Sunday, February 10, 2013

Felix Hernandez, Clayton Kershaw, David Price, and the lost logic of pitcher contracts

This past Thursday, the Seattle Mariners struck a deal on an extension with their star pitcher, "King" Felix Hernandez. The new deal, which adds another five years to the previous two years left on his prior contract, will keep him in a Seattle uniform through 2019.

The total value of the contract set a new record for the largest contract ever given to a pitcher, at $175,000,000. Additionally, it takes the average salary of Felix Hernandez to a semi-record $27,100,000 per season. This is the highest AAV of any pitcher signed to a full season; however, the contract Roger Clemens signed with the Yankees in 2007, a deal signed mid-way through the season, was worth a pro-rated rate of $28,000,000.

Hernandez is happy, the Mariners are happy, Seattle fans are happy. The other franchises possessing elite young starting pitchers coming up on extensions, however, may not be so pleased. King Felix's new deal sets the bar sky-high for the next crop of outstanding pitchers primed to hit free agency barring extensions: Clayton Kershaw, David Price, and Justin Verlander. Kershaw and Verlander are set to be free agents after 2014, while Price will be a free agent after 2015.

For the Rays, it seems a forgone conclusion that David Price will find a new home after 2015. However, much the same was said in regards to Evan Longoria's tenure in Tampa, and the Rays managed to find the money to retain his services with a nine-figure deal. The door isn't shut completely on Price as a long-term Ray, but it's only open a crack and we are two years away from his time as a free agent.

The same cannot be said in regards to Verlander and the Tigers, and especially not to Kershaw and the Dodgers in light of their hedonistic spending in the past eight-to-twelve months. I am not a betting man, but to bet against Kershaw being the first pitcher to sign a $200,000,000 contract would appear to be easy money. I think it's fairly likely that Verlander gets a large new deal with the Tigers, regardless of whether or not Dave Dombrowski retains his GM job and regardless of whether or not they win the World Series. Mike Ilitch is likely to realize the value (and not just on the field) that a player of Verlander's caliber brings to his ball club, and consequently his revenues/profitability. He may not crack the two hundred million dollar barrier, but he will be very close against it either way (it is plausible he asks for $28,000,000 annually over seven seasons, which would be a $196,000,000 contract).

Perhaps the more pressing question of all is this one: at what point did the general managers and upper management staff of the largest clubs decide to forgo the notion that long-term pitcher contracts are anathema to the team and the game more generally? It was not all that long ago that such long-term deals, even in free agency, were unheard of. Today, it becomes more and more commonplace.

More on this concern, after the jump.

Below are the pitchers to have received long-term contracts of 5 years or more.

Red indicates contracts of 5 years
Blue indicates contracts of 6 years
Purple indicates contracts of 7 years
Green indicates contracts beyond 7 years

Dave Stieb (1989; 11yrs/$25mil; Toronto)
Greg Maddux (1993; $28mil; Atlanta)
Pedro Martinez (1997; $75mil; Boston)
Greg Maddux (1998; $57.5mil; Atlanta)
Kevin Brown (1999; $100mil; Los Angeles)
Mike Mussina (2001; $88.5mil; New York AL)
Mike Hampton (2001; 8yrs/$121mil; Colorado)
Denny Neagle (2001; $51mil; Colorado)
Darren Dreifort (2001; $55mil; Los Angeles)
Chan Ho Park (2002; $65mil; Texas)
Kevin Millwood (2006; $60mil; Texas)
Gil Meche (2006; $55mil; Kansas City)
Daisuke Matsuzaka (2006; $52mil, plus $51,111,111.11 in posting fees; Boston)
Kei Igawa (2006; $20mil, plus $26,000,194 in posting fees; New York AL)
Barry Zito (2007; $126mil; San Francisco)
Roy Oswalt (2007; $73mil; Houston)
Carlos Zambrano (2008; 5yrs/$91.5mil; Chicago NL)
Johan Santana (2008; $137.5mil w/option that can take it to 7yrs/$162.5mil; New York NL)
CC Sabathia (2009; $161mil w/option that can take it to 8yrs/$186mil; New York AL)
AJ Burnett (2009; 5yrs/$82.5mil; New York AL)
John Lackey (2009; 5yrs/$82.5mil; Boston)
Justin Verlander (2010; 5yrs/$80mil; Detroit)
Cliff Lee (2011; 5yrs/$120mil w/option that can take it to 6yrs/$147.5mil; Philadelphia)
CJ Wilson (2012; $77.5mil; Los Angeles-Anaheim)
Matt Cain (2012; $127.5mil; San Francisco)
Cole Hamels (2013; $144mil; Philadelphia)
Zack Greinke (2013; $147mil; Los Angeles)
Anibal Sanchez (2013; $80mil; Detroit)
Felix Hernandez (2013; $175mil; Seattle)

