The Worst Contract Extensions in History

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 Teixeirafour three were extensions.)

(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.)

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.

The easiest answer, of course, is just to ascribe everything to the Yankee Effect, the Yankees’ ability to spend any amount of money on a player they want, forcing other teams to pay Yankee-like prices both to acquire players and to prevent players from going to the Yankees as soon as they are eligible for free agency. But that may be facile too. After all, it’s counterintuitive that a team would have to pay more for a player when there is no one to negotiate against. They would be better off letting the player become a free agent and negotiating with them once they hit free agency.

Am I oversimplifying the data and drawing a spurious conclusion from an admittedly small sample size? To some extent, sure. But this does jibe with our general reaction to many of the extensions handed out, from Joe Mauer to Ryan Howard to Todd Helton. Why did the Phillies, Rockies, and Twins hand out free agent dollars to players under team control? Did they really save money?

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:

  1. Derek Jeter, NYY, $189,000,000 (2001-10)
  2. Todd Helton, COL, $141,500,000 (2003-11)
  3. Johan Santana, NYM, $137,500,000 (2008-13)
  4. Vernon Wells, TOR, $126,000,000 (2008-14)
  5. Ken Griffey Jr., CIN, $116,500,000 (2000-08)
  6. 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 discouraging, considering that teams ought to have a competitive advantage when it comes to evaluating their own players: they see more of their own players than anyone and know more about their players’ health than anyone.

One would expect more stupid money to be spent on the free agent market than in team extensions. But at least among the most expensive contracts, the opposite has been true. Moreover, just two of those eleven extensions were handed out by the Yankees, the same number as the Rockies. Obviously, the Yankee Effect doesn’t tell the whole story.

It’s hard to fault a team like the Twins or Rockies for wanting to lock up the team’s most popular player forever, preventing them from ever leaving the team. And considering that a guy like Mark Teixeira — who is nowhere near as valuable as Joe Mauer or Troy Tulowitzki — can get $180 million on the free agent market, they may be right to want to lock up their players as long as possible.

But many of these teams have a curious sense of timing. Ryan Howard signed his mammoth extension in February 2009 April 2010, despite being under contract for two one and a half more years; Tulowitzki signed his two weeks ago, despite being under team control for four more years. Theoretically, a player’s price should increase the closer he is to free agency. So the earlier a team extends that player, the more money they should save. But how much money did the Phillies and Rockies save? How much more could Howard or Tulowitzki reasonably have commanded, had the team waited another year or two (or, in Tulo’s case, another three years or four)?

The Jayson Werth free agent contract prompted widespread snark, as even sexagenarian Mets GM Sandy Alderson commented, “I thought they were trying to reduce the deficit in Washington.” 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.




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Alex is a writer for FanGraphs and The Hardball Times, and is a product manager for The Washington Post. Follow him on Twitter @alexremington.

117 Responses to “The Worst Contract Extensions in History”

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  1. Bryan says:

    Three of the players you named had extensions…

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    • Bryan says:

      Scratch that, two had extensions.

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      • Bryan says:

        Wait, scratch that too. ONE had an extension.

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      • Bryan says:

        Joe Mauer was the only one to have an extension. A-Rod hit the open market both times free, Jeter did back in 2000, Mark Tex signed with the Yanks after 08.

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      • Not true about Jeter; he was eligible for arbitration. Rodriguez technically was a free agent. Tex and Rodriguez (the first time) were, of course, both free agents.

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      • Kurt says:

        Alex, technically Jeter and Alex both reached their contracts with the Yankees after having completed their initial contracts (Yankees don’t do extensions, they refuse to add years to an existing contract). Joe Mauer truly was an extension, and I don’t know how you consider the signing of Alex by Texas an extension, he was very clearly a free agent as he’d never played for Texas before that. As for Teixeira, he as well never played with the Yankees before he signed his deal, he was also very much a free agent. So how in the world did you ever come to a possible FOUR?! Seriously, Alex for $252MM/10 yrs. to Texas and Teixeira $180MM/8 yrs. to the Yankees were 100% free agent deals. I’m truly baffled how you could have made that mistake considering the magnitude of these contracts.

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      • Kurt, you’re right that four is a typo, and has been corrected in the text above. Jeter was team-controlled and arbitration-eligible — so I’m considering him an extension even if the Steinbrenner family didn’t see it that way. Alex in Texas obviously was a free agent, as was Teixeira. Mauer was obviously an extension. And Alex Rodriguez is a judgment call on my part, as I wrote above.

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  2. Art Deco says:

    Isn’t Alex Rodriguez’ current contract a new one, not an extension? He opted out of the original Texas contract after the 2007 season, becoming a free agent, and then re-signed with the Yankees.

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  3. Andy S says:

    If you go by WAR market value, Jeter’s was not an overpay.

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  4. Socrates says:

    First, I want to say that I like this site and everything about it. I often disagree with the posts, but that doesnt bother me and I sure hope it doesnt bother the authors either.

