Analysis of Long-term Free Agent Contracts

 Source: Mike Ehrmann/Getty Images North America)

Source: Mike Ehrmann/Getty Images North America)

The excitement that accompanies long-term free agent contracts (8-10 years in length) is followed almost immediately by immense scrutiny. These lengthy deals that buyout at least eight years of free agency are associated with significant risk, and it is usually assumed that the player will provide very little value in the last few years of the contract. Despite the high chance that the team will have a devastating amount of money allocated to an unproductive player, we are seeing more and more players signed to these long contracts. While I have mentioned that I consider these long-term free agent contracts to last a minimum of 8 years, they do not need to be signed on the free agent market. Rather, these deals can be extensions signed prior to free agency, but they must buyout at least 8 years of the player’s free agency. This would not include a player like Freddie Freeman, who signed an 8-year contract after 3 seasons in the Big Leagues, which means his contract only buys out 5 years of free agency. I make this distinction because these early career extensions are usually less money and also a different type of risk, as you pay for less of a known quantity.

What is making teams increasingly willing to pay tens of millions of dollars a year for more than 8 years of free agency? For starters, the clubs must guarantee something in the neighborhood of 8 years to secure a superstar talent in free agency these days. With the amount of money in the game continuing to grow, it reasons that clubs expect this growth to continue and make their payments in the last few years of the deal less substantial in regards to their total payroll. Beyond why these deals are becoming more common, we need to know how completed contracts turned out and the current outlook for ongoing contracts. This is important because it does not appear these long-term deals are going away, actually, we are likely to see more in the very near future with players like Jason Heyward and Ian Desmond set to hit the open market following the 2015 season.

Teams looking for one major addition to push them over the top for the next few seasons are more likely to justify a deal like this as a way to win in the short term, while not entirely ruining their future. After all, the player should provide at least 5-6 years of value before they are not a key contributor for the club, and in some cases even more. This gives the team enough time to develop young talent to arrive just as the star becomes extremely overpaid, so they can remain competitive. However, this is rarely what happens, as teams choose to kick the can further down the road and remain in win-now mode, which is not a bad strategy when you win, but what about when you lose?

The Angels can attest that it puts incredible strain on the farm system without improving the Major League roster enough to reach the Postseason. While they finally made it to the Playoffs in 2014 with the best record in baseball, they accomplished this feat two years after they planned. Despite significant free agent expenditures for Albert Pujols (2012) and Josh Hamilton (2013), the Angels did not make it beyond the regular season until 2014. Baseball Prospectus ranked the Angels’ farm system as the weakest of all clubs for the second straight season heading into 2014. Sacrificing draft picks for star free agents and trading top prospects for Major League improvements failed to help the Angels’ efforts in 2012 and 2013, although it helped them for 2014, they have paid a steep price. Where Pujols should have been the star to anchor the Angels roster, he led to the need for more additions, further delaying the rebuilding of their farm system. This is not to say anything negative about the Angels, more to point out that these deals do not guarantee the club’s success, nor does it guarantee the player will remain a star even in the early years of the deal. The Angels are not the only team that has signed a player to a long-term contract and not immediately experienced success, but each team with such a contract was in win-now mode or nearing such a phase.

Another driving force behind these deals is the record amount of money flowing into the game. While many people would like to believe baseball’s popularity is fading, that just is not true. Revenues have been growing for some time, and in 2014, Major League Baseball saw a 13% increase giving them over $9 Billion in revenue for 2014. MLB’s new television deal with ESPN has led to each MLB team receiving over $25 Million per year, which is a $15 Million increase. This is money that MLB gives to every MLB team, but many teams are now receiving much more money from their own local television deals. This influx of cash has led to more spending in free agency, as teams have more money to spend now and also greater security moving forward. With teams like the Angels taking in over $150 Million per year from these deals, it is no surprise clubs are willing to guarantee long-term deals in order to land a superstar for the remainder of his prime. This is especially the case since inflation will likely make the payments in the later years of the deal less significant than they currently seem. Inflation will not make these deals bargains, but it certainly mitigates some of the risk associated with these types of deals, especially if the club expects increased revenue moving forward.

