Sports Illustrated’s John Heyman reported yesterday that the Yankees and Robinson Cano reached an agreement on a long-term contract. Cano gets four guaranteed years for a total of $30 million – the deal is worth $28 million in salary, and contains two option years that are worth $2 million if not picked up. If the Yankees pick up the option for the fifth year of the contract, Robbie will get a $13 million salary in 2012.  If they pick up the second option in 2013, he will make approximately $15 million.

In order to fully understand this deal and what makes it a positive for the Yankees, we first need to examine the basic structure of how baseball players are paid. When a team calls a player up to the Majors they effectively control that player for six years, after which the player is eligible for free agency. The first three years of service time the player logs are basically at Major League minimum, with the player having no say over his salary – he takes what the team offers him. After he accumulates three years of service time he is eligible for salary arbitration – a process by which the player submits a salary request, the team submits what they are willing to pay, and then an arbitrator decides which figure is more appropriate (the arbitrator cannot split the difference or negotiate a different figure, he/she must choose one of the numbers submitted). If the player and the team can come to an agreement before the case is reviewed, the arbitration is cancelled.

In a handful of cases players are eligible for arbitration before they accrue three full years service time, a group known as Super Twos. The Super Twos are determined by finding all the players who have more than two years of service time, but less than three. The top 17% of these players (in terms of days of service time) are considered the Super Twos, and are eligible for arbitration a year earlier. Keep in mind, this doesn’t mean that they aren’t controlled for the same six years still, it just means that they get four years of arbitrations instead of only three. In the end this nets the player more money because they replace one year of ML minimum salary with an arbitration year. Cano hasn’t played three full years in the Majors yet, but because he was called up so early in the year his rookie season and then played two more full years after that, he was in the top 17 percent of players with two-plus years of service time, and was thus eligible for arbitration this offseason.

So the bottom line here is that Robinson Cano was controlled by the Yankees through 2011, regardless of what he wanted to do about it. He earned ML minimum until he was arbitration eligible, and even then his salary would only climb incrementally, as arbitrators do not use the free agent market as a barometer of what players should earn. On top of all that, none of the money is guaranteed. If Cano had gotten injured or his skills had fallen off the Yankees could elect not to pay him much or simply release (non-tender) him. To give you an idea of how a (star) player’s salary progresses while he’s still under control of his team you can look at most any all-star in the majors, in this case Derek Jeter:
 

Year	Salary
1996	$130,000
1997	$550,000
1998	$750,000
1999	$5,000,000
2000	$10,000,000
2001	$11,000,000

You can see that the first three years of his career are around ML minimum, and then once he reached arbitration in year four, he began to make good money. In Cano’s case, because he’s a Super Two and reaches arbitration in year three, his progression would have looked something like this:
 

Year	Salary
2006	$381,000
2007	$490,800
2008	$4,000,000
2009	$7,500,000
2010	$10,000,000
2011	$13,000,000

The figures for 2008 and beyond are estimates based upon arbitration cases historically, and make the assumption that Cano continues to be one of the best second basemen in the majors. Because the arbitration process is done on a year to year basis, if he has a bad year anywhere along the way his salary will reflect it the following season. If he has a career ending injury in 2008, the Yankees can simply release him and not take any monetary hit. As you can see, the present salary system greatly benefits the baseball owners when it comes to young players.

So now we come to Cano’s deal, which is essentially a four year, $30 million pact. Many people when seeing these numbers don’t consider the fact that it is the Yankees buying out his remaining arbitration years, and immediately assume that it’s a great deal because they’re “only paying him $7.5 million a year on average.” Well, considering what we’ve just discussed here, the Yankees were going to own his right for those four years anyway, they weren’t going to have to guarantee anything except the present year’s salary, and they could essentially dictate his salary for the most part. The approximation of Cano’s salary arc laid out above puts his next four years’ salary at roughly $34,500,000, and again, this assumes that he remains healthy and one of the best players at his position for all four years. A four year, $30 million contract is not nearly the bargain that it appears to be at first glance – the Yankees are buying out his arbitration years, this is not a free agency contract.

This brings us to the following question: If the Yankees are only going to save less than $5 million at best, why on earth would they guarantee four years that they already own? There are two potential answers:

By guaranteeing the player’s arbitration years, the team is hoping to get a noticeable discount on the total cost of those years. If a player stands to make around $30 million over his next four arbitration years, the team may try to offer him a three year deal for a guaranteed $23 million or so.

By guaranteeing the player’s arbitration years at what he would likely make, the team is hoping to extend the contract beyond the remaining time the player is under control and start buying out some of his free agency, too. If a player stands to make around $30 million over the next four arbitration years, the team may offer him a five year deal for a guaranteed $42 million. By doing this they’re locking in the $30 million over the remaining four arbitration years, and as a compensation for doing this, the player is allowing the team to “buy out” a year of his free agency for $12 million. Seeing how salaries have exploded again recently, locking in a player beyond their six years at a reasonable rate is an extremely valuable thing.

Since the Yankees can afford the luxury of paying slightly more for each arbitration year, saving a couple of million dollars isn’t worth taking the chance of guaranteeing three to four years that they already own. We can see that Cano is getting a very fair payout on his remaining four arbitration years, so it’s obvious that the Yankees aren’t trying to save on them. This brings us to the important part of the contract: two team option years - 2012 at $13 million, and 2013 at $15 million.

The beauty of the Cano contract is in the option years. In return for guaranteeing Cano what he was reasonably likely to make in the next four years, the Yankees obtained rights to not one, but [i]two[/i] of his free agency years. The fact that they gained these rights in the form of team options is incredible. It cannot be stressed enough that they did not have to guarantee any of the really big money. Most of the pre-arbitration, multi-year contracts being signed in recent years guarantee some, if not all, of the free agent years the team is given access to. It would have been reasonable to expect Cano’s contract to be five years, $41 million or six years, $56 million; this would have still been a great deal because the Yankees were buying some of Cano’s free agency at what is likely to be a heavily discounted rate. However, the team did that one better by gaining the rights to the two free agent years, but not having to guarantee them. Almost every other pre-arbitration contract you see (David Wright, Jose Reyes, Grady Sizemore, Justin Mourneau, etc.) guarantees at least one of the free agency years the team is granted access to. Cano gave the Yankees two years of his free agency, and they didn’t even have to commit to them right now.

In the end it is important to understand that there is a big difference between a contract signed in free agency and a contract signed in a player’s pre-arbitration or arbitration years. Non free agency contracts will always have lower total values than those signed on the open market. A four year, $30 million deal for Cano would be a dumb move for the Yankees to make without the option years, because they already held his rights at relatively cost-controlled rates for those years. However, when you factor in that the Yankee gain two years of Cano’s free agency at reasonable rates, and don’t even have to guarantee them, the deal becomes an excellent one.