    That said there is one thing that I think everyone (the contributors and commentors) need to acknowledge. It deals with player valuation in the real world. Essentially, it needs to be acknowledged that teams make money off of more than JUST winning. They make money partially off of the image of the franchise. Has anyone stopped to consider that the Marlins, Royals, Rays, and Pirates have attendance problems NOT because they dont win (as obviously the Marlins and Rays have won in the past… very recently for the Rays), but that fans are less interested because of the… transient nature of the roster.

    Lets take the Marlins for example. They have won… twice. And both times, they completely dismantled their rosters. The Royals have been pretty bad for almost 20 years, but they also let arguably their most popular players go (Beltran and Dye) over that time. This year they traded Dejesus (while not THAT good, has been viewed as popular) and are now talking about trading Greinke.

    I think that smart franchises realize the need to pay a little extra than what the players value on the field is.

    For instance, dont you think that Jeter is worth a ton to the Yankees? Internationally and in America he is one of the most (if not the most) recognizable players. Did he earn $15M on the field? Not even close. Does he earn that for the positive image he brings to the team (rightly or wrongly positive)? ABSOLUTLEY.

    Mauer to the Twins, Wells to the Toronto, Helton to the Rockies, etc. They are all the faces of their franchise.

    As for when they sign these extentions (multiple years left of control), I think that as players get closer to free agency they become LESS likely to do the extentions and want to test the market. Mauer is an exception, because has some injuries that delayed an extention earlier.

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    • EdwardM says:

      In general you’re right in saying that a players valuation by his team involves more than his contributions on the field. However, there is a danger when a team signs a player to an enormous contract or simply over-pays a young player approaching free agency.

      If, in subsequent years, that player does not meet the expectations implicit in the new contract, fans can become disillusioned with management and suspicious of the team’s ability to ever field a winning team.

      You mentioned Wells, but many think the Jays also made mistakes with Ryan and Hinske (don’t get me started on Orlando Merced and Carlos Garcia). These signings might help generate some early season buzz but when September after September the team is out of the race, then all but the die-hards slowly turn their attention elsewhere.

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    • Baron Samedi says:

      the Toronto!

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    • matt says:

      You can add Oakland to that list.

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    • seattlecougar says:

      Great point. Makes me wonder where the Mariners would be today (almost certainly not in Seattle) if they’d cut bait on Griffey, Randy Johnson and A-Rod without even trying to keep them. Goodwill toward your fan base goes a long way.

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    • It would be an interesting exercise to evaluate the Giants based on this. There are a lot of examples from Bonds to Zito to the current group. Perhaps we’re still too close but they are enterting a situation in which Lincecum, Cain, Wilson and Posey (Sandoval? Maybe) are all wildly popular and contribute on the field and drive team image.

      They’ve done extensions with a number of those guys, but short ones.

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    • ofMontreal says:

      I agree that there is a religion of sorts to FGraphs & BP and such, but they do evaluate for franchise value. If anything, I think they tend to undervalue the pie that’s being fought over. The Players Association knows roughly what teams make and the teams bid against each other & themselves. The ‘inflation’ we are seeing this winter seems to be more about proof of assets. It’s difficult for retrograde stat-driven analysis to account for going forward financial health. That makes up a lot of the disconnect.

      Also, I read an interesting quote by Reinsdorf today saying ‘they usually have 4 plans available’ for where they are going. That sounds pretty right. Sometimes teams mess around with multiple plans and that doesn’t generally compute in this world. We here reading this stuff care that JWerth got too much money more than almost anyone else. But Washington had their reasons (a lot I’m sure) for doing it just like the Phillies had reasons for doing RHoward and not some others with as much tenure.

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    • Andy says:

      I’d be more comfortable with arguments for “franchise value” if the the proponents of this view would offer some actual hard data or analysis. I’m sure that this would be difficult, and the general idea doesn’t strike me as implausible; but until you show me the numbers, a lot of this seems uncomfortably similar to the kind of hand-waving rationalization that we’ve come to be suspicious of (rightly, I think) in many old-school writers.

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      • Catcher50 says:

        Obviously, we don’t yet have an answer, but there was a violently negative outburst from the Nats not re-signing Dunn, yet the offer was (presumably) a reasonable one. They evaluated his abilities and value, on the field and made what was probably the best offer, both in length and amount, by a National League team.

        The offer that he finally took was longer and for more money, but…by an American League team. Potentially, the Chisox did not overpay. Same price, same length by the Nats, to keep a fan favorite would have been grossly overspending.

        Whether they overpaid, over extended, for Werth is yet to be determined, but not overpaying for Dunn, almost required it.

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      • Barkey Walker says:

        This data would be hard to come by. It is things like cross value and the price of high end suite contracts.

        Attendance might be a good measure though, and that should be possible.

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  5. exxrox says:

    Also, Teix was also clearly a free agent when he signed…anybody gonna start to do some fact-checking around here, or business as usual?

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  6. Sam says:

    How was Helton an “unmitigated disaster?” According to Fangraphs numbers, he’s provided $112M of value thus far, with another year left on his deal.

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    • Lee says:

      I was thinking the same thing. Unmitigated disaster is an… unmitigated overstatement.

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      • Patrick says:

        That is EXACTLY what I was thinking.

        It hasn’t been a great contract, and even good is generous… It’s been kind of bad. But it hasn’t been close to a disaster.

