Mark your calendars, folks! Friday, March 29th, 2013 will probably go down as one of the more memorable days in contract history (not that anyone actually remembers the specific days when contracts are signed). Three different extensions were handed out today to three very different and very deserving players. The Diamondbacks locked up Paul "Goldy" Goldschmidt, the Tigers made Justin Verlander a 200 million dollar man, and Buster Posey doubled up on an old-ish record. Let's dive right in:
Paul Goldschmidt
Deal: 5 years/ $32 million, option for $14.5 million
This goes down as the least surprising deal of the day. It has been reported throughout the off season that extending Goldy was right at the top of the Diamondbacks' wish list. Goldschmidt is starting to emerge as one of the best young hitters in the game, and it's clear that the D-Backs hold the opinion that there is certainly room to improve. Whether you like fWAR or rWAR, it's probably safe to say the Goldy put up three wins in value last year. On the free agent market (remember, I use a 5.2 d/WAR model) this performance is worth ~$15.6 million AAV. In terms of extension talk (remember, the hole point of an extension is to use the lack of leverage against a player in negotiations to sign a deal for *less* than the free agent market would bear), this performance would probably be worth something along the lines of $12-$13 AAV (I'm not sold on any extension model yet, but I like the low-4's for now).
Now let's get to the projection section. Clearly, Goldschmidt does not lack power. With a swing conducive to power production (both heavy line drive numbers and home run numbers), I think it's also a bit safe to say that Goldschmidt should be a lock for some consistent offensive production. He got his strikeout rate well down from 2011 and kept it at 22%, which can be worked with. He also walks 10% of the time, and his ISO has been steadily over .200 over 764 PA in his young career. This basis suggests consistent development, so I'll go with a projection that looks like this (Goldy is also an adequate defender and is decent on the bases):
2014 (25): 4.5 WAR (extension starts in 2014)
2015 (26): 5.0 WAR
2016 (37): 5.3 WAR
2017 (28): 5.5 WAR
2018 (29): 5.3 WAR
2019 (30): 5.3 WAR (option year)
Again, I try to be favorable to players and give them the benefit of the doubt. Rapid development into his prime and a solid plateau through his prime years. This model suggests 30.9 wins in six years, which is about $132.87 million over those six years if we assume an extension ratio of 4.3 d/WAR. Now, here's something new I'm going to throw in...it's easy to look at $32 million vs. $132,87 million and say "well that's a no brainer for the D-Backs if they are right about his development." However, the $32 million number doesn't factor in what the player would have made without the contract. Goldschmidt was scheduled to start arbitration after the 2014 season, and he would have gotten a significant chunk of change. Just to take a guess (as arbitration numbers can be odd and variant), here's what his arbitration numbers may have looked like:
2014: 750k
2015: 4 million
2016: 7 million
2017: 11 million
2018 (FA): 20 million (I think it's safe to say that 20 million is pretty conservative for a 4.8 win player in 2018)
2019 (FA): 25 million (sweet goodness)
That total is about $67.75 million, which is considerably more than the deal the D-Backs gave Goldschmidt. The deal gives Goldy a guaranteed $32 million with a 2019 club option for 2019 that would be $14.5 million, bringing the total to 46.5 million over 6 years, or an AAV of 7.75 million (and remember, the deal doesn't cover 2013, where the D-Backs will be paying Goldschmidt scraps as a pre-arb player).
All in all, a fantastic get for the D-Backs, especially after reports that Goldy had turned them down earlier in the off season.
Justin Verlander
Deal: 5 years/$140 million (w/2020 option for $22 million)
This deal is a big one. When you add on the two years Verlander was already under contract, the hurler can reach a total of $202 million over the next 8 seasons, which makes him the first $200 million pitcher in history. All in all, I'm not concerned about the next two years' commitments as they were already guaranteed to happen. The deal adds $162 million in potential new money to his contract (still making him the highest paid pitcher in history). Using an extension model, this deal assumes Verlander produces 37.7 wins IF his option vests (and it does so if he finishes top 5 in Cy Young voting in 2019). The question is: can he get there? My answer is "probably" in this scenario. Why? Well, the deal starts with Verlander's age 32 season (aka, two years down the road in 2015). Here's a predictive model:
2015 (32): 6.4 WAR
2016 (33): 6.1 WAR
2017 (34): 5.8 WAR
2018 (35): 5.5 WAR
2019 (36): 4.8 WAR
2020 (37): 3.5 WAR
This model is pretty conservative, because it has to be (sorry, pitchers). While I favor the argument that he is a horse with strong mechanics and a strong body/work ethic, I also thought the same thing about Roy Halladay. Well, I think it's obvious that Roy Halladay hit a wall last year in his age 35 season. I understand that Verlander is strong, but 240+ innings is a ton for any pitcher these days. That's what concerns me the most. Anyway, this model still predicts Verlander to create 32.1 wins over the course of this added money. While not quite what the contract demands, there are other factors in play here. Firstly, other pitchers are breaking contract records left and right. By the time Verlander hit free agency in 2015, we probably would have seen the first $300 million dollar player (eyeing you, Clayton Kershaw), which means the going rate for Verlander on the open market would have been HUGE. This alone destroys the validity of the 4.3 d/WAR extension model, and it probably also throttles the 5.2 d/WAR model for free agency. Using the 5.2 d/WAR model, Verlander only has to produce 31.2 wins, which means that the Tigers still got Verlander for juuuuuuust under current market value (but as I said, that model will be destroyed at this pace).
