Jeter Gets 3 Year Deal, Player Option For 4th Year

Jack Curry is reporting that the Yankees have come to an agreement with Derek Jeter on a new deal. It is a complicated deal, so I will quote Curry’s article and then provide some simplification:

The deal averages to $17 million for the first three years, which includes a $3 million buyout in the fourth year. If Jeter doesn’t exercise the $8 million option in 2014, he will make $51 million. If Jeter exercises the $8 million option, he loses the $3 million buyout and is guaranteed $56 million over the life of the contract. But Jeter can increase his fourth-year salary by reaching some incentives. That is where the Yankees and Jeter got creative.

Jeter’s contract includes a point system in which he earns points for winning the Most Valuable Player Award or finishing in the top six in the voting, for winning the Silver Slugger Award, for being named MVP in the World Series or the League Championship Series, or for winning the Gold Glove. If and when Jeter notches any of those incentives, he will earn an undisclosed amount of points. After three years, those points will translate to a dollar amount, which will be added to Jeter’s salary in 2014. Jeter can earn as much as $9 million in incentives, so the maximum amount he could earn in the final year of the deal is $17 million. The most Jeter could earn in all four years is $65 million.

If Jeter doesn’t maximize the $9 million in incentives across the first three seasons, he also has the chance to earn points in the fourth year of the contract and therefore add to his $8 million salary. In addition, Jeter agreed to defer some money in the deal.

Let’s break this down.

1) The base of the deal is officially 3 years, 48 million dollars, but Jeter gets at least 3 million dollars in the 4th season no matter what (either as a part of his player option or due to a 3 million dollar “buyout”). The 3 million dollar buyout is really just a deferred payment from the first 3 seasons. As such, the effective base of the deal is 3 years, 51 million dollars.

2) The 4th year option is 8 million dollars, but because he loses the 3 million dollar buyout if he exercises the option, it really is a 5 million dollar option. Effectively, the pre-incentive deal is either 3/51 or 4/56.

3) On top of this, Derek has incentives based on certain awards that can raise the value of the 4th year. This means that if he declines the 4th year option, those incentives are meaningless. If he exercises the 4th year option, he can add up to 9 million dollars to his salary in that season based on incentives earned over the life of the contract (not just in the 4th year). This means that the maximum value of the deal is 4/65.

My take: It all depends on how easy it is to earn the incentives. I had no issue with 3 years and 57 million dollars, so 4 years at 56 does not really bother me. I know people complain that it leaves an old player on the roster for another year, but the Yankees can bench him if they so choose. Older players have been phased out throughout the history of the sport, even iconic players that were seen as the face of the franchise. Honestly, I cannot get too worked up about a 5 million dollar option for the 4th season.

The point system complicates matters. If Jeter is excellent over the next few seasons and earns MVP votes and Silver Sluggers, this will not be a big deal. But if Gold Gloves and playoff MVP’s help him earn a ton of points, the Yankees will be playing Jeter for a handful of good games or based upon his reputation as a “fielder,” which is a very bad idea. Hopefully, the points are scaled properly so that these lesser achievements are worth far fewer dollars.

In all, I am satisfied with the deal. I would have preferred that the Yankees stood fast on their initial offer, but I understand the difficulty in that and think they reached a moderately reasonable solution, assuming the incentives are not too easily attained.

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