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    • chuckb says:

      It’ll end up being at least a $20 million overpay, about 14% of its value. Perhaps it’s not an “unmitigated disaster” but it was definitely a loser of a contract for the team.

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      • Resolution says:

        Well, that’s ignoring the points Socrates made above around any extra money a team generates from building their brand by securing franchise players. Granted we really have difficulty quantifying this but it will definitely have to add something. Whether that’s enough to close that 20 mill gap is another question.

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      • Sam says:

        Getting $120M of value out of a $140M contract is below average, but there has to be some room between below average and unmitigated disaster.

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    • CesarV says:

      It’s not only the contract’s total value but the structure, if these contracts are backloaded and players start struggling, the contracts will choke the organizations (sans bosox and nyy). This issue is deeper than raw WAR and $$$.

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  7. Resolution says:

    I think it might be harsh to call the Helton contract an unmitigated disaster. If we assume a win is worth 4 million dollars (probably a bad assumption), he’s provided about 32 wins over the course of the contract so he’s about 12-13 mill shy of justifying it. He still has one season left to add more value, though it remains to be see if he’ll be an asset. The bigger part of the problem on the Rockies end was that it represented like 20% of their payroll, not really Helton’s production…

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  8. AustinRHL says:

    Yeah, count me into the crowd questioning the Helton contract being named an unmitigated disaster. There’s no question that it’s an albatross now, especially after Colorado renegotiated it to extend it and defer the salary, but Helton provided quite a lot of value for the first few years of the contract. Yes, it proved to be an overpay, but it wasn’t as bad as you say.

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  9. Rob says:

    Teams pay a premium to keep players they like off the market. It doesn’t seem so complicated.

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    • But how much of a premium should they expect to pay?

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      • Rob says:

        More complicated…

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      • SOB in TO says:

        It’s not the money as much as it is the length. Players trade dollars for job security. Pretty much why Jeter wasn’t going anywhere else. He wants t play three/four more years, and no other team was going to pay him to play three/four years.

        Nice “tribute” on FJM to you.

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    • Patrick says:

      But if they’re paying a premium, then logically they must be getting something back for that premium.

      I can see one of two things in play here:
      Off field value (Franchise player… I live in St. Paul, so I know all about that – Hi Joe Mauer!)

      And:
      Keeping them off the market..

      But… If that second one is the main benefit… Then how big of a benefit is it? Isn’t the purpose of keeping them off the market to avoid having to overpay to keep them/letting them go elsewhere? I view these, if we’re remembering to think of the “off field value”/”franchise player” effect as a separate thing, as the same thing.

      So if teams are paying more than market value for their players to “keep them off the market”… Then unless they’ve got off field value to the team above and beyond a normal player… What exactly have they achieved?

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  10. cxl72 says:

    Phillies fan here….Howard signed 2 extensions, one in 2/09 and the second huge one in 4/10. I disagree with the contract extension but lets give him a chance to earn it.

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  11. CircleChange11 says:

    I just wanted to say “scratch that”; I was feeling left out.

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  12. Jesse011 says:

    Jeter hit .334 in 2009. Aside from last season he’s been excellent

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    • Jason B says:

      He’s been very good for a long time, no question. But 2009 appears to be the outlier out of the last four seasons, not 2010. 2009 shouldn’t be used to establish a baseline value.

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  13. Jackweiland says:

    I like the idea here. Some thoughts:

    1. Longorias extension bears mentioning here. That was certainly a massive success.
    2. I guess the question really is at what rate are extensions successful compared to what rate FA deals are successful. Data on that (even subjective data) would be interesting. A large percent of FA contracts don’t equal out in terms of cash and WAR either, do they?

    I’d like to see this idea expanded. Good stuff.

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    • Hank says:

      I was thinking the same ( except for the part about Longo’s contract – it is confuse by arb years as Z below indicates… it’d be like looking at Verlanders deal or Lester’s deal or King Felix’s deal to some extent)

      What might be interesting is looking at the % missed in valuation.
      1) Are teams missing on extensions by a greater % than FA contracts are missing (not absolute $…. like 40mil wrong, but looking at it on a % basis). You could limit it to long term FA contracts as it’s probably not fair to compare valuation accuracy of 2-3 year FA deal vs a 4-7 year extension

      2) Is the “goodness” of the extension a function of time on the team? Are there differences from teams signing players who have been on the team for a while (Jeter, Tulo, Pujols) vs what are more or less free agent contracts (Santana, eventually AGonzalez)…

      Players traded in their final arbitration year I think have to be more or less treated as FA’s when negotiating what is technically an extension. (I’m remembering Santana as being traded 1 year before FA, I could be wrong on that). unfortunately parsing the data down probably means too small a sample size to even make a crude observation.

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    • seattlecougar says:

      Your point about Longoria’s extension has me thinking about this more, now…

      Naturally it’s tough for a contract to be a lower risk of “worst in history” when the overall amount is lower. If the player busts, the team has more financial wiggle room left to work around him. Thus, it makes sense to start with only giant contracts and work from that list.

      But when the question is about the economics of resigned contracts vs. free agent contracts, it does seem like a big piece of the puzzle is being left out by only looking at these giant contracts. The Longoria extension is a great example of a player sticking with his home team for what amounts to a discount.

