Reasons Young Starters Are Extended

If they hadn’t signed extensions, Zack Greinke and Dan Haren would be hitting the free agent market and Felix Hernandez and Justin Verlander would be preparing for their walk years. But like many effective young starters, Greinke, Haren, Verlander and Hernandez signed multiyear extensions before hitting free agency.

Not every extension becomes a success story, of course. Sure, deals like Ubaldo Jimenez’s or Adam Wainwright’s now seem team-friendly, but Nick Blackburn and Scott Feldman signed deals that their clubs probably regret. So why do teams commit millions of dollars to such a fragile, unpredictable group early in their careers? MLBTR surveyed agents and executives to determine the answers. Here are the results:

Savings Through Arbitration

Just because a player hasn’t hit free agency doesn’t mean he’s affordable. Just ask the Angels how much they like thinking about Jered Weaver’s upcoming raise. Good pitchers are well paid through their arbitration years, and teams can lock players in to modest raises if they sign them to extensions early.

Agent Matt Sosnick, who represents starters such as Josh Johnson, Ricky Nolasco and Dontrelle Willis, knows teams can avoid handing out massive raises with well-executed extensions.

“Look at the guys who had huge jumps,” Sosnick said. “If you’re a team and you look back and you could have made a deal that could have locked you into a [smaller] raise, would you have gone back and done that if you had the choice? You probably would have.”

One recent example of a big jump in salary came last offseason, when Jorge de la Rosa obtained a $3.6MM raise entering his final year before free agency. It’s easy to look back and envision deals that could have been, but it’s hard to commit millions to a pitcher who is always at risk of injury or ineffectiveness. Not much is guaranteed when it comes to starters, but every team must take calculated risks with pitchers to succeed. One National League executive says teams take on those risks because of potential savings.

“The main reason to extend a pitcher is to save money in future years,” the exec said. “If you take on the risk of giving a pitcher a long-term deal, you need to recoup savings that make the risk worthwhile.”

There’s a good chance that pitchers like Wainwright, Jimenez, Jon Lester and others would have earned more money through their arbitration years if they hadn’t signed extensions. The Cardinals, Rockies and Red Sox can take those savings and direct them at other needs because they took on risk early.

Team Control of Free Agent Years

Teams control players until they have accumulated six years of big league service time, but clubs can keep their best pitchers longer if they sign them to extensions. The Tigers signed Verlander for three of his free agent years and the Mariners did the same with Hernandez. The Tigers and Mariners committed about $20MM per free agent season, but they were never going to sign their aces to a hometown discount. If they can afford it, teams are better off keeping their top pitchers on the roster and off the open market.

But players only get so many chances on the open market, so agents sometimes prefer not to negotiate long-term extensions.

“Because there are deals where by far the best deal is not doing anything,” Sosnick said. “There are times when just making no deal and letting it play out until free agency is the best thing that can ever happen to you.”

Not every player is willing to sign extensions that include free agent seasons, but when good ones are open to long-term deals, teams can keep players for more prime seasons.

Luring Top Free Agent Starters Isn’t Easy

If the Yankees have trouble developing top starters (and even if they don’t) they can offer C.C. Sabathia $161MM and A.J. Burnett $82.5MM and still have enough to bid aggressively on Cliff Lee. But for teams like the Pirates, Brewers and Rays it’s much harder to attract and afford free agent pitchers.

It makes sense for small and mid-market teams to consider extending the pitchers they develop. That’s no doubt part of the reason the Pirates extended Paul Maholm and Ian Snell. Those extensions did not work out for Pittsburgh, but the Pirates have fewer ways of building a pitching staff. Unlike the Yankees or Red Sox, they cannot rely heavily on free agency.

The Rays extended Scott Kazmir and James Shields and while only one of those deals looks good at this point, it’s not hard to see why Andrew Friedman signed them. Top free agent starters aren’t signing in Tampa Bay, but the Rays can maintain a solid rotation if they extend their best homegrown starters.

