Monday, July 31, 2006
In an earlier post, it makes sense for the Sox to want Miguel Tejada on the field, but it works financially as well. An inferior player to Tejada, Raffy Furcal, signed with the Dodgers last winter for $39M over three years. The net present value of Furcal’s deal, at signing, was $35.4M at a 5% discounted rate. Thus, the free market valued Furcal at $11.8M per season.
Tejada is set to make $12M in 2007, $13M in both 2008 and 2009, and $4M in each 2010 and 2011 for a total of $46M and a net present value of $40.87M (using the same 5% rate). Tejada will be paid on average $13.623M for three years of service. The difference in average annual salaries, $1.823M, between the two shortstops is in line given that Tejada is the better player.
The Sox contract extension of Josh Beckett is an indication that Yawkey Way anticipates the free agent market going upward. Owners have the money to spend with the baseball’s strong financial health. Coupled with the few impact bats even with their warts (Carlos Lee and Soriano this winter, and Ichiro, Vernon Wells, Andruw Jones possibly in the next) heading to free agency should lead to an explosion of position player salaries as we have seen for pitchers. Tejada’s contract could look even better over the next three seasons.
So how does the deal get done? Well, it probably won’t since rumor has it the O’s owner Peter Angelos killed a deal with the Astros, but the Sox would likely need to get other teams involved, and the reason why the Sox were exploring three and four team deals.