      I’m also curious about the 9-figure free agent contracts — are those busting at the same rate as the extensions? More/less often? Some spot checks don’t make the extensions look any worse than the free agent signings… Manny and Giambi both seem a tad overpaid, Soriano and Lee are looking like albatross signings…

      There are the occasional success stories (A-Rod #1, Pujols), but it really seems like the moral of this story is that $100+ million contracts rarely pan out regardless of how the player was obtained.

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      • JoeyO says:

        The first A-Rod deal was anything but a success. Sure, his individual production versus salary may be argued. But if I told you I successfully climbed Mount Everest but lost both legs, an eye, 4 fingers and must now live on life support, would you really consider it a success?

        That is the problem with that first Rodriguez contract; the cost absolutely destroyed the signing franchise. Within one year they realized they needed to get out of it, approaching Rodriguez to defer 45 million all the way till 2011-2020. But even that wasnt enough, and two years later they came to the conclusion they had to just pay to get him out of town completely.

        Overall, the Rangers ended up spending approximately 135 Million of the initial 252 commitment for just 3 years of Rodriguez. That is 45 million per season played for Texas, while the club was hogtied nearly the entire decade.

        That first Rodriguez deal is really the worst contract ever signed. Not because of a lack of production from the player of course, but rather the ramifications it had on the club. No team has been, or probably ever will be, effected as negatively by a single signing.

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    • david says:

      In addition to Longoria, Ryan Braun’s extension, which included three free agency years, is among the best deals ever signed.

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  14. Z says:

    Um longorias contract is far diffrent as a lot of it covers arb eligible years. I think that the other players on this list were extensions that covered non team controlled or arb years. At least I think I’m right about this

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    • Jackweiland says:

      You’re right, but to me you’re missing the larger point. The real issue to discuss is whether or not teams resigning their own players outside of the larger market works out better or worse than teams signing guys in the open market.

      The exact specifics of that are less important, to me.

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  15. RoxFan says:

    Like someone else said above, I think players add value that is not measured in Wins and WAR. I think the Helton contract turned out well for the Rockies, otherwise they would not have immediately jumped into another 10 year contract with Tulo.

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    • Jason B says:

      I don’t disagree that Helton’s contract wasn’t the “unmitigated disaster” the author claimed, but I don’t think that contract has any particular bearing on the Tulo situation. Was it even the same GM? Too lazy to look. But I’m thinking each situation and player should be valued and negotiated with independent of something that happened a decade ago (not that it necessarily is, but should be).

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      • Rox Girl says:

        It was the same GM. The same GM who has steadfastly refused to offer pitchers contracts longer than three seasons after the true disasters that were the Hampton and Neagle contracts. If they still have bearing on how he operates, why shouldn’t the Helton contract, which was negotiated afterwards, also have bearing?

        It does, but the bearing has been to spur O’Dowd to make similar deals with Tulowitzki and now attempt one with Gonzalez. The Rockies have already said that they’ve seen a season ticket spike in the weeks since Tulo signed his extension. It seems O’Dowd knows this is a way to lock in a revenue stream for the franchise. I don’t know if it would work with every club the same way, each market is different, but if O’Dowd really got poisoned from this well the first time with Helton, he wouldn’t be going back, and he likely wouldn’t have his job.

        This really is a poorly researched article on the economics of these extensions, and frankly I’m disappointed.

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      • Jason B says:

        Yeah, I only half believed what I was typing anyway. We always let our past decisions influence decisions going forward, even when they should be independent. And that’s not always a bad thing.

        “frankly I’m disappointed.”

        Feel free to post one better for all to critique.

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  16. Matt Berger says:

    No way Helton’s a disaster. If he didn’t sign that contract when he did, he zips out of Colorado, the 2007 trip to the World Series doesn’t happen, nor does 2009′s playoff run, and his value extended so far into the clubhouse. He essentially helped Hurdle develop a team full of young talent.

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    • NEPP says:

      But I cant measure those types of things with WAR…thus, they do not exist.

      Seriously though, the Helton deal wasn’t all that bad. It MIGHT have been a slight overpayment but overall, it was pretty solid.

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    • NSCEGF says:

      Who else could have been signed, and for how much? This isn’t just a “with-Helton-or-without-Helton” situation. Could they have traded for another 1Bman? Signed someone else for less? Replaced his offense at another position? These are all factors.

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  17. DownwiththeDH says:

    Poorest attempt at describing a worthwhile subject I’ve read on this site in a year. Please do more on your rough drafts… Helton’s contract should be considered a success. He’s significant part of the reason 40k people will show up to a Rockies game when they have even a whiff of a chance to compete for the playoffs.

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    • chuckb says:

      “He’s significant part of the reason 40k people will show up to a Rockies game when they have even a whiff of a chance to compete for the playoffs.”

      No he isn’t. He’s about a 1 win player right now. People will show up b/c the Rockies are good. They’ll show up b/c a team led by Tulowitzki and Jimenez is a pretty good bet to win 90 games. They’ll show up despite Helton, not b/c of him.

