How James Shields’ Opt-Out Could Benefit San Diego Padres

James Shields recently signed with the San Diego Padres for four years and $75 million, and the move clearly had huge implications. As I examined, the Padres rotation alone after adding Shields could make them competitive in 2015.

However, after everyone had already judged the deal, we found out something new that could at least slightly alter our perception of the contact. As Ken Rosenthal of Fox Sports reported on Friday, Shields’ contract contains a clause that allows him to opt out of the deal after the second year.

Almost always, these opt-out clauses benefit the player and hurt the team. They allow a player to have flexibility in their deal, as they can either opt out and seek a bigger contract if they have been performing well or simply play out the rest of their deal if they think that they cannot make more in free agency. Also, players use opt outs as leverage in extension negotiations with their teams.

However, Shields opt out could end up being a rare case in which it benefits the club.

Shields’ deal with the Padres is backloaded. He will make $31 million in the first two years of his deal, and in the final two he is guaranteed $43 million via two $21 million salaries and a $2 million buyout of his team option. Let’s take a look at what value Shields would need to produce in order to have neutral value in those two segments of the deal.

For the purposes of this, we will assume that one win above replacement in the future will be worth the same as it was in 2014, which was around $5.5 million. This will not be the case because of inflation and other factors, but it is impossible to say where it will be in the future, and it should not be way different from the $5.5 million mark in the next four years anyways.

Using that number, Shields will need to be worth about 5.6 WAR, or 2.8 WAR per season,  over the first two years of his contract in order to produce neutral value. That should be easily attainable if he stays healthy. Since 2007, he has only fallen under 3.5 fWAR once, and in the past four years he has not fallen under 3.7 fWAR. Even if he does regress some, Shields’ chances of producing neutral or positive excess value in his first two seasons are quite good.

In the final two years of his deal, when Shields will make $41 million, he will need to be worth 7.5 WAR, or 3.8 WAR per season, to produce neutral value. If the option is not exercised and he is paid his $2 million buyout, that bumps up to 7.8 WAR, or 3.9 WAR per year. Doing this is a bit more of a stretch. Shields will likely experience some decline over the life of his contract, and his chances of producing neutral value are slim. In fact, since 2008, pitchers age 35 (how old Shields will be in the third year of his deal) or over have produced just nine seasons at 3.8 fWAR or above.

If Shields’ $16 million team option is exercised, then he will need to produce 2.9 fWAR to have neutral value that season. Only nine pitchers aged 37 (how old Shields would be that season) or older have produced that value since 2008. Once again, Shields will likely have significantly regressed by this point, and he may not be able to produce neutral value if his option is exercised.

If Shields opts out after year two, however, the Padres will get the probable neutral or excess value that he will produce in the first two years of the contract without having to deal with the negative value that he will produce in the final two or three.

Of course, Shields opting out is no guarantee, but it is a possibility. Shields could use the logic of getting as much money guaranteed as possible since his playing career will likely be winding down at that point. If Shields is confident he can top the $43 million guaranteed over his final two years, even if it is on a three-year deal, then he might be willing to test free agency. It is not too much of a stretch that Shields could get a three-year deal worth around $17 million to $18 million at that point, which would get him $51 million to $54 million guaranteed.

While opt-out clauses almost always benefit players, this is a rare occasion where it could be a win-win situation for the player and team. If Shields opts out after year two, he could guarantee himself more money, and the Padres would not have to hold onto him while he produces negative value over the final two or three years of his contract. We certainly cannot say that this outcome is probable, but it is possible, and we will have to wait and see how it plays out.

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