If you note the years, you see that there were two pitcher contracts in excess of five years prior to 1997. A couple of the top-tier pitchers got 5-7 year deals leading into the new millennium, but it was following the year 2000 that the rate begins to take off.

From 1989 to 1997: three (3) contracts of 5+ years for pitchers
From 1998 to 2006: eleven (11) contracts of 5+ years for pitchers
From 2007 to 2013: fifteen (15) contracts of 5+ years for pitchers

So it is clear that the rate at which pitchers are receiving monster (both in terms of years and dollar) deals has been increasing at a rapid pace, particularly since 2006. The number of top-shelf pitchers has not increased exponentially in step with this uptick in contract offers, so teams therefore are settling on giving lesser pitchers equally-large deals. This is of particular concern for baseball.

Contracts beyond five years in length tend to tie up a team's finances (particularly if that team is not among the top ten to twelve payrolls in the league) and increase the odds of your team having an injured player on your roster, due to the cumulative amount of "mileage" being placed on the pitcher's arm over time. Pitching is a motion that is antithetical to natural biomechanics; in layman's terms, the overhand pitch movement is almost certain to guarantee at least one serious arm injury over a player's career, and for many players it is more frequent than that. Following this logic, such long-term deals increase the risk that a team takes on in signing a player while decreasing the risk a player faces in signing the deal. The player gets financial security, a guaranteed roster spot and a guaranteed salary over the life of the deal (barring options/incentives); the team gets a (presumably) high-caliber player, but also runs the risk of drastically overpaying for that asset and hurting the growth of their team in the process.

Therefore, one would assume that the upper management of baseball franchises would look to maximize the potential value they could eke out of a player in such a deal, meaning they would target only the most talented (and preferably younger and with a low track record of injury) pitchers on the market. This seemed to be the case leading up through the 2000 season. It may be a stretch to call Kevin Brown a top-shelf pitcher at the time considering he had bounced from Texas to Baltimore to Florida to San Diego to Los Angeles in the span of six seasons, but going into 1999 Brown had earned two All-Star appearances, posted two top-three Cy Young finishes, taken two World Series trips and brought home one title, and posted both an Age-31 season where he had a 1.89 ERA/215 ERA+/46 ERA- with 6.8 WAR, and an Age-33 season where he posted a 2.38 ERA/164 ERA+/60 ERA- with 9.3 WAR (granted, in PETCO Park for the '98 Padres).

However, following Mike Hampton's eight-year, $121,000,000 deal in 2001 with the Rockies, the mantra appeared to be broken. Since Hampton got his deal, several other pitchers below the top-tier of aces got large deals: Denny Neagle, Darren Dreifort, Chan Ho Park, Kevin Millwood, Gil Meche, Barry Zito, Carlos Zambrano, AJ Burnett, John Lackey, CJ Wilson and Anibal Sanchez have all received deals between five and seven years in length and in excess of fifty million dollars (and as high as more than double that amount). While several of these pitchers were very good, and posted some great seasons, they are (and were) unmistakably not ace-caliber starting pitchers when they got their contracts. In fact, some of the aforementioned names on that list are downright astounding.

This is an engulfing trend amongst the "haves" in the baseball community, and even among some of the "have-nots" (the Royals in particular). There are about as many contracts given by AL teams (fifteen) as by NL teams (twelve), and the distribution is fairly even across the board (the Yankees have done four of these deals; the Dodgers and the Red Sox three; the Phillies, Rangers, Tigers, Giants, Rockies, and Braves have all done two of such deals; the Blue Jays, Mariners, Royals, Cubs, Astros, Mets, and Angels one such contract each).

