Long-term deals for young players rise rapidly
Bumgarner the latest to sign multiyear contract early in career
John Hart remembers one of the first phone calls he answered after announcing the first set of unprecedented long-term contract extensions for several young Cleveland Indians. It was from Fred Claire, his good friend and the Dodgers' general manager at the time.
"John, what are you doing?" an incredulous Claire asked. "That's why we have the system. We can evaluate the players, then prior to free agency, we can sign them."
"You might be able to do that in L.A.," responded Hart, now a studio analyst with MLB Network and the Rangers' senior advisor of baseball operations. "But we can't do it in Cleveland."
Hart's diversion from the norm helped bring a great deal of success to Cleveland, as it kept a number of talented young players under club control with greater cost certainty. It was extremely unconventional at the time, but the philosophy of signing pre-arbitration-eligible players to long-term contracts has gained traction.
Since the end of last season, there have been 12 long-term contract extensions signed by pre-arbitration-eligible players, some of them relatively unproven but mostly potential franchise cornerstones. There were five extensions similar to this in the previous offseason and seven a year before that.
|Player||Age||Yrs.||Guarantee||Last option yr.|
|Carlos Santana, CLE||26||5||$21M||2017|
|Alcides Escobar, KC||25||4||$10.5M||2017|
|Salvador Perez, KC||21||5||$7M||2019|
|Jonathan Lucroy, MIL||25||5||$11M||2017|
|Jon Niese, NYM||25||5||$25M||2018|
|Andrew McCutchen, PIT||25||6||$51.5M||2018|
|Cory Luebke, SD||27||4||$12M||2017|
|Cameron Maybin, SD||25||5||$25M||2017|
|Madison Bumgarner, SF||22||5||$35M||2019|
|Matt Moore, TB||22||5||$14M||2019|
|Derek Holland, TEX||25||5||$28M||2018|
|Sergio Santos, TOR||28||3||$8.25M||2017|
Those lower-payroll clubs can't afford to make a huge free-agent investment then see it fail, but they can realistically risk a $10 million-$13 million mistake.
Some higher-payroll teams have gotten in on the action as well. The Mets recently signed pitcher Jon Niese. The Rangers did the same with pitcher Derek Holland. The Blue Jays locked up reliever Sergio Santos after acquiring him this past offseason. The Brewers signed catcher Jonathan Lucroy. And the Giants agreed Monday to a long-term extension with lefty Madison Bumgarner.
There are a few common themes found through all the deals. Five went to starting pitchers, one to a late-inning reliever and the rest went to up-the-middle position players.
The contracts are laden with club options. While the players make more money early on in their careers under these deals than they would otherwise, teams can benefit from those options by keeping a potential superstar on board into his free-agent years at a much more reasonable price.
Take Bumgarner or Moore, for example. Bumgarner's 2017-18 options are worth $12 million each, potentially more with escalator clauses. Moore's 2019 option is for $10 million. Both young lefties will be in the prime of their careers, and both are former top prospects who could anchor rotations and potentially compete for Cy Young Awards.
On the open market at that point, they could command deals closer to those of CC Sabathia ($24.4 million average annual value) or Cliff Lee ($24 million AAV). So teams will shell out more up front than the smaller salaries they'd receive before or during arbitration, then potentially get superstar value on the field for something closer to a role-player investment.
On top of that, the club options allow a team to cut those players loose if they don't pan out. But that doesn't mean there are no risks taken on by the clubs. Injuries, off-the-field problems or simple ineffectiveness could come back to make the contracts look like mistakes.
When Moore went to Rays pitcher James Shields for advice, he told his teammate one of the best things about signing a multiyear deal was not having to worry about pitching for a contract or being distracted by negotiations.
"It comes down to what's best for you and your family," Bumgarner said Monday after signing a five-year deal for $35 million plus two option years. "I felt this was the right decision for us to make. I'm excited to be here and not have to worry about that [contractual] stuff now, just go out there and pitch. That's all I need to focus on. It kind of took a weight off my shoulders."
Credit the Rays for bringing the idea back into the spotlight. Much like Cleveland in the 1990s, Tampa Bay simply doesn't have the resources to compete financially with the Yankees and Red Sox of the world. So, executive vice president of baseball operations Andrew Friedman and his staff got creative.
About a week after Evan Longoria was promoted from Triple-A in 2008, the Rays locked up the future All-Star third baseman to a nine-year contract. It's now viewed as the most club-friendly deal in baseball, especially considering Longoria's offensive production and Gold Glove defense.
The Rays reached similar agreements with other players, most recently Moore. Given the lefty's pedigree, Tampa Bay likely guaranteed that it will own the most club-friendly contract in baseball from 2008 (Longoria) to 2019 (Moore's last option year).
"There's a lot of risk involved," Friedman acknowledged after Moore's deal was completed in December. "But for us, there's three really important criteria as we go through these types of deals. One being ability, two being work ethic and three being character. He scores really highly on all three fronts.
Moore set a record with the largest contract for anyone with fewer than two years of service time -- a mark Bumgarner surpassed on Monday. Moore went through a long process of evaluating his risk/reward scenarios with Matt Sosnick and Paul Cobbe, his representatives.
They ran through eight different simulations, trying to get a feel for how much Moore could earn over the life of the contract in various scenarios, including an injury, multiple injuries, how many times he'd throw 200 innings in a season and so on.
Moore even brought in his personal financial advisor to look at the simulations. When he finished one, he'd ask for more. He asked questions about how much he'd make after taxes, how much he could put away -- even something as specific as how much he'd be saving at specific interest rates.
"Matt was as involved in this deal as any player's ever been in any deal we've ever done. He was probably twice as involved," Sosnick said. "He wanted to make a choice based on the fact that it was a good business choice -- not a good business choice for us, but a good business choice for him personally."
So, what would they say to someone who believes Moore cut his potential earning power by agreeing to a long-term deal so early?
"You owe it to your client to advocate in your client's best interest," Sosnick said. "If we had walked away [from the deal] and Matt had gotten hurt, I would have thought about it for the next 20 years."
"There was a lot of personal decision-making that I had to basically make in my mind," Moore said after signing the deal. "Was it worth it? I feel like the risk is being shared on both ends, and I'm happy where we are."
But not every agent shares that mentality when entering into such negotiations, and not every player is willing to listen to that kind of offer when it's proposed to them. They believe they can make more in arbitration, and they're often right.
One of the reasons Hart came up with the idea in the first place, though, was his aversion to going through arbitration. He didn't believe the process of fighting over relatively minor differences in numbers worked toward his goal for the club, which was to rebuild the market and "reestablish the love affair between the fans and their baseball team" by keeping the Indians' young nucleus intact.
It ended up working for Cleveland, and the same idea helped turn Tampa Bay into a perennial contender. More and more, front offices are adopting it to help build their clubs.
So, why doesn't every club try to sign their young talent more often? Take it from the man who pioneered the idea back in the early '90s.
"It's risky. This is a hard game, believe me. There are a lot of ways to failure," Hart said. "It's a very risky situation for the club. I know what the GMs are going through."