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      • JT says:

        What reasoning would you have to say people still show up “despite” of Helton to Rockies games? He is still, and will always be, one of the Rockies most popular players even with his on field production dropping off significantly over the last few years. You will see just as many Helton jerseys as Tulo jerseys at Coors. I think you are giving too much credit to on field production in the here and now as it relates to attendance.

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      • BlackOps says:

        He’s saying people won’t show up if the Rockies don’t have a legitimate shot at making he playoffs, and they won’t. He’s also saying that having a shot at the playoffs is due to the on-field performances of Tulo, Gonzalez, and Jimenez, not because they like Helton. I think you’d be crazy to claim that Helton was ever as popular as Tulowitzki is now, anyway. He’s been the best player in franchise history, but nobody will come to a game just to see Todd Helton in his demise, unless it’s his LAST one.

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  18. Doug Melvin says:

    This is going to be like European soccer, where almost every team ends up massively in debt for self-inflicted inflation.

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  19. Z says:

    Zito was not an extension. If sandovoal got an extension it would be nowhere near 100k. Same goes for Wilson and probably Cain seeing as only 4 pitchers have and honestly neither Cain nor Wilson are that great (good but not 100k good.)

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  20. Matt Sc says:

    Much of this has to do with asymmetric information. Players are more accurately valued by the team they are currently members of compared to the league as a whole. They are simply privy to more information. You can see this demonstrated by the difference in injury rates between free agents who sign with their current club/who are extended in arbitration vs. free agents who sign with a new ball club (check out Pindyck and Rubenfield, Microeconomics for more info).
    Teams will then be signing on average better players compared to those they let reach free agency. And paying a premium to do so…

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    • chuckb says:

      There is asymmetric information available but that doesn’t matter that teams are “more accurately valued by the team they’re currently members of” than they are the other teams. We’re also talking, for the most part, about so-called “franchise players” — players who are believed to have some value to the franchise beyond what they provide on the field. Therefore, it’s possible that these teams are biased in the players favor when other teams may be able to value them more objectively. Their current teams are more likely to pay for past performance (possibly, this needs to be tested) while other teams are more likely to pay for future performance.

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  21. DavidYoungTBLA says:

    When you look at the most expensive contract extensions ever, isn’t it more likely that it will be hard to earn that much value? The extensions that paid off big aren’t going to be amongst the most expensive.

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  22. Tigerdog says:

    Case Study: Detroit Tigers
    Free Agents: Pudge Rodriguez, Magglio Ordonez, Kenny Rogers, Todd Jones, Troy Percival, Jose Valverde, Johnny Damon, Adam Everett, Brandon Lyon.

    Extensions: Miguel Cabrera, Justin Verlander, Placido Polanco (the good ones end there), Jeremy Bonderman, Dontrelle Willis, Nate Robertson, Gary Sheffield, Carlos Guillen, Brandon Inge, Everett, Jones, and Rogers again, and you can add the option picked up for Pudge and Magglio’s $ 18 million option which was allowed to vest.

    The vast majority of free agent signings have been successful, and the majority of extensions have blown up on them. Yet the Tigers signed fewer free agents than any team in the league from 2006 thru 2010, instead handing out lavish extensions to unproven players or washed up veterans. The result was $80 million of bad contracts (bad being no other GM would take the contract and player, even for free) in two consecutive years.

    This winter, they’ve gone back to the free agent market, at least so far, but they’ve also signed extensions for Inge and Peralta, and they’re chasing down Boras to do a deal for Ordonez.

    The numbers in these contracts are not on the scale of the big deals that are the subject of Alex’s article, but the trend is the same. Free agent signings have been very selective but effective, while the extension business hasn’t worked well at all. Hopefully, the Verlander, Cabrera, and next Ordonez deals don’t backfire!

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  23. TexasRanger says:

    I just gotta ask how is Johan Santana not an unmitigated disaster? He was a 2 mill surplus in 08 (going on fg WAR.) Then an 8 million loss in 09, a 7 mill loss in 10 and has clearly sharply declined in talent as his price goes up. He is going to rack up generously a 30 million deficit for the Mets over the life of the contract, probably closer to 40.

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  24. Noli says:

    “Four of them have gone to free agent pitchers.”

    I believe there are five – brown, hampton, santana, sabathia and zito

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  25. Rally says:

    “This is discouraging, considering that teams ought to have a competitive advantage when it comes to evaluating their own players: they see more of their own players than anyone and know more about their players’ health than anyone.”

    That idea might apply to lessor players. A team has better information on a 21 year old in AA in their system than one in another team’s system. But when you are talking about the biggest superstars, the guys who are candidates for 100 million dollar contracts, there really isn’t any secret information. There is just too much attention on these guys.

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    • Erik says:

      What if part of the problem is that they THINK they have more information, so they underestimate the risk and therefore overpay? It’s probably easy for an outside club to look at a player, even if he’s been heavily scrutinized, and come up with a number of potential pitfalls. Maybe the current club thinks they “know the answer” to each of these pitfalls–they have definitive information on injury history, personality, etc, and consider past performance more indicative of future performance?

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  26. Shagomir says:

    Santana was not a free agent – he was traded to the Mets with 1 year of team control remaining, and then signed to that ridiculous extension.

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    • Shagomir says:

      oops misread that. sorry.

