, this deal is probably going to end up paying Heyward something like $65 million over three years or $88 million over four years before he hits the free agent market again.

At that point, Heyward will probably not be as good of a player as he is now, as we shouldn’t expect him to retain all of his early-career defensive value, and he’s approaching the point where we shouldn’t expect the offense to improve dramatically. If he loses roughly half his defensive value over the next three years, he’d be looking at hitting the market again as a 29 year old who projected as about a +3.5 WAR player. The most recent comparison of a left-handed hitting corner outfielder with big platoon splits selling his decline phase was Shin-Soo Choo, and he got $130 million over seven years from the Rangers for his age 31-37 seasons. Heyward will be two years younger than Choo was when he landed his deal, and that point, there will have been five years of inflation in MLB since Choo’s deal was signed.

Choo’s deal is probably something like the floor for Heyward’s next contract — again, assuming he stays healthy, which is the primary variable in whether he’ll opt-out or not — and he’d probably only take that deal after the second option, as he’d probably prefer a one year, $23 million pillow contract by picking up his first option to try and have a better walk-year if his 2018 season wasn’t very good. So if we gave him the 7/$130M that Choo got and add that to the roughly $90 million that he’ll get from the Cubs in the first four years of the deal, that puts him right around 11/$220M.

But Choo’s deal is going to be ancient history by the time Heyward actually reaches free agency, and inflation is going to make it likely that he lands a much larger deal than Choo’s deal in a few years. When Choo signed his deal, teams were paying roughly $6 to $7 million per win; when Heyward is deciding whether to use his first opt-out or not, the market will probably be closer to $9 million per win. Here’s what a +3.5 WAR outfielder, selling his age-29 to age-35 seasons, would expect to get in that kind of market.

Jason Heyward’s Contract Estimate — 7 yr / $171.6 M

Year	Age	WAR	$/WAR	Est. Value
2019	29	3.5	$9.0 M	$31.5 M
2020	30	3.5	$9.5 M	$33.1 M
2021	31	3.0	$9.9 M	$29.8 M
2022	32	2.5	$10.4 M	$26.0 M
2023	33	2.0	$10.9 M	$21.9 M
2024	34	1.5	$11.5 M	$17.2 M
2025	35	1.0	$12.1 M	$12.1 M
Totals		17.0		$171.6 M

Assumptions
Value: $9M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), 0 WAR/yr (28-30),-0.5 WAR/yr (31-37),-0.75 WAR/yr (> 37)

If he collects roughly $70 million before the first opt-out, then sees a market where his fair value is around 7/$170M, it’d probably be a pretty easy call for him to hit the market and reset his salaries. At that point, the contract would end up paying Heyward something like $240 million over ten years, or right in line with the mega-contracts that Albert Pujols and Robinson Cano commanded. And this is assuming Heyward declines from a roughly +5 WAR player now to a +3.5 WAR player over the next three years. A total payday of 10/$240M for Heyward isn’t even the optimistic scenario, as he’d probably be able to get another deal worth $200 million deal if he still projected as a +4 WAR player going into his age-29 season.

These opt-outs are why Heyward took only $184 million. As Eno noted after the David Price signing, the opt-out was probably worth something like $10-$15 million for Price, an older pitcher with a significantly higher chance of collapse. For Heyward, each opt-out is probably worth more, and by doubling up on the chances to hit the free agent market again while he’s still in his prime, he’s put himself in a position to end up with something like $250 million over his remaining productive years.

So, yes, the Cubs got a really good value by signing Heyward for 8/$184M, but given that he’s now got a floor of $184 million with a more likely outcome of something like $240 or $250 million, this deal should work out just fine for Heyward as well. He might have left a little bit of guaranteed money on the table, but getting the 2018 opt-out probably should outweigh the value of getting a few million more per year during the part of the contract that is likely to get voided anyway.

While opt-outs are always going to be player friendly clauses, this contract is a perfect example of how including an opt-out in a deal can make a contract a win for both sides. The Cubs get a really good player at a bargain price for the first three or four years of the deal, and as long as Heyward stays healthy, he’ll get another nice contract in a few years. For both the Cubs and Heyward, this is a win-win contract; the losers in this deal are the rest of the teams in the NL Central, who are going to have to figure out how to contend with a juggernaut for the foreseeable future.