Overall, the money in this deal is fair. Roy Halladay may have hit a wall at age 35, but he produced some of his greatest seasons in his early 30's. This gives me hope that Verlander can do the same, and the Tigers aren't locked into that 2020 option if Verlander does fall off. Considering the way the pitching market is developing, this is probably also a pretty strong contract. It was also probably wise to get this deal done now instead of waiting until after the Dodgers attack Kershaw.
Buster Posey
Deal: 8 years/$159 million (9 years/$167 million if you include 2013 salary) + 2022 option for $22 million
Oh boy, this one is huge. For reference, Carlos Gonzalez and the Rockies set the record for total dollars given to a player with less than three years of experience at $80 million back before the 2011 season. This deal almost DOUBLES that record! As a Super 2, Buster Posey is already in arbitration, with a scheduled 2013 salary of $8 million. Posey turned 26 two days ago, and he was scheduled for free agency in 2017. This contract covers those arbitration years and the first few years of his free agent eligibility, as well as giving him full no-trade rights. Unlike the other deals, the breakdown was reported with this one:
2013 (26): $8 million (already scheduled, not new to the deal)
2014 (27): $10.5 million
2015 (28): $16.5 million
2016 (29): $20 million
2017 (30): $21.4 million
2018 (31): $21.4 million
2019 (32): $21.4 million
2020 (33): $21.4 million
2021 (34): $21.4 million
2022 (35): $22 million (option, $3 million buyout)
As expected, this contract is a beautiful example of deferring money to later years. The deal is strikingly similar to Joe Mauer's extension from 2011, and it actually pays less money, even though it is over about the same age range that Mauer's deal is (28-35 for Mauer vs .27-35 for Posey). Granted, Posey was further from free agency than Mauer (and Mauer was far more established within the Majors), but the deal is still great. Using the 4.3 d/WAR extension model, the total over 9 years (if we count the extension) calls for Posey to create 38.8 wins in value. I really don't want to get into projection value for a catcher long-term, but if I had to, I'd go with something like this:
2013 (26): 6.0
2014 (27): 6.3
2015 (28): 6.0
2016 (29): 5.7
2017 (30): 5.5
2018 (31): 5.2
2019 (32): 4.8
2020 (33): 4.3
2021 (34): 4.0
2022 (35): 3.7
If you're wondering why the value numbers aren't being projected upward into Posey's prime, it's because I'm automatically assuming that he is going to get less and less time behind the plate as his career goes on. It's no secret that playing catcher requires a lot of stamina and durability, and with a contract this large, the Giants will want to limit risk as much as possible. Posey already was down to 114 games caught in 2012, and I don't anticipate that number going anywhere but south in the near future. The Twins have done the same thing with Joe Mauer, and I feel that both players will be treated the same way. Now, this all being said, that's 51.5 wins in value over 10 years, which is a solid 5.15 WAR/year clip. This kind of production mandates an average AAV of $22.145 million using the 4.3 d/WAR model, so it looks like the Giants just about nailed this one right on the head. Given the fact that Posey is sitting alone atop his position right now, this deal looks like a fantastic get along the lines of the deals given to Ryan Braun and Troy Tulowitzki.
All in all, this is a great contract. Let's just hope Scott Cousins isn't going to try to run him over in the near future.
Lasting Thought
We are seeing more of the same in these extensions. Arbitration is going to be dead as a process very soon, if it isn't already considered legally dead within MLB. Teams and players just don't want to deal with the process. It's also clear with the extensions given to Felix and Verlander that teams aren't about to play the free agency game with their top players any more. The new television contracts are bringing in a new element to free agency: more teams capable of paying out massive contracts. This is even bringing loaded owners like Mike Ilitch to lock up their players before they hit the market, even if the contracts are basically being handed out at projected current market value.
Down the road, there are two key players that will mean a lot to the future understanding of how teams will approach new deals: Clayton Kershaw and Robinson Cano. With he money the Dodgers have, it would not surprise me if Kershaw (25 years old) became the first $300 million man in baseball. A deal totaling 10 years and $300 million isn't out of the question, given that he's scheduled to make $11 million in 2013 as it is, and it's pretty much a given that the Dodgers won't let him get to the open market. With Cano, it seems he and Scott Boras are intent on making him the next big free agent signing in MLB. In the modern landscape, his status as a superstar at a thin position hitting the market at a reasonable age is incredibly rare. There is no doubt in my mind that Boras and his staff will use this as incredible leverage, and it's likely that there won't be a shortage of teams seeking Cano's services.
At the end of the day, the MLB landscape is changing, and it's changing quickly. Teams are countering the inflated revenues due to TV deals by simply not allowing their players to hit free agency in their primes (another example: the Cardinals extended Adam Wainwright for nearly $100 million this week). We'll have to see what the next CBA does about this, but for now: enjoy it. We are living in the golden age of professional baseball, IMO.
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