Eyebrows were raised recently when the Astros agreed to an extension with first base prospect Jon Singleton that was reported simultaneously with his first promotion to the big leagues. Extensions have broken new ground in different ways of late, and this deal represented a heretofore unseen foray into long-term guarantees for young players who are completely untested at the MLB level. Let’s take a look …
Framing the Contract
The deal pays Singleton $1.5MM for this season and $2MM annually from 2015 to 2018. It also includes three club option years over 2019-2021, progressing as follows: $2.5MM ($500K buyout), $5MM ($250K buyout), $13MM ($250K buyout). Singleton is assured of earning $10MM for the next five years, would earn up to $30.5MM in base salary if the options are exercised, and could max out the deal with an additional $5MM in incentives.
Since Singleton had zero days of MLB service at the point the contract was agreed upon and was highly unlikely to reach Super Two status, the standard means of describing the contract would be as follows: it pays him an above-minimum MLB salary for his partial first season, guarantees his three pre-arbitration and first arb-eligible campaign, and gives the club options over his final two years of arbitration and first year of free agent eligibility.
But the notion that the deal gives the Astros control over Singleton through to his first free agent year is heavily dependent on a key assumption — namely, that Singleton will stay in the big leagues over the life of the deal. In actuality, it is far from a certainty that Singleton’s play (and/or the team’s impossible-to-predict circumstances) will actually warrant his continued presence on the team’s active roster through to 2021.
Testing the Criticism
Of course, it remains obvious that Singleton has cut off a good chunk of the upside he might have realized through arbitration, and has potentially even delayed his entry to the free agent market by a season. That is the major complaint that has been logged against the deal. Defenders, meanwhile, have generally focused on Singleton’s off-field issues, noting that he may have had valid non-pecuniary motivations for signing.
It strikes me, however, that something basic is being overlooked here. Singleton — a $200K bonus signee out of high school — not only got his cash up front, but has completely avoided the downside scenario. And it is not as if the contract is completely without upside. At worst, Singleton is a bust who walks away with $10MM. At best, he is a top-rate big leaguer who earns over $35MM through his age-22 through age-29 seasons and hits the open market as an attractive commodity at the reasonably youthful age of 30. (That is, if he has not already agreed to a new extension in the meantime.)
Likewise, it has largely been overlooked that the contract is significantly front-loaded. Singleton will earn $7.5MM before reaching arbitration eligibility, which is much greater than he’d expect to bring in at the league minimum rate (this year, $500K). That certainly increases its value.
The real issue, I think, relates to that simple, timeless maxim of which Baseball Prospectus is fond of reminding us: prospects will break your heart. Singleton is every bit a prospect, as he entered the year facing questions about his maturity and ability to hit left-handed pitching. He rose to 27th on Baseball America’s top-100 list last year, only to slide to 82nd before this season. He is a first baseman who will need to hit — a lot — to keep his place in the big leagues.
His situation, in other words, is highly variable — perhaps more so than many have acknowledged. Some observers have touched on the implications of this fact. BP’s Zachary Levine tackled the Singleton extension from an economics perspective, applying marginal value concepts and game theory to the deal, explaining how Singleton’s individual value-maximization strategy may not have aligned with that of the collective (i.e., other union members). Likewise, looking at it from a labor perspective, the Economist recently noted that the Astros “acquired all of Mr. Singleton’s upside without taking on any of his downside risk.”
I am not sure I agree with the Economist’s notion that the team has not added downside; if anything, it has done just that, albeit at a manageable level ($10MM and a relatively firm commitment of a roster spot for some time.) To my thinking, the team agreed to take on some risk from Singleton in exchange for some of Singleton’s upside. He can still achieve significant earnings above his guarantee, and Houston could ultimately be enticed to pay more through the options than it would have through arbitration if Singleton has injury or performance questions but still carries enough promise that the team wishes to retain him.
But that still leaves unanswered whether, based on the reasonably possible outcomes that a player in Singleton’s situation might look forward to, the deal represents a fair exchange of risk and upside. To help answer this, I think it worthwhile to look at some actual, real-world scenarios that have played out in the recent past.
