Examining The Madison Bumgarner Extension

It’s not surprising that Madison Bumgarner's part of the Giants’ long-term vision. The 22-year-old is establishing himself as one of the best left-handers in the National League as he begins his second full season. But the specifics of the five-year, $35MM extension he signed yesterday were somewhat surprising. Here’s a breakdown of the deal:

What Distinguishes Bumgarner From His Peers

Bumgarner signed a record deal for pitchers with one-plus years of MLB service time. Most pitchers in Bumgarner’s service class have signed four-year deals in the $10-12MM range, but Bumgarner’s deal corresponds to the five-year, $30MM template for starters with two-plus years of service. 

How’d he pull that off? I am guessing his representatives at SFX argued that he has enough bulk and quality to separate himself from most of his own service class and place him alongside more experienced pitchers.  

Many players in Bumgarner’s own service class don’t compare. He had 150-200 more innings than pitchers such as Cory Luebke, Wade Davis or Brett Anderson had when they signed as one-plus players (for an interesting counter-example, check out James Shields’ stats through 2007). SFX presumably said ‘Bumgarner needs to earn as much as the pitchers in the next service class because he is as accomplished as them.’

Why Bumgarner Could Ask For $30MM+

Pitchers such as Jon Niese, Derek Holland, Clay Buchholz and Trevor Cahill signed for $25-30.5MM as two-plus players. They have only a slight advantage over Bumgarner in career wins, starts and innings despite their one-year advantage in service time. Bumgarner has more innings than Ricky Romero or Yovani Gallardo did at the time of their deals, and at least as many starts. (Innings matter a whole lot when we’re discussing pitchers’ arbitration years.)

There's also quality. Bumgarner’s ERA is substantially below the marks of Niese and Holland and well below the marks of Romero, Gallardo, Cahill and Buchholz and Jon Lester. He also has a better career walk rate than anyone in this group and better career strikeout rate than anyone but Gallardo. Not only has he pitched his share of innings, they’ve been good ones. Cy Young votes and postseason experience help, too.

Still, I wouldn't have expected Bumgarner to sign for more than $30MM. He ultimately obtained more than most pitchers in the service class ahead of him.

Why The Deal Works For The Giants

The Giants likely looked ahead to Bumgarner's arb years and thought 'this guy's going to get expensive in a hurry.' They know better than any team that elite pitchers can earn lots by going year to year through the arbitration process.

Bumgarner had been on track for a first year arbitration salary of $4MM or more. It would only get more expensive from there, so the Giants obtained some potential for savings in arb here. The deal also insures against the possibility that Bumgarner breaks out into an ace.

Arbitration savings are nice, but they’re a risky way to try to save given the guaranteed commitment required. Most importantly, the Giants extended Bumgarner’s time in San Francisco by at least one year, and possibly three. The Giants now control more of his prime years.

Why The Deal Works For Bumgarner

Let’s start with the $35MM guarantee. Not only does Bumgarner obtain a ton of money, he establishes a new record for pitchers in his service class.

It’s also worth noting that this deal won't necessarily represent the only big payday of his career. At the latest, he'll hit free agency following his age-29 season. Left-handed starters C.C. Sabathia and Cliff Lee have shown teams are willing to pay for elite starters well after they turn 30.