Against Early Extensions, Generally

A lot of teams are locking their players up long term. The Pirates added the most recent extension to the set today: signing Andrew McCutchen potentially through his 3rd free agent season. He’ll be a free agent long after his 30th birthday, and less attractive to teams like the Yankees, who may have sought to pay him big money previously.

Seeing so many teams lock up their young players through early free agency is a little depressing as a Yankee fan. I want my free agents signed when they are 27, not 32. It is natural to extend that depression into a feeling of, “Hey, we should get in on this party too!”, but that would be a mistake. The Yankees get to play by a different playbook than the Pirates.

Let’s take Michael Pineda, for example. He is an extremely talented pitcher. If he pitches very well in 2012, he could be a candidate for a large extension. The Yankees might buy out 1 or 2 of Pineda’s free agent years, in additional to two of his free agent years, for, say, $60 million. Pineda hits free agency at 30 instead of 28. This would be a bad outcome.

The Yankees would take a significant risk on their books, without a ton of benefit for success. If Pineda develops into the next C.C. Sabathia, they will have ‘won’ the contract. That’s great. But even if they had not signed him to it, the Yankees may have benefited from his age 29 and 30 seasons. The Yankees can afford it, and even if they can’t, they will have Pineda under control for 5 seasons. A more likely outcome is that Pineda instead develops into a pretty good MLB pitcher. At that point, you are gambling that he would make more money in arbitration and free agency than he would under the contract extension. You are also simultaneously gambling that, years down the line, you won’t need the flexible, fungible dollars on your payroll for another player.

The Pirates, Rays, and Nationals would prefer to make this gamble. They know that they cannot afford to pay most of their players once they hit free agency. They make this trade off because they don’t have the budgets to be truly risky. Truly risky involves waiting for a player to hit free agency, then being the highest bidder, likely net losing on the contract in the later years. Instead, they take the moderate, but unnecessary for high payroll teams, risk of paying very young players for a long time.We haven’t seen a ton of these contracts blow up in team’s faces yet, but we will eventually.

E.J. Fagan been blogging about Yankee baseball since 2006. He is a Ph.D. student at University of Texas at Austin.

11 thoughts on “Against Early Extensions, Generally

  1. Greg

    The issue is of course at what price. Look at Matt Moore’s deal (he’s basically one year less experienced than Pineda and Nova). He got 5 years $14M guaranteed, plus the Rays got three option years ($2.5M of that money would apply to the first option year if exercised). So since our guys are one year more advanced, eliminate the first year of Moore’s contract. Would you like to sign Pineda and Nova today for 4 years/$14M, with options for the first three FA years at $4.5M, $9M and $10M?

    • Probably not for Nova, but almost definitely for Pineda.

  2. T.O. Chris

    The key is identifying the players worthy of such early contract extensions. You don’t lock up a guy like Ivan Nova early, the upside is too limited. But guys like Justin Upton, Evan Longoria, Andrew McCutchen, and Matt Moore are exactly the kind of players you should be looking to lock up as early as possible. The talent in each one of these cases is enormous and was easily spotted early on. However that’s not enough, as an organization you then have to assess the players work ethic, dedication to making themselves great in the long term, and the character of that player. If you are comfortable with the player in these areas, with the talent of the players listed, then it’s smart to lock that guy up, small market or not.

    I think 60 million is a little high for Pineda. Felix Hernandez got a 5 year 78 million dollar deal with 5 years of experience, coming off of a sub 2.5 ERA, and an almost 7 WAR season. You could probably lock up Pineda after two years for 5 or 6 seasons at under 50 million. Even if you just signed him to a 6 year 50 million dollar deal that’s only 8 million a year, throw in a couple of escalating club options and you have a nice deal. I’m not saying you have to run out and extend a pitcher who has yet to reach arbitration, but I don’t think it’s this awful end of the world move you apparently do. We know for sure that Pineda’s going to be making more than 8 million in arbitration if he stays healthy, the gamble is really more health related than anything else with Michael.

