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.

About EJ Fagan

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. 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?

  2. 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. 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.

  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.