According to Michael S. Schmidt of the New York Times Bats Blog, the Yankees and Derek Jeter are close to a three-year agreement that will include a “highly unusual” and “creative hybrid-type option”. In his post, Schmidt includes the words “for a fourth year”, but doesn’t attribute them to his source. So, maybe the creative option doesn’t have anything to do with an extension of the contract? Either way, below are three guesses at what the deal’s creative addendum might be.
1) A mutual option based on performance in the first three years
Assuming the two sides could agree to a formula, the value Jeter provided during the contract could be evaluated against the money paid to him. In other words, if the formula determined Jeter provided $40 million in value, it would be subtracted from the rumored $52 million contract total. Then, that $12 million difference would be used to fund a fourth year, which might be predetermined at something like $25 million (the annual value of Jeter’s rumored first request). As a result of the math, the Yankees would then have the option of paying Jeter $13 million in 2014. If they declined the option, a percentage buyout could be included. Similarly, if Jeter outperformed his contract, the amount would be added to the same $25 million starting point, but with a higher percentage buyout included if the Yankees declined. In both cases, negotiated minimums and maximums could be determined. Also, the contract could include conditions under which Jeter would be able to opt out of the fourth year.
Highly Unusual? Yes. Creative? I’ll leave that for you to decide.
2) An option to buy part of the team upon retirement
As mentioned above, there is no confirmation that the “ creative option” involves a fourth year. So, why not offer Jeter the chance to become an owner?
Baseball rules prohibit active players from owning equity in a major league franchise, but what about a future invitation to buy a stake? If permissible, the “creative option” would give Jeter the right to acquire a specified interest in the team at pre-determined cost. Considering the exponential way the Yankees’ value has been increasing, such an option would be highly attractive to the business-minded Jeter, even if the eventual sale price is close to market value. From the Yankees’ perspective, having Jeter become a limited partner would not only provide some cash flow, but also ensure an even closer association with the team than might otherwise be expected (i.e., more than just throwing out first pitches and attending Old Timers Day).
3) A personal services contract upon retirement
Just in case option #2 is against major league rules, the Yankees could accomplish a similar end by transitioning Jeter to an “employee” when his playing days are over.
One of the arguments made by the Jeter camp is his “brand value” should be incorporated into the value of his new contract. The Yankees have argued that to build a winner, its focus must remain on the field. So, why not compromise and offer to compensate Jeter for the value he adds to the business side…but hold off on most of it until he is finished playing? Whether it’s a 10-year, 20-year or lifetime deal, the advantage of the personal services contract is it wouldn’t count as payroll and therefore not be calculated against the luxury tax. Also, if it includes work done for YES, the Yankees’ partners in the venture would share the cost.
Thankfully, the two sides have replaced the intrigue about whether a deal would get done with how it will be structured. The solutions mentioned above are probably too unusual to actually be considered, but who knows. Your guess (feel free to leave one in the comments section below) is as good as mine.