The general feeling around the game is that these long-term contracts will always end in disaster, and while this is often the case, it is not a guarantee. These types of deals do not always end in multiple years of little production and the entire production over the course of the deal can make up for any lack of production in the later years. 21 contracts have been signed that bought out at least 8 free agent seasons and of those 21 deals, 7 have concluded:

Successful: Among these 7 contracts, three can be considered clear successes for the team. These three are Derek Jeter’s 10-year, $189 Million pact, Scott Rolen’s 8-year, $90 Million contract and Alex Rodriguez’s 10-year, $252 Million deal. During the 9 years that Jeter would have been a free agent without his deal, he accumulated 46.2 fWAR, which comes out to $3.8M/Win. While this shows his deal was certainly successful when considered in its entirety, Jeter also never faded, always being a worthwhile investment. Scott Rolen’s 8-year deal proved to be even more valuable for the team, as his 35.3 WAR over the course of the contract, coming out to $2.5M/Win. Similar to Jeter, Rolen was a valuable player throughout the life of his deal. Finally, Alex Rodriguez’s first 10-year contract was also a very valuable signing for the team. While he opted out after only 7 years, we can still see how he performed in the three years following his opt out. If he had played the entirety of his deal, Rodriguez would have been worth $3.6M/Win and he also never faded during this time.

Even: Of the 7 concluded contracts, Manny Ramirez’s 8-year, $160 Million deal and Todd Helton’s 9-year, $141.5 Million deal were relatively fair for both the player and team. Both contracts ended with the player averaging $4.8M/Win, which is just about what a win was worth in 2008, according to Dave Cameron. Ramirez’s value faded slightly towards the end of his deal, as his defense deteriorated, but he did finish strong in 2008. Helton also lost some value, as he was about replacement level in 2 of his last 4 seasons, but did rebound each time, so he was not a complete waste of resources at any point.

Unsuccessful: The final two concluded deals have not been so team-friendly. Alfonso Soriano’s 8-year, $136 Million contract and Ken Griffey Jr.’s 9-year, $116.5 Million contract never lived up to the hype associated with such long-term deals. Soriano accumulated 19.6 WAR over the course of the deal, worth $6.9M/WAR, and was eventually released during his final season, as he struggled mightily to a 64 wRC+ through his first 67 games in 2014. Ken Griffey Jr.’s deal is about the worst-case scenario for how these deals can play out. Over the life of his contract, Griffey Jr. accumulated just 9.7 WAR, meaning each win cost more than $12 Million. However, even though his WAR was not impressive, he still carried a 118 wRC+, which may not merit such a significant deal, but he did provide offensive value throughout his deal.

Now let us look at how the ongoing contracts look moving forward. However, with the recent increase in popularity of these deals, many of them are far too early in the contract to make any meaningful conclusions. With that in mind, I will not classify 8 of these ongoing deals because they have not gone beyond two seasons, which is not enough time to gauge the deal’s progress. That leaves us with 6 deals that we can draw some conclusions from:

Successful: Only one of these 6 contracts can be considered a clear success. Tulowitzki’s 10-year, $157.8 Million deal from 2011 through 2020 bought out two non-free agent seasons of 2011 and 2012, so for this exercise, it is an 8-year, $144.1 Million deal beginning in 2013. While Tulowitzki has been hindered by injuries in the two seasons of this deal, he has still accumulated an amazing 10.5 WAR and he still looks to be in his prime. His deal expires around age 36, which means Tulowitzki should be a good bet to finish out this deal while still providing value in the final years. Even if he fades heavily at the end of the deal, he should make the overall investment worthwhile, as he only needs to be worth about 10 more WAR over the final 6 years of his extension in order to be worth about $7M/Win, which is right around market value.