At first glance, it would appear that clubs have learned from the mistake-laden years of 2006 to 2009, in which large deals were given to the likes of Lackey, Meche, Zito, Big Z, Burnett, Millwood, and the previously-unknown commodities from Japan, Daisuke Matsuzaka and Kei Igawa. Most of the deals given to pitchers since then have been given to pitchers who are young, dominant, and with minimal injury history. However, the recent deals for both CJ Wilson and Anibal Sanchez bring pause. Both players are solid #3 pitchers with #2 pitcher upside that is met about half the time. However, this is offset by frequent poor outings (more from Wilson than Sanchez). Thus, they might be placed into the earlier group of solid but not quite ace pitchers getting large deals, meaning some clubs appear to still be willing to take the plunge.

So the question now becomes about what this brings for the future, and in relation to Felix Hernandez's $175,000,000 deal in particular.

With the recent explosion of television mega-contracts between cable providers and baseball franchises, the odds of the monetary aspect decreasing any time soon is slim to none. It would be myopic to look at the facts and think otherwise.

That said, players being tied to draft pick compensation may aide such an endeavor. While players may still get contracts more sizable than their true talent level (example: Edwin Jackson got $52,000,000 over four years from the Cubs this off-season), the odds of getting that deal are lessened if they are tied to draft-pick compensation. In essence, this lessens the frequency with which teams might be inclined to give a second- or third-tier pitcher a first-tier pitcher's type of contract.

This can be seen presently with the plight of Kyle Lohse, who is tied to draft-pick compensation and cannot seem to find a suitable team or an offer to his liking (though he has stated that no one has been calling, either). Other pitchers in the future who are of a makeup similar to Lohse (quality, but nothing outstanding at the major-league level) may, in the future, find the waters of free agency just as frigid as Lohse does presently. But this system is in its test phase, and there is no guarantee that a team with a lower draft pick would not be willing to sacrifice it to get a pitcher who could offer them a more complete team with a better shot at a World Series victory, which is of course the bottom line from a general manager's vantage point.

Signing players at younger ages, as many teams have been doing with their top young talent, not only buys out their arbitration years but usually allows a team to retain that player for less than the player's true market value. While not ideal, this does reduce the costliness of an injury to that player from a payroll standpoint. If nothing else, GMs and their staffs seem to be demonstrating a little more restraint than previously, at least as far as the length of a contract is concerned. However, the mantra of a five-year maximum on pitchers appears to be an incredibly flexible rule.

A two hundred million dollar pitcher is an inevitability, all but a formality...but this was a long time coming. Over a decade ago, Alex Rodriguez received his first of two contracts in excess of $250,000,000. More and more hitters of a lower caliber have received deals beyond $100,000,000 in such a time (Jayson Werth, Carl Crawford, Vernon Wells, Carlos Lee, etc.). It would be only logical for pitchers to follow in like manner, yet the rate of bad deals for hitters seems to occur at a higher rate than that of pitchers. That said, the case may simply be that the overall market for players takes longer to coalesce as it is split into pitchers and hitters (that is to say, hitters are valued more and were the first priority, but pitchers are catching up).

The hope now is not to reverse the trend of monetary excess in sports, but to maximize the success rate of such perilous long-term deals. Whether such a notion can be quantified into a mathematical equation is questionable, but logic should be the dictating factor in such decisions, not desire.

It also raises the question of how such deals will affect how young players (your Strasburgs, Zimmermanns, et al) will be handled in their pre-arbitration years. Until now, teams have been able to exert their muscle over the player in pre-arbitration years, keeping their salaries down. However, the recent moves of top pitchers getting nine-figure contracts, teams more and more frequently locking up young talent, and the draft regaining relevancy (and thus a little more leverage for those players and their agents) points to younger players being able to wring more money out of their deals in the future. Madison Bumgarner's six-year, $36,250,000 extension signed in April 2012 is an example of this. But that is another post for another day.

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