Recent Contractual History of Top-100 Corner Infield Prospects
SB Nation’s Grant Brisbee recently looked at first-base prospects in the context of Singleton’s deal, but he was considering whether the players ultimately proved worth receiving a Singleton-type contract. I think it also useful to consider things from the player’s perspective, looking at actual, bottom-line earnings outcomes. Using the actual results for similarly-situated players as a guide, how does Singleton’s deal look by comparison?
Singleton is not a unique bird. By my count, between 2004 and 2009, the Baseball America top-100 prospect list featured no fewer than 58 players who were listed as corner infielders or ultimately ended up at first as big leaguers. I used those date cutoffs to keep salaries relatively recent and to avoid players who have yet to advance far enough for comparison; I included corner infielders to increase the sample because prospect positions are often ephemeral and many players move across the diamond. (Though I use numbers, I do not intend mathematical precision, nor do I think it would be terribly useful in this pursuit.)
To start, 44 of those players have advanced far enough in their careers that it is reasonable to assess whether or not they’d have been better served by accepting a Singleton-esque extension (not that they likely had the chance). By my count, 21 were pure busts — due to some combination of performance issues, injury, and/or lack of opportunity — who never sniffed arbitration, if they made it to the big leagues at all. In other words, roughly half of the players from this sample were essentially zeroed out in terms of earnings.
- Brad Nelson, Jason Stokes, Andy Marte, Dallas McPherson, Brian Dopirak, Eric Duncan, Michael Aubrey, Josh Fields, Joel Guzman, Matt Moses, Justin Huber, Bill Rowell, Brandon Wood, Chris Marrero, Angel Villalona, Lars Anderson, Josh Vitters, Beau Mills, Matt LaPorta, Mat Gamel, Brett Wallace
Next, we can look at the six players who did reach arbitration, but were ultimately non-tendered or otherwise disposed of before reaching free agency. I think it is fair to say that at least the last four — and perhaps the first two as well — would have been better served by going the route of Singleton.
- Edwin Encarnacion: $7.6MM through two arb years; non-tendered and signed one-year, $2.5MM free agent contract with $3.5MM club option (ultimately exercised)
- Casey Kotchman: $7.85MM through three arb years (incl. Super Two); elected free agency after outright and signed MiLB deal, then signed one-year, $3MM deal
- Ian Stewart: $4.52MM through two arb years; non-tendered and signed one-year, $2MM free agent contract, then signed MiLB deal; entered age-29 season with 4.088 years of service
- Daric Barton: $3.45MM through three arb years; outrighted multiple times; entered age-28 season with 4.030 years of service
- Steve Pearce: $1.55MM through two arb years; outrighted multiple times; entered age-31 season with 4.116 years of service
- Blake DeWitt: $1.1MM through one year; out of league at age 28
Of course, some players were able to go through arbitration and reach free agency while earning significant amounts of money. Even in these cases, however, it is not always clear that the player would not have been better off with a pre-MLB extension. While some of their ultimate earnings top Singleton’s $10MM guarantee, he could easily out-earn most of the below-listed players if he performs to or above their level, even accounting for salary inflation. (Salary information through player’s first free agent-eligible year.)
- Prince Fielder: $33.5MM total arb earnings, then signed nine-figure free agent contract
- Chase Headley: $24.9MM total arb earnings; expected to sign multi-year free agent contract
- Adam LaRoche: $15.25MM total arb earnings, then signed one-year, $6MM free agent deal with mutual option (ultimately declined)
- James Loney: $14.35MM total arb earnings, then signed one-year, $2MM free agent deal
- Kendrys Morales: $12.2MM total arb earnings, then signed one-year, ~$7.4MM free agent deal (declined $14.1MM qualifying offer)
- Conor Jackson: $9.35MM total arb earnings, then signed MiLB deal
Then there are the extension cases, eight of which came for players who had reached or were nearing arbitration eligibility. Most of these, naturally, turned out to be better for the player than a Singleton scenario — owing to the fact that these players were almost all outstanding major leaguers who warranted huge commitments.
