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benihana's picture

 
 
I believe the major disconnect is the dogmatic approach that fans have been conditioned to accept regarding annual budgets.
There seems to be a prevailing idea that the budget is set in stone, be it at $93 million this year, or some other random number.  The idea continues that budget busting contracts won't be accepted, and somewhat cynically, that any savings in the budget this year will simply be pocketed by the owners.
Frankly, there is no "budget cap" in 2017, at least certainly not one in which we fans should be worried about some "anchor" weighing down, because we believe the front office lacks a basic conceptual understanding of economics.
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Assuming 5% growth in salaries (a number I find historically to be a very low estimate: http://www.cbssports.com/mlb/salaries/avgsalaries) the net present value of a salary paying 25 million for the next 6 years is $127 million.  The net present value of an annuity paying 20 million for the next  8 years is $129 million.
So you are talking about $2 million dollars in present day value, not even $5 million per year, $2 million - to gain 2 additional years of Fielder's service.
To assume that the front office doesn't understand that fact, is, in my opinion, laughably presumptive.
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(edited to add:)
We've somehow been conditioned to believe that the average annual value (AAV) of a contract is the number that gets set into the budget, and that the total AAVs counted up can't exceed some arbitrary budget number?  Count me on the side that is dismissive of that idea.  It's not how business is done.
However, where this works to the front office's advantage is in perception.  For instance $200 million dollars comes to mind, since it just happens to be how many fingers and toes we have times 10 million!  Sign up Fielder to 10 years, $200 million, with $3 million a year deferred for an additional 10 years.  Your present day value would be less, your annual commitment would be less, but the perception of two hundred million dollars would be greater.  Gotta love perception.
 
- Ben.
 
 

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