Archives for November 2010

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.