Max Scherzer’s Big Contract

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The Nationals will need to sell many of these in order to recoup their investment.

Max Scherzer was announced to D.C. media members and fans of the Washington Nationals by the club Wednesday afternoon, as part of a new 7-year deal the all-star pitcher signed with the Nationals.  To say the terms of the contract are ‘eye-opening,’ is an understatement.

The deal, worth $210 million, gives Scherzer the second largest contract all-time for a pitcher and the largest ever for a free agent pitcher changing teams.  But based on the deal, Scherzer will only be tied for 52nd, among the highest paid players for the 2015 season(according to Sportrac).  How does that happen?

The most notable part of this deal involves the Nationals deferring half of the total value of the contract past the seven years Scherzer will be on the Nationals’ staff.  They’ve elected to pay the pitcher $15 million per year for an astounding 14 straight years.  So that’s a seven year playing contract, plus seven additional years paying him the same salary annually.  Pretty jarring details, especially since Scherzer will be 37 at the end of the playing deal and if healthy, can sign with another team(or re-sign with Washington) and would make an additional salary on top of the $15 million per year owed every year until age 44(the year 2028).

This deal is a very shrewd on signed by Scherzer and was undoubtedly created by notorious contract architect and mega-agent Scott Boras.  Boras and his associates have negotiated nearly half of baseball’s top-100 highest paid contracts and Boras himself has drawn the eyre of many clubs, with the Nationals being an exception.  Boras has 5+ players in the Nationals organization including OF Jayson Werth, who makes $21 million per year.

Let’s dig into the numbers of the Scherzer deal and see just how truly amazing it is. B75ZWkiIQAAogA0.jpg-large

Scherzer will make $41,095.89 per day for 14 straight years.  The 2013 US Census lists the median household income for American families at just over $53,000 in year.

Scherzer is coming off a 2014 season in which he won 18 games: on the heels of winning his first AL Cy Young Award in 2013.  He inked a contract on Wednesday with a value that eclipses the free agent contracts of Justin Verlander, CC Sabathia and Zach Greinke.  Each pitcher also had one Cy Young award at the time of their large free agent contracts, though none of them have won one since.

The Nationals will pay Scherzer an MLB-record $105 million after his playing contract.  Half of the teams in baseball last year had payrolls of less than $105 million and two thirds of the teams in baseball didn’t pay a player $15 or more last season: Schezer will make that amount for seven straight years after his contract.

The Nationals now boast the best pitching rotation in baseball, and are hoping this big deferred financial risk pays off in the short term.

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