Miguel Cabrera is reportedly close to signing an eight-year $152.3 million deal. As hard as this is to believe, given the contract size, this is an amazing deal for Dave Dombrowski and the Detroit Tigers. I have Cabrera valued at $268 million over this time period, and this accounts for his first two years of the deal being restrained by arbitration.
Cabrera will be only 25 in 2008 and he has posted OPS+ in the 150s for the past three years. Eight years is a long time to be tied down to a contract, and during that time league revenues and salaries will grow. At growth rate of ten percent—the historical growth rate of major league salaries—salaries will double in seven years. By locking in now to a modest $19 million per season ($21 million per season after his arbitration-eligible years) the Tigers are protecting themselves against future salary growth.
And at the same time, I can understand why Cabrera would do this deal, because an injury could make it all go away. If had to choose between a guaranteed $152 million or a probabilistic $268 million to do what I am doing now for the next eight years, the former wouldn’t be a tough choice. For players, their eggs are in one basket. Teams can diversify their risks across many players—some will underperform their contracts, others will overperform—which is why it is smart for teams to make this type of deal. Detroit fans should be happy that they will have one of the best hitters in the game for a long time.