- Justin Morneau, David Wright, Ryan Howard, Ryan Zimmerman, Joey Votto, and Freddie Freeman all agreed to extensions that best Singleton’s potential earnings in guaranteed money
- Alex Gordon: $2.55MM through two years of arbitration, then signed four-year, $37.5MM extension with $12.5MM player option
- Mark Teahen: $5.91MM through two years of arbitration, then signed three-year, $14MM extension
Finally, there were three pre-arb extensions. These, of course, are susceptible of more direct comparison to Singleton’s contract.
- Adrian Gonzalez: signed four-year, $9.5MM extension with one club option ($5.5MM) after .862 OPS season; 1.108 years of service at time of signing
- Evan Longoria: signed six-year, $17.5MM extension with three club options ($30MM total) after entering year as #2 overall prospect; .006 years of service at time of signing
- Ryan Braun: signed eight-year, $45MM extension after 1.004 OPS season; .129 years of service at time of signing
Lessons From Recent Top Prospects
All three of the just-mentioned early extension recipients had significantly more bargaining power than did Singleton: Gonzalez and Braun already had full seasons of big league success under their respective belts (outright excellence, in the case of the latter), while Longoria was considered a truly elite talent and owned a much higher floor as a strong defensive third baseman. The dollar amounts obviously need to be inflated somewhat to compare with Singleton’s contract, though his deal was more front-loaded than those earlier extensions. On the whole, they do not seem out of line with what the young Astro received, given his less-impressive resume and non-existent MLB experience.
Consider: Gonzalez got very little upside in his deal despite already having significant service time under his belt, though he did not sacrifice any seasons of potential free agent eligibility. Longoria clearly got a bigger guarantee and higher earning ceiling, but he was a much surer thing and gave up an extra season of free agency. True, Braun got more money, all of it guaranteed, though he also sacrificed an additional year of control (remember, he signed one season into his career). But, then, he had also already led the league in slugging and hit 34 bombs as a rookie. Ultimately, of course, all three landed nine-figure extensions after providing their worth on the field.
As MLBTR’s Steve Adams has noted (Twitter links), Singleton can still line himself up for a second extension if he performs to expectations — after potentially tripling his guarantee through the club options. And if he doesn’t, like the 21 players listed above who never made it, then at least he will have much more to show for his decades of hard work and development than they did.
In the aggregate, the examples given above show precisely why the deal makes much more sense for Singleton than it’s been given credit for. To my eyes, around 30 of the 44 players listed above would have been better off with a deal of the sort that Singleton reached. For many of those — namely, certain of the 21 busts — the deal might have made the difference in getting a real shot at the big leagues, to say nothing of earning the kind of money that they never saw at all (except, at least, for those who signed for big amateur bonuses).
Indeed, a handful of the remainder probably would have ended up approximately neutral, even after establishing themselves as regular big leaguers (this includes Gonzalez and Longoria along with guys like LaRoche, Loney, and Morales, each of whom signed short-term deals in their first seasons of free agent eligibility). Even some of those who landed significant extensions (e.g. Zimmerman, Gordon) had to give up additional free agent years to get a guarantee exceeding what Singleton can earn. And those players all took on immense performance and injury risk for several seasons before they got their first multi-million-dollar contracts.
Recent Top Prospects Still in Process
As mentioned above, there were 58 top-100 Baseball America prospects who were listed at the corner infield or ultimately ended up at first base between 2004-2009. Only 44 of those are covered above. What of the remaining 14?
While it is too early to assess with finality how these players fared as against a Singleton scenario — that is precisely why they were not included above — we can try to handicap things somewhat. Of course, the impossibility of predicting these things is demonstrated by the fact that many of the once-promising players listed above ultimately flamed out.