It’s a Feel-Good Story For The Fans

Extensions are almost always feel-good stories. Teams don’t offer tens of millions of dollars to players who are slumping horribly or injured, so extensions usually provide teams with good P.R. That alone is no reason to extend a pitcher, but it could contribute to a team’s decision making.

Last year, for example, the Marlins faced pressure from MLB to spend before they extended Josh Johnson. It wouldn’t be shocking if the Marlins completed the extension partly to calm the league and please their fans. 

Cost Certainty

As the NL exec points out, it’s not just a question of appealing to fans or saving money.

“Along with those savings come cost certainty for the club and goodwill for the player signed and others in similar situations,” the exec said.

Cost certainty allows teams to set their budgets in advance and operate with more confidence about future payrolls. Orioles president of baseball operations Andy MacPhail ran a large market team (the Cubs) and a small market team (the Twins) before coming to Baltimore. He points out that some clubs – generally ones in smaller markets – have to invest in young talent early to set up predictable, modest arbitration raises.

“A lot of times, you’re making obviously a judgment about the player, his future and what his productivity’s going to be,” MacPhail said. “But you’re also doing it in light of the economic reality that your club faces.”

But we can’t say that teams in the league’s smallest markets are the only ones looking for cost certainty.

“No,” Sosnick said. “Because would that be to say that if the Yankees or Red Sox had a really good young player that they would not try to lock that player up for four or five or six years?”

Indeed, if cost certainty and potential savings through arbitration didn't appeal to the Red Sox, they probably wouldn't have extended Lester.

How It All Adds Up

There are plenty of reasons to be hesitant about offering extensions – more on that tomorrow – but risk is inevitable when it comes to pitchers. Injuries and unexpected dips in performance threaten to make any extension look foolish in hindsight. Pitchers get long-term security and millions of dollars when they sign an extension, but they’re not the only ones who stand to benefit. Teams can save money and keep top pitchers around for longer than they otherwise might.

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29 Responses to Reasons Young Starters Are Extended Leave a Reply

  1. nm344 5 years ago

    good article

  2. Guest 5 years ago

    Kershaw and Bills need a extension on the quickness.

    • Kershaw for sure needs an extension. If the Dodgers give Billingsley an extension it’ll be because they believe he can bounce back from his so-so year and to buy low on his contract.

      • Guest 5 years ago

        so-so year? 4.6 war season is so-so? He needs a contract extension now.

        • BrocNessMonster 5 years ago

          Ha. I only signed on to say that Kersh and Bills need to be next. But you got it covered.

  3. The long-term security for the pitcher can’t be overstated. I’m sure Mark Prior wishes he’d signed an extension. He’s siting on $12.8 million career earnings when that could have been doubled or tripled by a long-term deal. It would have been a poor extension for the club but he might be able to accept his lot in life a bit easier if it had happened.

    • WolandJR 5 years ago

      Yeah, that point is totally missed in this article. Young pitchers would never sign extensions if there wasn’t a risk of getting hurt; so they forgo additional compensation in exchange for a little more financial security. If all goes well, they collect their under market value checks until they are in their late twenties and then sign their mega-deal then. But if their career goes all Prior, they can at least live comfortably off to that one big deal they got.

      • Scott Kazmir and Dontrelle Willis are both probably really happy right now that they signed extensions. They’re set for life even if they never throw another pitch in the big leagues.

      • Scott Kazmir and Dontrelle Willis are both probably really happy right now that they signed extensions. They’re set for life even if they never throw another pitch in the big leagues.

    • Zack23 5 years ago

      Did Prior ever turn down a long term deal? At what point did the Cubs feel comfortable giving him an extension?

      He had a great debut, 30 starts, then after that it was injuries. What pitcher is getting a 30m extension after 1 season?

