Diamondbacks: Market Dynamics V: Performance-Based Incentives Paying Players Like Salesmen

Get ready Diamondbacks fans, it’s Market Dynamics Week here at Venom Strikes, where we explore financial elements shaping the current baseball conversation. Frontloading, opt-out clauses, performance-based incentives, swellopts – understanding the function of these contract elements is essential to tracking the ever-changing financial relationship between players and owners – a bedrock talking point in the contemporary baseball world. Time to see what the hubbub is about with today’s topic: performance-based incentives.

Rather than look only at the deals the Diamondbacks are or are not signing, we are defining some of the terms being thrown around in free agency this winter in an effort to better understand how baseball’s free market behaves. Today, we look at performance-based incentives, what are they, and are they turning baseball into a commission economy?

Performance-based Incentives

As teams resist giving out large guarantees, players are countering with “incentive-laden” deals. Adam Wainwright‘s current deal is a perfect example of this.

The Cardinals have laid out essentially every possible circumstance for his 2019 season and paid him accordingly. Whether he starts or ends up in the bullpen, Wainwright will be rewarded for staying on the field. These incentives ensure Wainwright fair compensation and protects the team against injury.

Performance-based incentive-laden contracts are an attempt to grant fair compensation for services rendered. In a vacuum, this makes a ton of sense. Put together with these other contact elements – frontloading, swellopts, incentive deals – and it begins to feel like the Cardinals are paying Wainwright on commission.

This, indeed, would be a bizarre development. Paying players like salesmen. That is, after all, one of the many hats that a professional baseball players wears. What’s bizarre is that this doesn’t feel like a CBA-orchestrated development. Players are, generally speaking, disoriented by the direction the market has turned. Owners, meanwhile, are so wary of long-term spending that the only certainty worth paying for is the current season’s performance.

Gotta give ownership and their front offices credit: they’re doing a stellar job of protecting themselves against an unexpected downturn in performance (or severe injury). And still, if a player making the league minimum breaks out, say, the way Max Muncy did last season – there’s not a reciprocal reward system.

It’s true that there are reward bonuses for certain achievements, milestones, or awards, but they tend to be paltry in the grand scheme of things – $25K for an All-Star appearance, $500K for a Cy Young, etc – and they tend to be contractually negotiated at a time of free agency or extension. Most players with “outburst” seasons like Muncy are, for obvious reasons, making the league minimum, pre-arb, and therefore lacking in any kind of compelling negotiating position.

Next: Market Dynamics IV: Swellopts

The Diamondbacks personnel decisions have taken a backseat to new market forces this winter. One of those forces is performance-based incentives, which are becoming more common as owners hedge against potential dead money and players search for ways to up their value.

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