Wednesday, January 15, 2014

San Francisco Giants Financial Planning

Breaking Down the Master Financial Plan of the San Francisco Giants
by The Will Candlestick

As we head into a very uncertain 2014 for the San Francisco Giants, one thing is clear. The Giants have a plan. It might not bring a 3rd championship in five years, or even another championship in the next five years, but it will keep the team competitive each and every year. Before I talk about the plan, let's 1st take a look back at where this plan came from.

1. The Aaron Rowand Rule

While many fans assume this should be named the Barry Zito rule for the contract he signed in 2007, but as Henry Schulman and Susan Slusser wrote then, the rationale to sign Zito was different.

"We view Zito as a franchise player, and we'll certainly need one when Bonds goes," said a Giants source at the time.

When they said 'Franchise Player,' what they meant was 'Star Power.'  They felt Zito would be the perfect replacement for Barry Bonds because of his familiarity to the fans coming from Oakland and his Cy Young worthy curveball that would play well at AT&T Park.

The Aaron Rowand rule is based off of the large oversized contract he signed in 2008.  Rowand was brought in for his "warrior spirit" and what he would bring to the locker room. The problem was that by signing him in free agency instead of through trade or the draft, he cost over $12 million a year for the next 5 years. And as we saw 4 years later, the Giants weren't willing to even let him last that long, waiving him in 2011.

That's the difference between the 2 bloated free agent contracts.  Zito's was talent based, which despite the results, is always a reason to sign someone to large sums of money.  Rowand's was for intangibles.  The same intangibles Juan Uribe and Marco Scutaro used to propel the team to titles in 2010 and 2012 respectively and for far less money.  Uribe wasn't even offered a major league contract in 2010 until after Spring Training and Scutaro was a mid-season trade. That is where you find intangibles. A player with talent, who is being overlooked and out to prove something.  When you give a player like that $60 million, they have nothing left to prove, and while Rowand worked tirelessly in the cages to be good, his intangibles weren't worth the contract.

So, as a result:

The First Rule of Giants Baseball is: You Do Not Offer 5+ Year Deals To Free Agents from Other Teams.

The Second Rule of Giants Baseball is: You Do Not....ok you get the reference.

2. The Matt Cain Rule.

The next step in the plan is to protect yourself from yourself. If you cannot sign other teams players to massive contracts, the massive contracts should go to the players you already trust. The players whose medical histories you've written yourself and whose coaches know all of their flaws and all of their quirks. Bottom line: If you are going to win or lose, you are going to know who you are going to win or lose with.

'Growing' your Own:
Matt Cain, Tim Lincecum, Madison Bumgarner, Buster Posey and Pablo Sandoval are all home grown products that have been labeled as part of the present and future of the organization. All were given their 1st extension with the Giants well before their 4th year of arbitration, or in other words, 6th year in the Major Leagues. Matt Cain signed his extension in 2012, just before winning his 2nd World Series with the club, as did Buster Posey, signing his extension just before the start of the 2013 season.  This sets a baseline for all future contracts.

Before, agents for Cain and Lincecum could say to the organization: "If Zito is making $20 million a year, my client needs to be making at least $21 million"

Now, with Cain making the most money and Bumgarner locked in for 5 years, agents are limited in their leverage because the two best pitchers for the Giants aren't going anywhere and the Giants aren't looking for an 'Ace of the Staff.'

3. The Hunter Pence Rule
 

Earning your Money:
Angel Pagan, Marco Scutaro, Hunter Pence, Javier Lopez, Jeremy Affeldt, Ryan Vogelsong and Santiago Casilla, are all guys who have earned their 1st free agent contracts they signed with the Giants by playing with the Giants.  Because of what they did in a Giants uniform, they were given high priced contracts.



4. The Brandon Belt Effect.

Now let's fast forward to the end of the 2014 season. The Giants have just won their 3rd World Series...(ok sorry, just got excited.)

What the Giants have done is set themselves up for every future meeting with every future agency that comes into AT&T Park. Cain and Posey are your faces of the franchise. Bumgarner is locked in. Pence is now set up long term. Just with those Mt. Rushmore type pieces alone, you have leverage on every future starting pitcher and power bat. You can tell an agent that if their client wants to get more money than they are worth, they will need to find another club willing to pay it. 

So, if you are Brandon Belt, and you have struggled to find consistency at the plate throughout your 1st 2+ seasons and you see the way this organization is spending their money, here is what you can see.

A. The Giants have no issues at all spending money
B. The Giants are extremely reluctant to spend big money on a player they've never coached before.
C. The Giants will work with players who are inconsistent if they believe they are a part of their core.
D. 2013 proved that Brandon Belt is now officially a part of that core.
E. Core players don't leave.

So, whether it's Tim Lincecum re-signing for two years, despite 2 full seasons of ups and downs (more downs than ups)

Or, whether it's Sandoval or Belt not being traded the second they become tradeable/expendable (The Billy Beane Model)

If you are Sandoval, Belt, Sergio Romo or Brandon Crawford, you can see the light at the end of your contract, and you see that your next Major League contract will be with the San Francisco Giants.

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