  4. In need of an extension:
    Jered Weaver, Clayton Kershaw, Jonathan Sanchez and Phil Hughes if he does well in 2011

    • $1529282 5 years ago

      Francisco Lirianoooooooo

    • $1529282 5 years ago

      Francisco Lirianoooooooo

    • YanksFanSince78 5 years ago

      I think it’s too soon for Hughes. Rarely do the Yanks act agressively w/ their pitchers and I think it’s because they know and their players know that no one will outspend them if they want to retain you.

      • mikeindcarea 5 years ago

        Yankees don’t act ‘agressively’ with their pitchers because they do not (or need to) buy out arbitration years. The motivation behind locking a guy up is you take on risk of development for the reward of cheaper arb-eligible years.

  5. johnsilver 5 years ago

    Here is to hoping Bucholz joins Lester with another 5/30M type deal, both have around same type TOS in.. Just hope they are thinking along the same lines.

    Wonder if the LAD are in any kind of financial shape to go for a savings type extension even with Billinglsy or any of the youngsters they SHOULD be trying hard to lock up?

    • grabarkewitz 5 years ago

      With only one contract on the books for 2012, money should not be a huge issue, even for the McCourts. Sure, Kemp and Ethier will get paid, but extensions for Kershaw and Billingsley should be job one and two, this winter.

  6. nm344 5 years ago

    Hamels should be getting an extension sometime this year.

    • he got his extension after the world series. he still will have one year of arb left when his contract is up

  7. Zack23 5 years ago

    “but Nick Blackburn and Scott Feldman signed deals that their clubs probably regret”

    It’s almost like teams should look beyond fancy ERAs and dont sign guys long-term who strike 4-5 hitters per 9 innings. Twins gave Blackburn an extension the year after he gave up the most hits in the league- I’m suppose to feel bad for them?

  8. For every bargain like Lester or Wainwright there’s a Bonderman or Robertson lurking around. Tiger fans must be thrilled those two are finally off the books.

    • Pawsdeep 5 years ago

      Robertson definitely. But I think bonderman is more of a talent disappointment. When he signed the contract it was looking like he was going to earn it but then he just kept getting hurt and lost that killer velocity. Who would have known hed have been past his prime and he is only 28 and before his surgery/injuries he was a man beast with an awesome pitch arsenal with some serious heat on a fastball. Robertson was just a dumb(rowski) idea from the start. His contract should have never happened while bonderman was a good deal turned sour.

  9. Encarnacion's Parrot 5 years ago

    Ricky Romero is another example of young pitchers getting extended early.

    • j6takish 5 years ago

      Ricky Romero is also an example of a win-win. If the guy reaches his potential, he is an ace on the cheap, but if he never progresses, he is a 3-4 starter paid market value.

  10. Encarnacion's Parrot 5 years ago

    Ricky Romero is another example of young pitchers getting extended early.

  11. Pawsdeep 5 years ago

    While most of the guys in this list are being underpaid by their performance standards and comparison, verlander is a bad name to toss on the list because that dude is getting paid very well. Not to say he doesn’t deserve it, but grienke making around 1/3 of what verlander does is grossly unfair

    • j6takish 5 years ago

      I think he is a tad bit overpaid, but guys that throw 200innings and 100mph aren’t easy to come by

  12. The team that’s done the best job of keeping their starters cost controlled in recent years was probably the Indians; they bought out the arbitration years of Sabathia, Lee, and Carmona at bargain basement prices plus option years. Of course, the Carmona deal didn’t look so great a year ago this time, but even if he had flamed out, 4 years/15 million isn’t franchise crippling. Too bad they weren’t as fortunate with handing out deals to position players *cough*Travis Hafner*cough*.

  13. mikeindcarea 5 years ago

    This is a great piece.

    Thinking about Rays and Kazmir – they actually had the best of both worlds. They signed Kazmir to an extension to get his first year for cheaper than would have paid in arbitration, but then flipped him to the Angels as his contract began to escalate above his actual value.

    Risky strategy because your young pitcher may fall off a cliff – in which case you’re stuck with him (see Willis, Blackburn, Feldman, others). Kazmir looked like he was falling off a cliff, but rays moved him anyway…

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