I have Ellis valued at around $35 million for the next two seasons. $11 million is quite a discount, and I have to wonder what is going on here. Could my model be wrong? That’s certainly a possibility, but you don’t even need a fancy model too see that he’s worth a good bit more than $5.5 a year to his team. Just check out his previous contract with the A’s.
Prior to the 2006 season, Ellis signed a three-year that paid him $2.25 million, $3.5 million, and $5 million. At this time, Ellis was a first-year arbitration eligible player with the bargaining strength slated heavily in favor of the A’s. He agreed to a long-run contract that would void his opportunity to seek arbitration raises to potentially higher salaries in return for a guaranteed salary. Ellis missed the entire 2004 season with an injury, so I suspect he was quite aware of the risk-reward tradeoff. And with that contract heavily affected by the A’s superior negotiating position, the A’s agreed to pay him the exact salary in 2008 that it will pay him in his first post-free-agency contract in 2009: $5 million. $5 million is a lot of money, but it’s a lot less than he could have earned on the free agent market. Some people may laud Ellis for not just caring about money; but, the money he’s not collecting isn’t going into third-world hunger relief, it’s going to a wealthy American businessman.
And to top it all off, Ellis agreed to a club option for 2011 at $6 million. If his play drops off after two years, the A’s can simply cut him loose. If he plays the same as he has or he improves, then he cannot test his value on the free agent market until he is 35.
Ellis must really like playing in Oakland or his shoulder injury is quite serious. At double the wage he accepted the A’s would still be getting a bargain. The contract is so low that the A’s almost have to be suspicious that he might pull an Al Czervik from Caddyshack (.wav).
Addendum: As Tim points out in the comments, I am being a bit too harsh on Ellis. My point is that if this is a hometown discount, this is one hell of a discount. It shouldn’t necessarily follow that this was a discount; instead, a more plausible explanation is that his shoulder is in really bad shape.