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August 5, 2014

Baseball Therapy

Big Extension, Big Mistake?

by Russell A. Carleton


Let’s talk about Joe Mauer. In spring training 2010, the defending MVP and reliable six- or seven-win Mauer signed a contract extension with the Minnesota Twins that will run until 2018 and pay him roughly $23 million per year. It’s by far the richest contract the Twins have ever given out. I suppose that if anyone were going to get that contract from the Twins, Mauer, who hails from Minnesota and apparently believes so deeply in the cause that he is the father of actual twins, would seem to be the perfect candidate. Still, it was a big commitment from the “small-market” Twins. Such contracts are usually only legal in New York and Los Angeles.

Of course, there were gainsayers at the time, mostly because these contracts never seem to end well. Inevitably, someone brings up the words “aging curve” and says that in the last few years, there’s no possible way that Mauer (or whoever) will be able to justify his salary. It’s the sort of contract that can wreck an entire payroll. On the flip side were the optimists. Mauer’s skill set was getting on base, but there were signs that he was starting to develop a power stroke (a career-high 28 home runs in 2009), and while it was understood that he would eventually need to move from behind the plate, he might move to third base.

Fast forward to the fifth season after Mauer signed his big extension and he is a first baseman hovering around replacement level. He did have a few years where he put up good value. He still gets on base better than the league average, but he is no longer providing value by wearing shin guards. Nor did that power stick around. We’ve perhaps reached the dog days of the Joe Mauer contract.

A week or so ago, a listener on Effectively Wild asked whether small market/small budget teams actually had an advantage because when they had a player like Mauer, they could simply say “We don’t have the money to sign him.” In doing so, they could avoid the trap of the long-term contract. While it might make fans angry in the short run, it gives the team the freedom (and incentive) to look for other players who are under-valued, and maybe to spread that money around to three or four different options, all of whom might be pleasant surprises and collectively worth more than the one big signing.

Are big contracts always a waste of money? There are plenty of cautionary tales to say "yes," but is there a case to be made for signing them anyway?

Warning! Gory Mathematical Details Ahead!
The math isn't actually that gory this time. I looked at position players from 1999 to 2013, using WARP. At each position, I ranked players from highest WARP to lowest and came up with five main categories and a phantom sixth, about which more in a minute.

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6 comments have been left for this article. (Click to hide comments)

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leites

This is great reading, thanks!

Aug 05, 2014 07:22 AM
rating: 0
 
kmostern

Couple of points largely in agreement:

(1) The strategy of choosing a Mauer, Longoria, Tulowitzki, etc., on a small to medium market team (while letting others go) is also a marketing/branding strategy, one that can work for a team in revenue - fans like to know that the team is committed to their favorites, try finding an Oakland A's fan wearing a tee shirt with the name of a current player on it - even if in the long run it doesn't work in WAR. This is something the more clever than thou really ought to spend some time studying.

(2) In looking at long-term contracts, it would now be really useful to carefully consider the ideal year for signing the extension. I assume that the trend in the last few years toward signing long-term extensions with second or third year players, paying them a little more than you have to in their "cost controlled" years, guaranteeing their years 27 to 30, but having the extension expire before 35, is a sensible market reaction built on the belief by GMs that they were right to want to build brands around specific players, but that by signing players through age 38 or 40 they were doing it badly.

Aug 05, 2014 08:38 AM
rating: 5
 
hyprvypr

Great article.

As a Seattle Mariner's fan and expert amongst my baseball friends, I had to explain Robinson Cano's contract as such:

"Look, he'll be an All-Star, probably for 2-5 more years, and maybe a borderline All-Star for a year or two after that, but at age 38, give or take, there will probably be a pretty strong drop-off, at least in power, in which he turns into a .270-300 hitter with 5-10 homers and 20 doubles and doesn't have a lick of range at 2B. Furthermore, towards the very end of his contract, age 40-42 seasons, he'll probably be a nearly unplayable DH who doesn't hit much, yet still making $24 million a year."

To which they were aghast but I had to explain that in order to have those excellent services TODAY, you are basically telling Cano, look we're OK with you being a money-sink, and a mediocre or maybe even a bad player in years 8-10, as long as we can GET YOU HERE now. There are very few players in Robinson Cano's tier of value and to acquire that rare value, sometimes, like life, you have to overpay. In length loaded contracts, you are getting kinda fair value now and brutally robbed later, but it's the only way to acquire that talent.

Of course, in Seattle's case, they also had to add an extra $40-70 million for Cano to play in a less desirable market and lower performing team, but even at the Yankees offer of 7 years, $175, they would still probably get 2-3 years at the end where Cano was earning $25 a year and 'earning' $10 million a year on the field.

Aug 05, 2014 11:33 AM
rating: 1
 
maphal

The long term mega-contract has become very prevalent lately with the play (or lack thereof) of Lee, Howard, Kemp, Votto, Fielder, etc. Even Kershaw's contract will probably be an albatross in five years. Baseball is generating so much revenue that they have to spend it somewhere, so 30 year old superstar FAs is where it goes. Otherwise the union would accuse baseball of collusion. The lesson in all this is to invest in your farm system every year.

Aug 05, 2014 12:53 PM
rating: 0
 
rofldude

I think there might be another option than relenting to the long term contract: offer an inflated per year salary, but with fewer years. As an example, if a team offers a 10 year, $200 million contract, why not offer a 3 year, $90 million contract? It reduces total risk to the team, but still offers a player what should be a lifetime of security.

Aug 05, 2014 13:31 PM
rating: 1
 
jmanig78

Right, but for that to work all the offers would have to be structured that way; if a team wants a player "bad enough" it will "overpay" with a bigger contract and of course the player will take that. But then if all the teams agree not to offer large contracts they might have a collusion suit on their hands...

Aug 05, 2014 17:47 PM
rating: 0
 
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