The New York Yankees gave up key players in order to acquire Juan Soto in a trade with the San Diego Padres. The Yankees gambled by giving up key pitching prospects, which makes it important that they make every effort to extend Soto long-term. 

Resigning Soto will go a long way in determining whether the trade was worth it or not. If Soto is re-signed, the Yankees will have acquired a 25-year-old superstar who can be a cornerstone of the franchise for the next decade. If they don't, they will have traded away multiple starting pitchers and prospects for a one-year rental.

Now that Shohei Ohtani signed his groundbreaking deal with the Los Angeles Dodgers, the market has been set and the fallout can begin, starting with new deals for current free agents and extension negotiations for future free agents. Juan Soto is arguably the most prominent extension candidate, and now that Ohtani has signed we can start to discuss the type of salary and contract length that Soto may command.

The impact of Shohei Ohtani’s free agency

Shohei Ohtani‘s free agency was one of the most anticipated events in recent sports history. Now that Ohtani‘s deal is complete, the rest of the free-agent market will begin to move and progress can be made on future deals as well. Players in the 2023 free agency class and future extension candidates also wanted to see what Ohtani‘s market would be, as it could give them leverage in negotiations.

That may not have worked out exactly as expected. Because Ohtani signed such a unique contract with a significant amount of deferred money, something that many players are not willing to do, Ohtani‘s contract may not play as big a role in negotiations as previously anticipated. Ohtani‘s contract can still serve as a general guideline, though.

Juan Soto’s offensive profile should age well with Yankees

Soto has an offensive style of play that should age well. Because he doesn’t rely on athleticism, physical decline won’t impact him as harshly as it does other players. His generational batting eye will likely be the last aspect of his game to decline as he ages. Although he'll lose some power and bat speed, his overall contact skills should remain solid to above-average, if not elite. These aspects of his game, along with his young age, combine to suggest that a long-term contract will likely age better than most other contracts that are given for a decade or longer. The short porch in right field at Yankee Stadium could help Soto maintain power into the twilight of his career.

Given that Soto is only 25 years old and has an offensive game that should age smoothly, it is worth it for the Yankees to add extra years in order to reach a contract that reflects Soto’s value while keeping the AAV reasonable. Also, because contracts typically increase in value every year and the salary cap also rises, this deal will look much better in the future than it will look immediately after it is signed.

Yankees' perfect contract extension offer for Juan Soto

Let’s start by setting some preliminary guidelines. It is unlikely that Soto will accept any extension short of $500 million in total value. Scott Boras will likely believe that he can get Soto $600 million on the open market.

Soto is going to want long-term guarantees, and the Yankees should grant that. The longer the terms of the contract, the better for the Yankees, as it will reduce the average annual value and the luxury tax hit. Because Soto is so young, a deal running for 12 or 13 years or even 15 years will not be severely detrimental to the team. The final few years may still be difficult, but they will not be a total sunk cost as Soto's bat should still be effective, and he likely will continue to draw walks at an elite level.

The Yankees should offer Soto a 15-year deal with an AAV of $39 million for a total value of $585 million. This provides long-term security for Soto, offers him the most lucrative contract in MLB history in terms of real money without deferrals, and keeps the AAV manageable for the team.

Good faith negotiations are essential for both parties

If the Yankees are going to offer an extension, it is important that they make a good faith offer right from the beginning. Attempting to lowball Soto to come across as disrespectful and poison the relationship between the team and the player. Not only could this hurt the chances of agreeing to an extension, but it could also lead Soto to want to leave in free agency regardless of what the Yankees offer.

Alternative extension options the Yankees could offer

That's not to say the Yankees should immediately come out with their best offer. They should make a reasonable offer for both sides, along the parameters of the deal mentioned above, listen to what Juan Soto's camp has to say, and negotiate if necessary.

First, the team needs to decide how badly they want to keep Soto and what they are willing to go to. Next, they need to decide what the highest dollar amount is for the total value of the contract and for the annual value that they are comfortable going to. They can use that number to make a realistic offer for an extension that is still a little below their total cutoff number.

A reasonable estimate for the highest number of the Yankees could feel comfortable going to would be $650 million total, although there is room to go higher. A 15-year deal would be reasonable for both sides. It would give Soto a security guarantee for essentially the rest of his career, and at an AAV of $43 million it likely wouldn't be too detrimental to the Yankees from a roster-building perspective. Alternatively, the team could offer 17 years at the $39 million AAV mark, reducing the luxury tax hit while increasing Soto's total value to $675 million.

The problem with that offer is the closer you get to $700 million, the more likely Soto's camp will want to make him the first “true” $700 million player. The Yankees could keep the 17-year offer and reach that milestone by offering $41 million per year, for a total value of $705 million. That is the highest Hal Steinbrenner and Cashman should offer in extension talks, and it is a deal that would likely be quickly accepted by Soto’s camp, allowing the Dominican superstar to retire as a Yankee.