What Do Diamondbacks Incentive Bonus Clauses Teach Us ?
Yesterday we broke down the Diamondbacks 2023 payroll. While reviewing player salaries and trying to project what the 2023 payroll will be we are faced with the question of how to handle player incentive bonuses. When players sign free agent or extension contracts with teams there are often performance and milestone incentive bonuses included in the deals. Generally these are tied to some measure of playing time or health, or post season awards voting placement. A detailed look into the incentive clauses gives us a window into both the player and organization's thinking. The source for this information comes from Cots Baseball Contracts
Ketel Marte 5 years/$76M (2023-27), plus 2028 club option
Incentives: Marte's 2023-28 base salaries increase by $3M with a first through third finish in the prior season's MVP vote or by $2M with 4-7 finish in prior season MVP vote. Salaries also may increase based on performance bonuses based on plate appearances
Analysis: With an average annual of just over $15 million, Marte's contract is somewhat team friendly. He was an All Star in 2019 and an MVP finalist. But he's been plagued by hamstring injuries the last two years, so his contract extension came at somewhat of a discount. The bonuses tied to MVP voting finishes are significant, and if he is able to repeat his 2019 performance in any of the next five years then he'll receive $2-3 million on top of the average annual for each of those seasons. This should give Marte plenty of incentive to prepare and play hard to try to regain previous performance levels. The plate appearance information is not detailed. But clearly just being healthy and posting up more often, even without MVP performance is an important incentive for Marte as well
At the same time the team's exposure is limited somewhat as the risk of having a high dollar contract for an underperforming player is reduced.
Mark Melancon 2 years/$14M (2022-23), plus 2024 option.
Incentives: Performance bonuses: $100,000 each for 30, 35, 40, 45, 50 games. $250,000 each for 55, 60 games
Analysis: Melancon was guaranteed $6M for each of 2022 and 2023, with a $5M option for 2024 or a $2M buyout. With health a concerns in previous seasons the team tied an extra $1 million in possible incentives to games pitched. Despite having a poor season in 2022, (3-10, 4.66 ERA, 18 Saves) Melancon was healthy and pitched in 62 games. Thus he hit all the incentive bonus thresholds earning the extra $1M. The team has more bullpen options than they had a year ago and no designated closer heading into spring training. Melancon will need to pitch much better in 2023 to earn the incentives again as the team will have far less patience if there is a repeat of 2022 performance.
Zach Davies 1 year/$4.7M (2023), plus 2024 option
Incentives: Davies option for 2024 is for $5.5M. The buy out is $300K, thus he is guaranteed at least $5M in 2023. The option buyout increases by by $200K if Davies makes at least 16 starts.
In addition he has performance bonuses that could potentially add up to $3.25 million: $400,000 for 10 games started. $550,000 each for 15, 20 GS. $650,000 for 25 GS. $450,000 for 27 GS. $650,000 for 30 GS
Analysis: Davies missed a month last year with a shoulder injury, the second time he's had that injury. Nonetheless he still made 27 starts. Should he do that again, he stands to increase his salary from $4.7M to $7.95M. That would put him more on par with other innings eater type salaries that were signed this past off season. Credit to Davies' agent that he managed to tie the incentives to starts instead of innings pitched, as Davies typically has a low IP/GS ratio.
Evan Longoria 1 year/ $4M
Incentives: Longoria can earn up to a maximum of $1M in roster bonuses as follows: $150,000 for 90 days on active roster. $250,000 each for 120, 150 days. $175,000 each for 160, 165 days
Analysis: Longoria made four trips to the injured list last year totaling 65 days, (Finger, Oblique, Hamstring & Thumb). He missed 83 days with shoulder and finger injuries in 2021 as well. In fact he's made at least one trip to the IL in every season since 2018. He will be 37 this year and with his injury history he will be hard pressed to earn the entire $1M incentives possible.
Miguel Castro 1 year/$3.5M (2023), plus 2024 option
Incentives: The 2024 option is for $5M and becomes guaranteed if he appears in 60 games AND passes a physical. In addition he has two pathways to earn incentives, one is through games pitched and the other is through games finished. A high total of games finished would indicate he has won the closer's role.
Games pitched: $50,000 each 25, 30, 35 games. $75,000 each 40, 45 games. $100,000 each 50, 55 games. $200,000 each 60, 65 games (Total possible $900K)
Games finished: $150,000 each for 30, 35 GF. $200,000 for 40 GF. $250,000 for 45 GF. $300,000 for 50 GF. $350,000 each for 55, 60 GF (Total possible $1,750M)
Analysis: This structure clearly indicates Castro's desire to win the closer's role and the team's willingness to compensate him if he does. Last year Emmanuel Clase of the Cleveland Guardians led all of MLB with 67 games finished. No one else had over 60 and just five other pitchers exceeded 50 games finished.
Andrew Chafin. 1 year, $5.5M (2023) Plus 2024 option
Chafin's option for 2024 is 7.25 million and carries a $750K buyout. Thus he is guaranteed at least $6.25M in 2023.
Incentives: $250k each for 55, 60, 65 and 70 appearances, Total possible $1M
Analysis: Chafin has been durable for most of his career. In addition left hand relievers often have more games than innings pitched. Therefore the threshold for the first incentive is relatively high at 55 games. (Compared to Melancon and Castro for example).
Summary:
If all of these players are able to max out all of their incentives the team would probably be very happy with that result and gladly pay them. The team has cost certainty but can flex up as the higher performance levels and better health help create more wins. The players have real incentive worth hundreds of thousands and even millions of dollars to maximize their performances. Structure properly these types of arrangements are the definition of a win-win.
