After missing out on the Shohei Ohtani and Juan Soto sweepstakes in 2023 and 2024, the Toronto Blue Jays and first baseman Vladimir Guerrero Jr. have reportedly agreed to a record-breaking 14-year US$500 million extension to his contract with the team.
Author
- Ryan Clutterbuck
Assistant Professor in Sport Management, Brock University
The deal will likely prove to be a win-win for both sides.
For the Blue Jays, the win, as articulated by current Blue Jays pitcher Max Scherzer, means "you just solidified your organization, and you know who's playing first for the next 14 years."
One of Guerrero Jr.'s wins (that doesn't include a dollar sign), according to teammate Bo Bichette, is that he gets to remain at a team he wants to keep playing for .
In terms of lessons learned, this contract offers future sport managers and negotiators from across disciplines several reminders to reflect on and incorporate into future deals.
Dealing with time pressures
Time pressure arises in auctions or negotiations when people feel like they are running out of time.
It can lead to people making unwise decisions, such as the winner's curse , where someone ends up overpaying for something because they overestimated its value. However, in negotiations, there are real time pressures and imagined time pressures, and recognizing each is important.
For example, we can imagine an alternate universe in which the Blue Jays accepted and then acted upon Guerrero Jr.'s Feb. 18 deadline to negotiate a contract extension.
In that universe, there's no win-win potential. Instead, negotiations between the Blue Jays and Guerrero Jr. end and the conversation turns to possible trading partners and timelines to secure the greatest possible return.
The Blue Jays recognized Guerrero Jr.'s Feb. 18 deadline represented an imagined rather than a real time pressure. Faced with an imagined time pressure, the Blue Jays executed a clever act of negotiation jiu-jitsu.
Over a month after Guerrero Jr.'s Feb. 18 deadline had passed, Blue Jays President Mark Shapiro said: "I think we're going to sign him. I think we're going to extend him. The reason I feel that way is because we have such a clear alignment on the desired outcome."
Whereas other, perhaps less experienced negotiators may have been tempted to meet Guerrero Jr.'s demands with reciprocal force, for example, by issuing their own counter-ultimatum (as in: take it or leave it!), Shapiro simply ignored the demand and reinforced the team's desire to make Guerrero Jr. a Blue Jay for life.
Even experienced negotiators can fall into repetitive action-reaction cycles in which every demand, ask and ultimatum is met with equal or increased resistance from the other side. Of course, in every negotiation, either side will have to stand up for their interests and push back at times. But sometimes it can be more useful to simply step aside than it is to push back.
Time value of money
There were also financial issues that had to be resolved via negotiation. Notable, as well, is the time-value-of-money concept that entered into the sport lexicon with hitter Shohei Ohtani's uniquely structured contract with the Los Angeles Dodgers (US$700 million over 10 years with US$680 million deferred until 2034 ). This may have been a major factor for Guerrero Jr. too.
To understand how the time-value-of-money concept can impact negotiations, it may be helpful to reflect on how far $50 used to go 10 years ago and far it does today. Just as $50 in 2015 was more valuable then than it is today, the same will be true for hundreds of millions of dollars.
Much has been made of Guerrero Jr.'s reported contact and its compensation structure that, similar to outfielder Juan Soto's deal with the New York Mets, does not include such team/ownership-friendly deferrals.
Ohtani may be more comfortable and uniquely positioned, by virtue of his lucrative off-the-field endorsements in North America and Japan, to defer a large chunk of his US$700 million deal with the LA Dodgers. However, the message from Soto and Guerrero Jr.'s camps seems to have been: show me the present value.
What is interesting from a negotiation standpoint and worth reflecting on here and for the future is how showing Guerrero Jr. the present-value-of-money facilitated the deal.
Despite challenges to securing a long-term win-win, that included an arbitration hearing in February 2024 , the application of time pressure by Guerrero Jr. a year later and a reported deadlock over $50 million in the late stages of the negotiation , the Blue Jays and Guerrero Jr. can now each claim victory. It's a classic win-win.
Ryan Clutterbuck does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