Unsuccessful: I would deem the remaining five deals as unsuccessful or at least certainly looking like they will be by the time they expire. Unfortunately, Alex Rodriguez’s second 10-year deal did not go as smoothly as the first. Forgetting about his off-field issues, Rodriguez has still struggled to live up to his $275 Million contract, providing only one season of a WAR above 4, and only 4 seasons as an above average player. Albert Pujols’s 10-year, $240 Million deal may be even worse, as he has never resembled even the worst form he displayed as a Cardinal. This deal will be very ugly by the end of it. Prince Fielder’s 9-year, $214 Million contract has also gone poorly through its first 3 seasons and is likely to remain a rather poor contract, as he was always expected to age poorly, but now his early performance has not provided the value expected to make that worthwhile. Not quite as poor a deal as those above, but Mark Teixeira’s 8-year, $180 Million deal is not looking very good, as he has collapsed after 4 seasons that were about what you would expect from him. However, he no longer shows signs of the player he once was and the final two years of this deal are likely to be as ugly as the two preceding years, when he combined for 0.6 WAR. The final long-term deal that has not worked out so well for the signing team is Joe Mauer’s 8-year, $184 Million contract. He has the best chance of these 5 players to make his deal at least a fair deal, but his shift from catcher to first base will make that quite the challenge. Mauer’s hit tool is not as impressive at a position that is flush with offensive threats, especially since he does not provide the power typical of a first baseman. With 4 years left on his deal, Mauer should be able to maintain his above-average hitting ability, so he will still provide value, but just not as much as was expected when he signed the deal as a catcher.

It is apparent that these long-term deals carry substantial risk and usually result in a winner and loser, but we already knew that. What these deals do show, however, is that it is not a guarantee that these deals always end poorly for the signing club. If the team is on the right spot on the win curve when they sign the player, then it is likely to make the struggles at the end more bearable, but only if he performs well early in the deal. One thing we can draw from this is that the best deals were those that ended around age 36, but those deals that lasted beyond age 38 were ill advised. Clearly this has to do with players fading less at age 36 than 38, but more importantly those deals expiring before age 38 also bought out better early years from the players. This is because the players are still likely in their primes at the beginning of the contract; however, if the deal extends beyond age 38, the player is likely leaving their prime at the time the contract begins.

With this in mind, I would not suggest signing any players to long-term contracts if they enter free agency at or after age 31. This is partly due to the fact that such a deal would then run into the dangerous age of 39 or later, but also because these players are typically exiting their prime, so they will not provide the value in the early part of the deal to justify paying heavily for little to no production at the end of the contract. These deals can only work if the player plays like a star early on in the deal, as is expected, so it is imperative that the team signs him when he is still in his prime. Another significant criteria for a deal is that the team is prepared to win during the early years of the deal, otherwise, such a deal can hinder a rebuild and actually be a waste of resources, even if the player is productive. We have seen this with Troy Tulowitzki’s deal, while it has been worthwhile by his performance, the club has not been competitive for some time and may now be willing to trade him, despite the immense value his deal has. If these criteria are met, then such a long-term contract is a sensible investment, as the benefits outweigh the risks. However, in order to have a winning team in the future, even with so much money going to a somewhat unproductive player, the club must build its farm system during the early and middle years of the deal in order to have cost-controlled talent on the field, since they may have limited funds.

Cardinals’ Options at Shortstop

The St. Louis Cardinals have just completed a very successful season, in which they won the National League Pennant. However, even after such a successful season this club has plenty of issues to address this offseason. The Cardinals must look for an improvement at shortstop and also need to find a way to fit Kolten Wong into the everyday lineup, likely at 2nd base. While the Cardinals will likely address needs in Centerfield and their bullpen, this post will focus on the Cardinals’ options to fill their hole at Shortstop.

During the 2013 season, the Cardinals used a combination of Pete Kozma and Daniel Descalso at shortstop. Both of these players are light-hitting infielders, who fit best as utility infielders, but were used more as starters at one of the most important positions on the field. Kozma was initially used as the starting shortstop with the belief that his defensive ability would make up for any weaknesses in his offensive game; however, as the season continued, it was clear that his offense was worse than expected. This led the Cardinals to add Descalso to the mix at short, as he is a better hitter that Kozma, although still below league average. The duo combined for a 63 wRC+ and -0.3 WAR, each of which ranked the Cardinals’ shortstops 27th in the MLB at the position.

