If you hadn’t noticed, Major League teams have decided that the best way to use their current financial windfall is to keep their best players for essentially their entire careers. It wasn’t long ago that single team lifers like Cal Ripken and Tony Gwynn were the outliers, but now, it is becoming unusual for an elite player to not sign a mega-contract with his original franchise. Just in the last few years, we’ve seen the following players commit to spending the great majority of their careers with just one Major League team:
Joe Mauer, Joey Votto, Ryan Braun, Troy Tulowitzki, Evan Longoria, Felix Hernandez, Matt Kemp, David Wright, Cole Hamels, Matt Cain, Yadier Molina, Ryan Zimmerman, Justin Verlander, Adam Wainwright, and now Buster Posey.
Maybe not all of these players will stay with their current teams for the duration of these contracts, and a few might end up going elsewhere after these deals expire to squeeze an extra year or two out of the end of their careers. These aren’t necessarily contracts “for life”, but they do cover enough of the prime years of the game’s best players that it ensures that their legacy will be forever tied to one franchise. This represents a significant shift for Major League Baseball since free agency began.
Great players still change teams, of course. Albert Pujols left the Cardinals. Prince Fielder left the Brewers. David Price is almost certainly going to leave the Rays. Robinson Cano might leave the Yankees, though I’ll believe that when I see it. It isn’t true that every great player now retires with the team that brought him to the Majors. But there’s no question that MLB teams are moving to make that the more common occurrence, and fewer stars are waiting to get to free agency before cashing in on massive paychecks.
While it’s way too early in those contracts to judge them, I do think it’s interesting to note just how few look like mistakes. The Twins might not do the Mauer deal if they had it to do over again — owing more to where they are as a franchise than Mauer himself — but the rest of these mega contracts look like huge wins for the teams signing them, at least in the first few years of the deal. Back when Troy Tulowitzki signed his second long term deal with Colorado, I openly questioned their logic in doing so, given that the world economy was in the toilet and he had four years left on his current deal. Now, even with more injury problems, Tulo’s deal looks like a huge bargain.
When the Brewers did the same thing with Ryan Braun, I again suggested it was a bad call, but even with his recent connection to PEDs, there’s little question that Braun would get significantly more than that deal if he had waited. The Brewers saved themselves a lot of money by striking early.
I’ve learned my lesson. I’m not coming down hard on these contracts anymore. When Joey Votto signed his mega deal last year, I decided that my old views were outdated and that teams were making decisions based on their expectation of a very bright financial future for every team. Rather than kill another big contract for a franchise player, I figured that I needed to adjust:
So, at this point, we have a couple of options – we can continue to be shocked and amazed at the growing rate of contracts that guarantee big money to players from 2018 and beyond, or we can adjust our expectations for what premium players are going to be able to command going forward. With the promise of new money flowing into many organizations over the next three to five years, I’d imagine we’ll see more and more teams being aggressive in trying to lock up their young stars before they get to free agency and have to bid against whichever franchise just happened to renegotiate their television contract a few months prior.
That trend isn’t showing any signs of slowing down. Major League teams are swimming in money, and they’ve decided the best way to distribute those profits is to keep their franchise players from ever reaching free agency. I can’t say I blame them.
Matt Swartz did some interesting work a few years back on the return on investment provided by re-signing your own players versus poaching a free agent from another team. Overall, re-signed players easily outpaced hired guns, with Swartz noting:
The real difference in production seems to come at the end of deals, indicating that the primary cause of this appears to be asymmetric information, whereby teams are using intelligence they have about their own players and using it to determine who is likely to perform better. This seems to be a function of being able to detect both declining performance as well as health.
Teams have far more information about a player’s work ethic and health than we do. It doesn’t mean that every player who gets a long term deal deserved one and is going to justify his salary, but it does suggest that the pool of players who are allowed to reach free agency are less likely — as a group — to maintain their performances over the long term, as the reluctance of a team to keep them around might suggest that they have some information that makes them more skeptical about their endurance. This isn’t gospel for every player, and the data should be tweaked to account for agent preference as well — Scott Boras clients rarely sign these kinds of long term deals before free agency, but that’s a function of his advice, not a physical flaw among his clients — but it is worth remembering that money invested into re-signing your own player has historically brought a better return than trying to replace that player in free agency.
That brings us to Buster Posey. We’re 1,000 words in to a post with the Giants catcher’s name in the headline and we haven’t said anything about him specifically, but at this point, I think it’s important to understand the context of these deals, rather than viewing them in isolation. Posey’s new deal is an eight year extension that begins in 2014, so he’s now committed to the team through 2021. The contract includes $159 million in new money over those eight seasons, as he was already under contract for $8 million in 2013, so the AAV of the extension is essentially $20 million per year. The deal keeps Posey in a Giants uniform through at least age 34.
Most catchers aren’t particularly productive beyond their early-to-mid-30s, so Posey might not be a great player by the end of this deal. As always, though, you cannot evaluate a contract by how much a player will be overpaid when the deal is winding down without also noting how underpaid he will be during the first part of the deal. Nearly every big contract in baseball is team friendly at the front and player friendly at the back. This is just how these deals work.
So, the Giants are essentially betting that they’ll get better production from Posey’s five free agent years than they would have been able to buy with the roughly $110 million or so that they’re giving him to buy out those five years ahead of time, assuming he would have landed something like $50 million over his remaining arbitration seasons regardless. On the one hand, they’re taking on a lot of additional risk by signing this deal now, so they absolutely have to get a discount in price for buying future years three years away from free agency, but on the other hand, 5/110ish probably isn’t going to buy you anything close to Buster Posey in a few years.
Josh Hamilton — a clearly inferior player with all kinds of health and performance risks — just got 5/125 for his age 32-36 seasons. Posey would have hit free agency heading into his age 29 season, and salaries in baseball aren’t going down. Even if Posey regresses a bit over the next few years, the only thing that would have kept him from landing this kind of deal is probably a major injury that forced him to move out from behind the plate. Adjusting for inflation between now and the off-season of 2015, Posey just signed a deal for not too far off what Anibal Sanchez just got. Posey would have to fall a long way over the next few years to be viewed as the equivalent to Anibal Sanchez.
Certainly, it’s possible. We shouldn’t pretend that there’s no risk here, especially for a catcher with one serious injury under his belt already. If Posey has to move to first base in a few years, his value will drop pretty significantly. But, then again, Posey’s such a good hitter that it’s not clear he wouldn’t be worth this extension even with the expectation that he’d play first base for the last half of the contract. His career wRC+ is 142; Prince Fielder’s career wRC+ is 143.
So, yeah, I’m just not in the business of criticizing teams for taking these risks anymore. There’s so much money in the game that the inflation of player salaries is inevitable, and inflating your payroll by keeping your best players has historically been a better idea than trying to steal someone else’s best player that they decided they didn’t want to keep. Even the worst of these megadeals looks okay right now, and while some of them will eventually turn into albatrosses at the end of the contracts, I think these bets are better than the alternative.
In an era where everyone is keeping their stars from free agency, holding on to your money and buying the best free agents possible isn’t exactly a no-risk proposition either. There’s no way to spend $150 million without taking on some real risk, and there’s enough information to suggest that these kinds of extensions for true star players are the best way teams can use their money. Posey’s a true star and he’s now going to be paid like one. It’s good for Posey, it’s probably good for the Giants, and it’s good for Major League Baseball.