  3. Greg

    teams like TB HAVE to do these deals, because if the player is any good, they can’t afford the arb years (look at Kershaw for example). So they bet on the come. Teams like NYY don’t have to. Question is whether with certain players it makes sense to, becaue you’re confident enough of their future. I agree that Nova isn’t one of those guys, at least not yet. Might Pineda be? TB would say YES for sure. NYY – maybe not until after this year, at which point it might be too late.

    • T.O. Chris

      Obviously New York doesn’t have to do this, they aren’t a small market team. However like I said if you identify a kid who has supreme talent, is hard working, is dedicated to being great in the long term, and is a good character kid it makes sense to lock that guy up. Especially now that the Yankees are going to be playing with more of a budget than ever before, they need to make smart long term business decisions. Because of that it’s a conversation that at the very least needs to take place.

      It’s not like this is unprecedented for the Yankees. Is Cano’s extension after the 2007 season being complained about? With club options they locked Cano up for 6 years at 25 years old.

      Nova’s never going to be one of those guys. He isn’t a potential ace, he’s never going to be a top money guy. He’s a solid starter, you don’t have to worry about locking up solid starters though.

      How would it be too late? Pineda is a poor kid from the Dominican Republic, he probably won’t accept 14 million like Moore, but he wouldn’t turn down 40 or 50 million. He’d have the chance to set his family up for good, he’d be in a spot where he almost couldn’t say no.

      • Bryan

        Agreed. Hal himself said he wants to operate like Tampa Bay, and early extensions are a part of that. My guess is any extension will be after the 2014 season or if not, that’ll surely spell the end for one of Granderson/Swisher.

        If you’re talking about an extension by then though, there might be too much incentive for Pineda to test FA.

        • T.O. Chris

          You’d have to buy him out after this season. He’ll be in arbitration by 2014, so at that point you’d be negotiating with him at his peak, leverage wise. At that point there is no reason to extend him, you already lost the ability to buy free agent years cheaply. You might as well just go year to year and wait for him to hit the market.

          I hope it’s the end for BOTH Granderson and Swisher when each ones deal runs out, I don’t want either one signing new long term deals. If I had to chose one I’d say re-sign Swisher after the year ends and either trade Grandy or just let him walk after 2013. There is really no need to extend 2/3 of your OF into their late 30’s, especially for Granderson who has a skill set that hasn’t held up well to the test of time very often. Neither one needs to be here after 2013, but at least Swisher has a more time tested skill set and he won’t cost as much as Grandy.

          We can do some things like Tampa but we will never be run like them, and we shouldn’t be. We have advantages they only wish they did, we need to use them. But Pineda is a special talent, and if you identify him as having those other three things I mentioned above, then extended him after this year could really give you some long term flexebility with the payroll.

  4. I might do that deal for either one. Nova’s got a better health history, if he shows up he’ll put up numbers on this team. I’m a bit more worried about Pineda showing up, given the reliance on the slider and previous elbow injury.

    • T.O. Chris

      I’m not so sure it’s fair to compare Pineda in 09 to Pineda now. Pineda in 2009 didn’t throw as hard as he does now, his slider wasn’t as good as it is now, he wasn’t as tall as he is now, and he was extremely skinny back then. Pineda in 2009 and Pineda in 2011/12 are almost two completely different people.

      Also it’s not like people have relied heavily on a slider before without being injured. CC Sabathia and Randy Johnson come to mind almost immediately as two huge men who threw sliders a ton, both of whom have had legendary careers in terms of health from the starting pitching perspective.

      • Havok9120

        This. As a guy about that tall, there’s a HUGE difference between having that height with “average” weight and having that height plus the weight its scaled to carry. Your body becomes so much more durable and capable.

        • T.O. Chris

          Back in 2009 Pineda was much closer to 6’4 or 6’5 than he was the 6’7 he is now, he was considered extremely skinny, even told he was way too skinny by the Mariners FO. He was also throwing in the low 90’s back then. It wasn’t until after that when he had a growth spurt, got in the weight room, and saw an uptick in his velocity. He really wasn’t even that talked about as a prospect before that point.

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