Just over four years ago the Royals and Salvador Perez agreed to a contract extension after just 50 days of major league service time. That contract guaranteed Perez $7MM over his first 5 full seasons and included 3 cheap team options totaling $16.5MM. Assuming those options were picked up that brings his initial contract to a total of eight years and $23.5MM.
Today the Royals have reached a new agreement with Perez that will cover his 2017 through 2021 seasons, activating his remaining team options and covering an additional two free agent seasons for $52.5MM.
This adds two years and $36MM to his guaranteed contract, and sets a bad precedent for baseball, particularly among small-market teams, even if those small-market teams are following success with $138 million payrolls.
Perez's first contract
In his initial contract with the Royals he was paid $3.25MM that covered his three major league minimum seasons and guaranteed his first two arbitration seasons at $1.75MM and $2MM. His last arbitration season comes in at a $3.75MM team option. His first two eligible free agent seasons are also under team control through options valued at $5MM and $6MM.
His performance as one of the most durable defenders of the catching position has led to the team options being picked up as a mere formality. The last three seasons he has caught in 137 or more games. Offensively he has been roughly a league average hitter, but with superior defense that leads to him having been worth 11.9 fWAR over his first four full seasons in the majors.
Perez is being underpaid compared to his performance, but this is the risk a player incurs when you sign a deal that guarantees you millions of dollars before ever exhibiting major league performance.
You can end up looking like a tremendous bargain, but you also obtain financial security for your family that can last a life time.
Perez's new contract
The new contract as being reported has the Royals picking up the team options and Perez adding two additional free agent seasons for a total of $52.5MM. $16.5 of the guarantee comes from picking up his team options which essentially makes this a two year $36MM contract. Perez could be worth that on the free agent market, but we are currently four years out from when that decision had to be made.
The contract structure also will be worse than just tacking on a 2/$36MM extension onto the end of the current deal. Perez will receive a $6MM signing bonus and $3MM, $7.5MM and $10MM on the years covered by his previous team options. He will be paid $13MM in each of the two years of added control.
Catchers have a history of injuries adding up over time. If the Royals continue to ride him hard this deal could be risky when we're looking four years in the future. They might have made their player happy, but the cost in risk is pretty substantial.
Perez is coming off two seasons that have seen him decline on the offensive side of the ball putting up 87 and 92 wRC+. His first two full seasons he put up about average wRC+s of 114 and 106.
A 90 wRC+ is a fine bat out of your great defensive catcher, but if the innings of wear and tear catch up to him this contract could end just as bad as his first contract was good.
Affect on the Rays
The Rays have been aggressive in signing young players to long term contracts as they have done so with Carl Crawford, Ben Zobrist, Evan Longoria, James Shields, Wade Davis, Matt Moore, and Chris Archer.
If this sets a precedent of teams being pressured to make good on contracts that have ended up too much in the team's favor, then the Rays will begin to rack up disgruntled employees.
The Rays can't afford to pay their players more just because they are underpaid relatively to what they could be earning on the free agent market. Neither should the Rays be rewarding players by picking up options before that is necessary.
Imagine if the Rays had been forced into a situation where they needed to activate Carl Crawford's player options in 2009 and 2010 and tack on higher salary years with signing bonuses because it had become expected for high-performing athletes.
The Rays already have financial disadvantages that they have to overcome, and extending athletes on favorable contracts has been one route they have taken in order to try to keep good players in a Rays uniform longer than they would otherwise have been able to.
I doubt the Rays would follow suit, but in a hypothetical situation in which Archer was unhappy with his contract and wanted to get paid more, such a precedent by another small market team could become very problematic.