- Several players appear to be on a trajectory such that they probably would not take a Singleton deal retroactively — though most still have a fair way to go: Chris Davis ($13.65MM; two arbitration years), Pedro Alvarez ($4.25MM; one year), Eric Hosmer ($3.6MM; one year; Super Two), and Brett Lawrie (yet to qualify for arb; 24 years old)
- Others are too close to call: Justin Smoak ($2.64MM; one year); Matt Dominguez (yet to qualify for arb; 24 years old; reportedly declined five-year, $14.5MM extension offer)
- Still others seem situated such that, if they could, they might well take such a deal with the benefit of hindsight: Kyle Blanks ($1.59MM through two years of arbitration); Logan Morrison ($1.75MM; one year), Chris Parmelee (yet to qualify for arb; 26 years old), Mike Moustakas (yet to qualify for arb; 25 years old), Yonder Alonso (yet to qualify for arb; 27 years old), Jesus Montero (yet to qualify for arb; 24 years old)
The point here is that these results largely mirror those discussed already. There are two other players from the group of 58 that I have yet to discuss, and I think they provide an interesting additional outcome cluster that must also be considered:
- Todd Frazier: first made BA top 100 in age-23 season; yet to qualify for arb at 28 years old; 2.071 years of service entering 2014
- Chris Carter: first made BA top 100 in age-22 season; yet to qualify for arb at 27 years old; 1.159 years of service entering 2014
Frazier and Carter are both likely to qualify for arbitration for the first time next season, the latter by way of Super Two. We don’t yet know what they will earn, but we do know that the earliest they can reach sufficient service time for free agency would be in advance of their age-32 seasons.
It is important to understand this other type of downside scenario. Frazier, in particular, has been an above-average MLB performer ever since he came up for good in his age-26 season, and could well have done so earlier had he been put on a more aggressive promotion timetable rather than waiting for the end of Scott Rolen’s career. While it surely would have been difficult for the Astros to withstand pressure to treat Singleton in a similar manner, it is conceivable that Singleton could have been held up at Triple-A. It is a counter-factual scenario now, but Houston was rumored to be in the market for a first baseman over the winter (Jose Abreu and Loney were both mentioned) and could conceivably have added another younger player by trade this year.
As things stand for Singleton, the fact that the team is now committed likely means that he will have every chance to stick on the big league roster. That not only means that he should have the opportunity to maximize the achievable value in his deal, but also that he will be more likely to accrue sufficient service time to reach the open market when he is first eligible. And that, in turn, would increase his leverage for a second extension, maximize his future open-market value, and reduce his risk going forward.
In the final analysis, the notion that Singleton agreed to a “team-friendly” deal, or simply sold out in a situation of poor leverage, seems driven (as Levine suggests) by concern that deals of this nature prevent top-level salary growth. But the strategies pursued by Singleton and the Astros are not binding on other actors any more than were those of Gonzalez and the Padres or Longoria and the Rays.
It is worth emphasizing, too, that there are other recent developments that set down new guideposts for the overall player market. Freeman signed a massive deal with the Braves that seemed to portend enhanced leverage for established, high-end, early-career extension candidates. Miguel Cabrera inked a record-setting later-career extension with the Tigers two years in advance of free agency. And Fielder earned gobs of money through arbitration before inking a $214MM deal with Detroit, showing that the classic model of player wealth accumulation still holds force.
If anything, perhaps, the Singleton extension really marks the latest instance of a general trend away from formulaic contractual models. His deal opens new doors, especially, for players who did not have the opportunity to capture downside protection at their point of entry into the professional ranks, at which time they immediately become subject to the limitations of the reserve clause (as expressed in the collectively bargained Basic Agreement). There are potentially other, yet more creative options as well, such as private insurance (assuming it could be had by a prospect at a reasonable rate) or even public investment. But all players and teams will not pursue such a path; indeed, several of Singleton’s teammates (and others) have declined the opportunity, while some (if not most) clubs will remain largely uninterested in making such early commitments.
History teaches us that, even at his relatively exalted place in the eyes of the game as a top-100 prospect, Singleton was not assured of cashing in on his talent until he decided to forego the chance of becoming the next Fielder. That he chose to do so should have relatively minimal impact on those other players who have the means and desire to bear the inherent risk of transitioning from top prospect to established major league player.