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    • NEPP says:

      At the time, he was one of the top 3 pitchers in baseball and he had a fairly good track record health-wise. It didn’t SEEM like a disaster when it happened.

      Sure, there were warning signs like his dip in velocity prior to the trade but it was clearcut.

      Mind you, I’m am NOT a Mets fan so dont think I’m just drinking Mets koolaid on that one. Much like the Beltran deal, it seemed like a good idea at the time.

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  27. waynetolleson says:

    I don’t see how the Derek Jeter contract was a disaster. The guy got 1918 hits – would have been 2000 were it not for Ken Huckaby – over the deal, along with 980 runs scored. He was the face of a franchise that made the playoffs nine of those ten years, made the WS three times, and won a championship.

    If that’s a disaster, I’ll sign-up for that disaster any day of the week.

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    • DL80 says:

      So Jeter would have gotten 82 hits in those 36 games he missed?

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      • chuckb says:

        and hits and runs scored are the ultimate arbiter of whether or not a contract is worthwhile?

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      • Synovia says:

        If you’re talking about a team with a television contract like the yankees, it could be argued that wins are worth significantly north of 4M, and that things like hits (as they get close to 3000) do have monetary value to the team.

        The yankees pay Arod bonuses for home run milestones. Do you think they do that out of the goodness of their hearts, or becase they expect to make money off those milestones?

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      • waynetolleson says:

        Derek Jeter had 156 hits in 119 games, or 1.3 hits per game, in 2003. Had he played his usual 150 or so games, Jeter likely would have reached 200 hits, or come darn near to it.

        And, yes, hits and runs scored do, in fact, matter. I know that this must be mind-blowing to a website that looks only at things like wOBA, eQa, and WAR, but when a guy amasses nearly 3000 hits in a fifteen-year career, that’s pretty darn impressive.

        Derek Jeter will soon be the most overrated player in the history of the game with 3000 hits, 1800 runs scored, 500 2B, and five World Championships.

        Man, he sucks! He has been such a detriment to the Yankees over his career.

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  28. Yuni Betancourt says:

    This guy DownwiththeDH is a jerkoff.

    To say that this is the “poorest attempt at describing a worthwhile subject I’ve read on this site in a year” is a bit overblown.

    Why don’t you write an article and let the rest of us critique it asshole? I’m sure I would have some choice words for your (shitty) work product.

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  29. AJ says:

    The premium paid to keep a player via extension is hard to quantify, in my opinion, simply because you have no way of knowing how badly another team may want that player. In FA, all it takes is for 1 crazy owner to REALLY want someone and you end up with the Arod contract (1st one). For example, the case of Minn extending Mauer. It cost Minn a ton of money, boatloads for a small market (mid market?) team…but had he hit the market, it is quite possible that it would have taken more, much more, money to keep him (considering the NYY and BOS catching situations). While in the case of the Ryan Howard extension, maybe the premium paid was too high…as the big spenders (again NYY and BOS) now seem to have 1B locked up for a while, and letting Howard hit FA may have been an opportunity to retain him more cheaply. Interesting discussion for sure..and that’s not even getting into agents, and the policy of some to encourage their clients to never extend, rather to always test FA (Boras).

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  30. LD303 says:

    How did Todd Helton find time in the past however many years to go to the house of every mainstream sportswriter and no name blogger in America and kick every last one of their dogs? This is the nth article I’ve seen since the Tulo extension describing Helton’s extension as some kind of failure. “Unmitigated disaster” is the most hyperbolic term yet, so kudos to Remington for that. I still don’t get it though. Regardless of if you prefer FG or BBR WAR (not opening that box, just saying, there are people in both camps) the contract has been a mild overpay with one season to go. Sure, he was bad in 08 and 10 but in 09 he was a 3+ WAR guy, so it’s fair to imagine he’ll add at least a little more value this year. Why? Why why why? Why is everyone convinced that it was a bad contract? Is it because it was signed at relatively the same time as Hampton’s? Are there really THAT many sportswriters and bloggers out there all saying “DURR HAMPTON’S CONTRACT WAS BAD AND HELTON HASN’T AGED LIKE BARRY BONDS DID SO HIS IS BAD TOO DERP DERP DERP?” Really mystifies me.

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    • Fine, “unmitigated disaster” is hyperbole. But they’re stuck paying him somewhere between $40 and $50 million that they don’t want to pay him. If that isn’t disastrous, it’s somewhere close. $50 million dollars is a lot of money to waste.

