The conventional wisdom is that the Cleveland Indians hold all of the leverage in their long-term contract talks with right-hander Corey Kluber, the reigning American League Cy Young Award winner.
The conventional wisdom is wrong.
Yes, Kluber turns 29 on April 10, and is still a year away from arbitration. Yes, his signing bonus out of the draft was $200,000, and his major-league income to this point is slightly more than $1 million. Yes, his advanced age and relatively low earnings make him a perfect candidate for an immediate extension — he would not want to risk going to year to year.
All of that, however, assumes that the only way for Kluber to secure long-term financial security is by signing with the Indians as quickly as possible. That may have been the case, oh, five years ago. It is not the case anymore.
The players union, frustrated by the number of pre-arbitration players who accept below-market extensions and sacrifice free-agent years, is encouraging players and their agents to explore other ways to achieve security, according to major-league sources. Such ways currently exist, and the number of alternatives is increasing, sources say.
One option for a player would be to buy a loss-of-value policy similar in concept to what Nationals right-hander Max Scherzer purchased for his final season with the Tigers.
Another option would be to sign with Fantex Brokerage Services, a company that allows fans to invest in stocks linked to the brands of professional athletes, and offers the athletes a lump sum in exchange for a stake in future income.
Several NFL players have signed with Fantex, including Chicago Bears wide receiver Alshon Jeffery, Buffalo Bills quarterback EJ Manuel and San Francisco 49ers tight end Vernon Davis.
While Fantex has yet to sign a baseball player, it has been in contact with a number of interested major leaguers and likely will make its first plunge into the market soon, sources say.
Kluber need not be a trailblazer — he could protect himself quite nicely if he merely purchased a loss-of-value policy that would protect him against injury in 2015.
Injury, after all, is his only real threat; as long as Kluber stays healthy, he is not likely to experience a dramatic regression in performance. And in time, players may be able to mitigate even that risk; according to one source, at least one other company is developing a loss-of-performance policy.
A loss-of-value policy is not necessarily foolproof; former USC football star Marqise Lee, who had such a policy on his draft status with Lloyd’s of London, recently sued the insurance company, saying his claim was denied after his draft position, and therefore value of his first contract, fell due to a knee injury suffered in college.
Scherzer never had to collect on his own policy, remaining healthy and finishing with a 3.15 ERA in 220-1/3 innings last season.
“Once you took the injury-risk factor out of it, and you can just go play baseball and not have to worry about anything . . . I was set,” said Scherzer, who, unlike Kluber, already had earned $29.55 million in his career.
Scherzer told Fox Sports earlier this spring that his policy cost $750,000, and that he would have received $40 million tax-free if he suffered any type of injury that prevented him from receiving an offer above the Tigers’ original $144 million proposal to him.
Kluber’s premium and potential payout would be significantly less — he has only two-plus years of major-league service, while Scherzer had five at the time he took out his policy. But the idea would be the same: Buy peace of mind, then seek an even bigger payout the following year.
Scherzer, 30, went on to make a huge score in free agency, negotiating a seven-year, $210 million contract with the Nationals. Kluber is at a lower level of service, but undoubtedly could negotiate a more lucrative extension next winter as a first-time arbitration-eligible player.
The five-year, $35 million extension that the Giants awarded left-hander Madison Bumgarner in 2012 serves as a baseline for Kluber. Given three years of inflation, not to mention his Cy Young Award, Kluber almost certainly would command a higher number. But it’s unlikely that in a five-year structure, his guarantee would exceed $40 million.
Keep in mind: Kluber’s one free-agent year in such a deal would come when he was 33, and at that age the Indians would want to pay him at less than the going rate. Club options, which typically are standard in such deals, could increase his potential payout. But again, those years would be discounted.
If Kluber waits? Different story.
Both Justin Verlander and Felix Hernandez signed big contracts in 2010 when they became arbitration-eligible; Verlander a five-year, $80 million deal, Hernandez five years for $78 million. Kluber almost certainly would not reach that level, given his age. But with another above-average season, he likely would clear $60 million — a potential increase of about $20 million from what he would get today.
So sometime soon, Kluber will face a decision:
● Sign long-term with the Indians, assuring immediate security for his wife and two daughters, but lose the chance for an even bigger payday one year later.
● Purchase a loss-of-value policy (he could borrow from a bank to pay the premium, and pay only the interest out of pocket) but forfeit an immediate life-changing guarantee.
It is not an easy choice, not for a pitcher who was inconsistent in the minors and did not break out in the majors until the second half of 2013. But it is a choice — a choice that swings leverage back to Kluber, particularly if he trusts in his ability.
The negotiating game in baseball is not unlike the actual game — teams develop strategies, and opponents must adjust. For years, pre-arbitration players have sold themselves short by accepting below-market extensions. Kluber could start to reverse the trend.