Hey guys, remember when I posted an article about Ron Santo written by a guy who thought Home Run Baker had nothing to offer but a nickname? No? Well anyway, he's back, and making an asinine post about contract extensions.
As is the case with most fangraphs articles, a lot of this is dry info that's poorly written and a slog to read, so I'll cut right to the chase:
Here’s a fun fact. In baseball history, there have been exactly twenty-five nine-figure deals — twenty-five contracts for $100,000,000 or more. Four of them have gone to free agent pitchers. Position players have received the other 21, and of those 21 contracts, 11 have been contract extensions, and just 10 have been free agent contracts. (Of the top five contracts in baseball history — Alex Rodriguez, Alex Rodriguez, Derek Jeter, Joe Mauer, and Mark Teixeira — four three were extensions.)
Right. Either that or two. Two were extensions. Mark Teixeira signed a free agent deal with the Yankees (This should be pretty obvious, given that he played for Anaheim the year before). And A-Rod signed two free agent deals, one with the Rangers, and one with the Yankees.
(Technically, as Bryan and Art Deco point out below, Alex Rodriguez was a free agent when he signed his second contract with the Yankees. But I view it as an extension, because he essentially used the opt-out in his contract as a bargaining tactic in his negotiation with the Yankees — who were the only team able to afford the amount of money they wound up paying him. That’s a judgment call on my part, though, and if you want to consider him a free agent both times, that alters the numbers a little bit: ten extensions, eleven free agent contracts.)
Oh okay, you view A-Rod as an extension because you say you do. Gotcha. But never mind. Let's focus on why Mark Teixeira's free agent contract was an extension. Oh? That's the last you're going to mention him? Gotcha.
So why have more position players been paid more money when they weren’t on the free market than when they were?
It’s too facile to say that free market competition actually depresses player salaries, but it’s beyond question that teams have a tendency to bid against themselves, both on the free agent market and when negotiating extensions. After all, the two biggest contracts in baseball history both belong to Alex Rodriguez, and both his free agent contract with the Rangers and his extension with the Yankees were largely the result of a team bidding against itself. Of course, the Yankees can better afford to bid against themselves than could the Rangers.
First of all, it's not beyond question that teams have a tendency to bid against themselves in contract extensions. They're negotiating with an agent what it will take to get their player to forgo free agency. Thus, they are bidding...against other teams. Secondly, the Rangers were in no way bidding against themselves for Alex Rodriguez in the 1999 offseason. A number of teams wanted to sign A-Rod. They didn't have access to what those teams were bidding and they bid a number that made sense to them because they had a new cable contract coming in contingent on signing Rodriguez. But that's hardly "bidding against themselves."
Anyway, let's get to the real stupid stuff:
The jury is out on three of the eleven richest extensions in history, those featuring end dates between 2015 and 2020: Troy Tulowitzki, Miguel Cabrera, and Joe Mauer. But we can start to evaluate the other eight. First, Ryan Howard and Alex Rodriguez are signed through 2016 and 2017, but they have already started to look like albatrosses. And the jury is more or less in on the other six. They are listed below:
Derek Jeter, NYY, $189,000,000 (2001-10)
Todd Helton, COL, $141,500,000 (2003-11)
Johan Santana, NYM, $137,500,000 (2008-13)
Vernon Wells, TOR, $126,000,000 (2008-14)
Ken Griffey Jr., CIN, $116,500,000 (2000-08)
Albert Pujols, STL, $100,000,000 (2004-10)
Of those eight contracts, three of those have been unmitigated disasters (Helton, Wells, and Griffey), two have been qualified if overexpensive successes (Jeter and Santana), two are likely disasters (Howard and Rodriguez), and only one was a clear success (Pujols). In other words, seven of the eight extensions have been hard to justify on their dollar value alone.
This is where I "laugh out loud." Let's start with the "unmitigated disasters." Griffey's contract exists largely before Fangraphs started computing dollar-values for WAR so let's give Remington this one, since he's probably right. Wells is a disaster indeed, although he has come close to the $18 million he makes per year last year. But Todd Helton?
Let's go to Remington's own site and see what an unmitigated disaster looks like:
Todd Helton 2003-2010 Fangraphs WAR: 31.4
Todd Helton 2003-2010 Fangraphs Contract Value: $111.9mm
Todd Helton 2003-2010 Actual Salary (using avg per year): $123.8mm
What an unmitigated disaster! A loss of about $1.5mm per year!
Now let's take a look at one of his qualified but "overexpensive successes:
Derek Jeter 2002-2010 Fangraphs WAR: 41.9
Derek Jeter 2002-2010 Fangraphs Contract Value: $151.7mm
Derek Jeter 2002-2010 Actual Salary (using avg per year): $170mm
Man that's overexpensive! A loss of ~$2mm per year. Meaning he was something like 9% overpaid. What an overexpensive success! Look--I'll buy "overpaid" but overexpensive strikes me as having connotations of someone making more than about 10% of what they should have made. Especially when, allegedly, Jeter brings in plenty of off-the-field income. I think that might have been overstated in this year's negotiations, but certainly he bring in at least $2mm per year in corporate tie-ins and merchandise revenue (and yes, I know that the Yankees don't make specific money off of JETER jersey sales, but they make money off of jersey sales in general, hats in general, souvenir bats in general, etc and you have to figure Jeter moves those to some extent)
In short, 3 of the contracts Remington mentions are more or less square deals or an out and out bargain (Helton, Pujols, Jeter). Of the remaining extensions, two have been hampered by injuries (Griffey and Santana) and one was made as a publicity move rather than a baseball move (Vernon Wells). Now, injuries happen, and you can't just discount them. But they certainly don't say anything specific about contract extensions, now do they? If Griffey and Santana are overpriced, it's not because "teams bid against themselves." It's because "they got hurt." Certainly you'd rather be paying a hurt player like Santana $22mm a year than the dollar amount he could have gotten on the open market. How do we know what Santana could have gotten on the open market? We don't, necessarily, but we can take a pretty good guess.
Anyway, all of this non-information adds up to an asinine conclusion. Here goes:
But just as many inexplicable dollars are being spent on extensions, which aren’t even a market — they’re a response to a hypothetical market, and in recent history they’ve been a poor investment. If eyebrows should be raised anywhere, contract extensions are the place to start.
So much is wrong with this. So much. I'll leave that to you the reader to deciper because I'm utterly sick of this uninformed squawker who can't even be bothered to look up players' statistics.