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      • LD303 says:

        Where are you getting your numbers from? As for the money they still owe him, he reworked and deferred some of the money from the final 2 years of his contract (while signing a small extension) before last season. So far, they have paid him $119 MM from that deal. Here’s what they still owe him:

        2011: $4.6 MM signing bonus (part of the reworking) + $6 MM in salary = $10.6 MM
        2012: $4.9 MM
        2013: $5 MM
        And $13.1 MM is deferred. Even with 3% interest on the deferred portion, the total ends up being somewhere around $35 MM. Really, had they not done the restructuring, they’d have owed him $9.9 MM less than that (the value of the 2012 and 2013 base contracts, which were a separate extension). If you want to include that in the total, I suppose you can since it was part of a restructuring effort to give the team money to spend this offseason, but it’s still not technically part of the original extension. Whatever, we’ll count it, and say that the total value of the contract is roughly $155 MM. So how are we calculating value? You don’t seem to care about “value to the franchise” or other intangibles like that, so let’s go ahead and just use WAR like most people. By either FG or BBR, he’s been worth about 31.5 WAR since he signed the deal. Tangotiger says 1 WAR on the FA market is worth about $4.6 MM, which is below the $5 MM estimate a lot of people throw around but we’ll go with $4.6 MM for your sake. Given that, it seems Helton has been (conservatively) worth $144.9 MM so far. That means the contract is basically paid for (even with the extra extension) if he sits down tomorrow and doesn’t play another game. He probably will, and I’m sure he can pile up 2 WAR in the next 2 seasons- he was almost at 4 WAR in 2009- to make the contract a wash before you even factor in the intangible “face of the franchse/puts butts in seats” stuff. Your assertion that they have this balance remaining that they “don’t want to pay him” isn’t really a good way to approach value. They do want to have him around- he’s still at least an average player and the farm system doesn’t have an 1B talent coming up anytime soon- they’re just going to overpay him for the next couple years. Which is fine, because at the beginning of the deal, when he was a 7 WAR player, they were underpaying him.

        See how that works? It took me 5 minutes to find all that information and 8 minutes to type it up. Try it next time you’re going to write an article! It’ll really help your credibility.

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    • waynetolleson says:

      You have to understand we’re on Fangraphs. This is a website that really thinks that one statistic, WAR, really sums-up a player’s value and performance down to the last decimal point. This is the website where because of how some mathematicians have chosen to weight certain metrics, players like Derek Jeter and Todd Helton are “unmitigated disasters” who have weighted down their teams with their onerous contracts.

      Meanwhile, players like Adrian Beltre are worth every single penny, well, because they said so, dammit. Get with the program.

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  31. joe lefko says:

    Teams aren’t just bidding against themselves in contract extensions. They’re bidding against the market, and how expensive their player, who they clearly don’t want to lose once eligible for free agency, might become. Suppose the Phillies had extended Werth a year ago, for an extra 6 years at 108 million. We’d assume it was an overpay, that they bid against themselves. We’d never get the opportunity to know that they actually saved money (assuming they would actually want him back, which in this case, they didn’t).

    The problem is that teams don’t set the price of $/WAR they want to pay a player, the market does. Overpaying isn’t giving a guy more money than we’d expect, assuming a certain $/WAR, it’s paying a higher $/WAR rate than what the market set. And teams aren’t dealing with perfect information on what that rate is.

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  32. Michael says:

    People keep on listing both A-Rod contracts as the two highest ever, but since he opted out after 2007, his first contract was actually only a 7 year $158 million contract, giving him the the first and 7th largest contracts, right behind Manny.

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  33. Leo Martin says:

    Very interesting piece Alex, and the discussion in comments has raised a lot of good ideas. A few more thoughts:

    1. I question the idea that contracts where team overpaid by “only” $15-20M weren’t disasters. They’re at least losing bets. Remember, even a contract where a team pays exactly market rate for the wins they end up getting isn’t necessarily a “win” for the team, it’s just market neutral. And that doesn’t factor in what marginal wins are worth to different teams. Having a $100M player on your books for the next 8 years isn’t necessarily a god idea if your franchise is noncompetitive for most of that period.

    2. Length of deal could be an interesting angle on this. Deals spread out over more years should be riskier (I suspect) because there’s more time for the player to get injured/have skills deteriorate. It’s just harder to project production further into the future. I wonder if length of deal correlates with whether a $100M contract was an extension or a FA deal.

    3. Building on the idea of the “full market value” of a player to his current team (including PR/marketing aspects, rewarding the player for past performance to build credibility on the FA market, etc.), there may be a simple psychological aspect to this. I think it may be harder for a front office — both emotionally as an organization, and in terms of local PR — to lose a star player they’ve enjoyed having, and become accustomed to having, than to not acquire one they’ve never had before. There are many things in life that if I’d never gotten used to having I probably wouldn’t care about, but now that I’m used to them, you’d have to pry them from my cold dead hands. Toaster waffles or my iPhone, for example.

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  34. mk says:

    jeter an overexpensive success?

    i can understand how someone would look at 180 some million bucks and reflexively think “he can’t be worth that much.” but vis a vis other player contracts it’s pretty hard to argue that jeter was overpaid during the 2000s. i mean, the only players i would even consider to be more valuable than jeter during the past 10 yrs would be manny and pujols……and personallyi still think if i could have one guy during that stretch it would have been jeter. anyway, i find it hard to believe that the yankees feel the contract was any kind of mistake.

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    • I’m sure the Yankees have no regrets on Jeter’s contract, because they can afford it. But $189 million is significantly more than any other team would have paid him for his production.

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      • And that really doesn’t matter. Jeter’s brand is WORTH more to the Yankees than any team. Just like Tulowitzki’s brand is worth more to the Rockies than any team. Revenue comes from ticket sales, and fans want to go see a player they have rooted for since the beginning. Helton jerseys still populate Coors Field more than any other. The increased revenue from having that brand is really being understated here.