It is clear that the Cardinals need a new option at this position, as they can no longer afford to get such little production from such a premier position. The Cardinals do not have an elite prospect in their system that inspires hope that the answer can come from within the organization, so it is likely that they will have to address this issue from outside the organization. Now let’s analyze some of the options the Cardinals can turn to.

Internal Options:

  1. 1. Re-sign Rafael Furcal: There has not been much talk of this option and there is good reason for that.  He is not a long-term solution and may choose to retire after missing the entire season due to Tommy John surgery.
  2. 2. Transition Kolten Wong to Shortstop: Many Cardinals fans hope for this solution. It would provide a long-term solution at short and give the Cardinals the opportunity to hang onto fan favorite, David Freese. However, this is not a very realistic possibility due to his lack of range and fringy defense at second base.

Trade Possibilities:

  1. 3. Trade for Troy Tulowitzki: The Cardinals have the Farm System to pull off such a big trade, but the Rockies insist that they will not trade Tulowitzki. The Cardinals may not want to pay the price, but if the Rockies become willing to trade Tulowitzki, he would immediately become the best option available.
  2. 4. Trade for JJ Hardy: This has been discussed since last offseason, but it is more likely that the Orioles will extend him, especially after the injury to Manny Machado.
  3. 5. Trade for Erick Aybar: The Angels are looking for pitching and the Cardinals have surplus pitching, essentially making this a very likely possibility is the Angels are willing to deal a quality shortstop they just extended through 2016. Aybar is a plus defender, who put together two strong offensive seasons between 2011 and 2012.
  4. 6. Trade for Asdrubal Cabrera: Definitely the most talked about trade possibility since last offseason. Cabrera had a down season in 2013, but is still a quality defender and should return to being a premier offensive shortstop. The Indians would likely be willing to trade Cabrera for pitching, especially since they have top prospect, Francisco Lindor in the Minor Leagues, potentially ready to ascend to the Major Leagues.
  5. 7. Trade for Elvis Andrus/Jurickson Profar: The Rangers have surplus middle infielders and are likely to trade one of Andrus, Profar or Ian Kinsler. Andrus was just signed to an 8-year extension, but they were reportedly willing to trade him this past Trade Deadline. Profar is a 20-year-old elite shortstop prospect, who may require just as big a return as Andrus. The Rangers would seek Major League level talent, making this a difficult trade to pull off.
  6. 8. Trade for Alexei Ramirez: The White Sox would likely jump at the opportunity to trade Ramirez for prospects as they begin to rebuild. However, there are concerns about his declining power and his always-poor on-base numbers. His defense is still strong and he would not require as much talent in return, but he likely would provide as much value as the other options.
  7. 9. Trade for Yunel Escobar: Escobar enjoyed a strong first season with the Rays, as his defense greatly improved and his on-base numbers went back up to .332 from .300. However, there are concerns about his mental makeup and his clubhouse attitude.

Free Agent Possibilities:

  1. Sign Stephen Drew: Arguably the best Free Agent shortstop available, but he has plenty of holes in his swing. He is an outstanding defensive shortstop and hit 13 home runs in 2013. His agent is Scott Boras, which could complicate things, but if the Cardinals choose not to trade from their Farm System, then Drew is the most likely solution to their shortstop woes.
  2. Sign Jhonny Peralta: He was suspended for 50 games last season for his connection to the Biogenesis clinic. That could drive his price down, even though he is coming off a strong season, in which he slashed .303/.358/.457.  He is a consistent defender, but his offensive numbers have been sporadic through the years.

Looking at all 11 of these possibilities may seem ridiculous considering some are unlikely, but the Cardinals have the Farm System and the financial resources to pull off any of these moves. I feel the three most likely moves are the Cardinals acquiring either Aybar or Cabrera via trade, or Drew via Free Agency if  they are unable to swing a trade. No matter what move they make, it is clear that the Cardinals will do something this offseason to address their hole at shortstop.

Check out pieces that the Cardinals have to trade: https://baseballstooges.com/2013/11/13/cardinals-trade-chips-for-2013-2014-offseason/

Anthony Cacchione