        Carlos Pena is a better player than Todd Helton now, but replacing Helton with Pena on the roster would significantly hurt the fanbase, and consequently, the ticket sale revenue. Ignoring this very obvious effect in favor of strictly on field performance is a frighteningly incomplete analysis. It doesn’t apply to all players. Teams pay a premium for franchise players, and that premium pays for off the field effects as well.

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      • vivaelpujols says:

        Oh give the indigence a rest. Jack has know idea how many added revenue Helton generated, and neither do you. How is he supposed to account for that, just guess, or assume that it all evens out?

        At any rate, it would still be overpay for Jeter. They could have have paid less for Jeter.

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      • Mr. wOBAto says:

        Unless of course Boston had decided to overpay Jeter, then the Yankees have the stream of below average replacement the Sox did over that time period, and then who is the face of the Yankees?

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  35. mk says:

    also, i’d point out that these owners are professional businessmen. they didn’t get rich enough to own pro sports teams by wasting money. you gotta figure that aside from the occasional mistake—many of which rightly pointed out here—owners are paying players the exact right amount to profit handsomely off their services.

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    • They got rich in entirely different industries. Jeffrey Loria got rich in the art world; Frank McCourt got rich in real estate. Nintendo got rich from video games; Liberty Media got rich from providing TV programming in hotel rooms. What do they know about running a baseball team? You shouldn’t automatically assume that someone who’s rich has specialized knowledge about an industry they’ve never worked in before.

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  36. Mike says:

    I hear what you’re saying about the “Yankee Effect,” but I’m not quite buying it, no pun intended. The Yankees target specific players they need, as we’re seeing right now with Cliff Lee. That is driving up the price, although it’s a dance right now between both the Rangers and the Yankees that’s setting Lee’s price. The Yankees did drive up the price on Carl Crawford because the Angels offer was low and once the Red Sox stepped in, the Yankees were going to make sure their long-time rival paid at least market price, or as it turns out, more so. The Red Sox do the same back to the Yankees, putting in a seven-year offer for Lee to help drive up that price. (BTW Are they really doing themselves favors with this approach?)

    Yet most of the times the Yankees are not in on the many of the free agents and it’s obvious that their not. Werth wasn’t even on their radar. Did the Yankee Effect set that price? No. The Yankees were not players in Jason Bay or Matt Holliday last year and it was obvious they weren’t. They had nothing to do with what seemed like overpays for both players. Yet are they overpays? Since free agency started, every new contract seems like an overpay. The trend is constantly upward, and that’s all we’re seeing. It would be going on regardless of the Yankees.

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  37. astat says:

    How has no one else rec’d LD303′s rant?

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  38. Rawktober says:

    Anyone that wants to see some actual data related to the value provided by the large contracts discussed here, see my article at:

    http://www.purplerow.com/2010/12/10/1868418/helton-contract-is-not-an-unmitigated-disaster

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  39. Kyle says:

    The Yankee effect doesn’t have to mean that every free agent is paid too much, because the Yankees were targeting signing that player for more than anyone else. It’s just when one team constantly pays too much for too long, other teams feel like they have to overpay. Plus, many players share agents. And if you want to sign one player later on who shares that agent, you overpay for another player. It’s sad, but true. You take care of an agent’s player who maybe had a down year, but is still good, and he might not rape you as much when signing a player you really want later on. Or just let you make tons of offers while the Yankees will just outbid them in the end while other free agents go other places.

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  40. BRIAN says:

    Tulo and Mauer TOGETHER that more valuable than Tex but certainly not seperately.

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  41. Z says:

    I think the biggest problem with trying to find a diffrence between a contract extension and a fa is that usually the player will get a fair price, if he gives them a discount it’s usually fairly small. It’s not like we have no idea how much a player will get in fa, on the contrary, I’m sure the players agent has a very good idea of what his client would get in fa. Also, whenever we see a “great” contract extension, most of it covers mostly arb years and it’s cheeper in general because at this point a player has not ammased much money. They give a large discount for security. After a player has earned fifty mill he really has no need for security, at least money security.

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  42. neuter_your_dogma says:

    Isn’t there added value in extending/resigning one’s own players b/c the extending/resigning team doesn’t give up high draft picks the team would give up by signing an equivalent free agent from another team (assuming the player is a type A)?

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  43. Nish says:

    I think you’re overlooking the fact that some teams may be forecasting far higher market salaries for players in the near future, and therefore want to lock them up now (like homeowners refinancing their mortgages). In the past 2 decades, salaries have increased much more rapidly than anyone would have expected. If dollar inflation increases and/or baseball revenues increase at fast pace, then paying Tulowitzki $15M a year may end up looking like an absolute steal for the Rockies, even if he is only league-average by then.

    On a related note, part of the reason so many of the contract extensions you cite look so bad is because you’re using the absolute cut-off of $100M contracts. Those all only occurred in the past 10 years, so you are biased toward only 1 era. And it was an era in the beginning of which many GMs probably (and ultimately incorrectly) assumed salaries would continue to increase exponentially. Maybe in earlier eras, relatively rich contract extensions had a higher rate of success due to a combination of solid player performance and ever-escalating average salaries.

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