The Curse Of The Unnecessary Contract Extension

When the Phillies gave first baseman Ryan Howard a five-year extension worth $125 million in April 2010, the deal was roundly ridiculed throughout baseball. Howard was a one-tool player, and older than most people realized — thanks to the presence of Jim Thome in Philly, his first stint as a full-time major leaguer came at 26. By the time GM Ruben Amaro Jr. gave him that suspect extension, Howard was already 30 years old.

Making matters worse, the deal didn’t even start immediately; instead, it was tacked on to the end of his contract. Starting in 2012, or almost two full seasons after it was signed, Howard’s new contract would run through the 2016 season, just shy of his 37th birthday.

If two seasons doesn’t seem like that long, think about what Major League Baseball looked like exactly two years ago. At this time in 2012, David Wright was coming off a monster first half, and Chase Headley was in the midst of a monster stretch run; both third basemen were arguably among the top five players in the game. Over in the American League, Derek Jeter was on his way to leading the majors in hits. Justin Verlander was a year removed from being the league MVP and Cy Young winner. Nobody had ever heard of Yasiel Puig. The Houston Astros were still in the National League.

In baseball, a lot can change in a short period of time.

Of course, the Phillies obviously couldn’t have anticipated that Howard would blow out his Achilles tendon in Game 5 of the 2011 NLCS. But that’s sort of the point. You can never be sure of what’s to come. When teams give long-term deals to free agents, it’s because they have to do so to persuade that player to pick them over other suitors. But when they give future extensions to players who still have years left on their deals, they add unnecessary risk to contracts that, by their sheer size, are already tremendously risky in the first place.

Howard has been a replacement-level nightmare since he signed his extension. But he’s not alone.

* * *

Just to be clear, the list that follows is of long-term extensions given to veteran players that didn’t start for at least two years from the time of signing — not the long-term deals that buy out a young player’s arbitration years, such as Evan Longoria‘s famous first contract days into his major league career, or extensions that came within a year of free agency, such as Matt Kemp‘s, Joe Mauer‘s and Clayton Kershaw‘s.

Over the past few seasons, there have been several examples of nine-figure contract extensions that didn’t begin until well into the future:

Note: In some cases, the terms reported differ from what is shown here, as some deals included existing years in the publicized total, like Hernandez getting “seven years for $175 million.” The figures offered here account for “new money” only.

So, how have these worked out?

So far, so good

Of the deals listed above, only two aren’t entirely problematic. Felix Hernandez‘s is one of them. In fact, King Felix has done more than just maintain his success in Seattle since signing his extension — he has actually improved. This season, the Mariners’ ace is on pace to become one of only two pitchers in the history of baseball to strike out more than a quarter of hitters while at the same time walking less than 5 percent and getting grounders from more than 55 percent of opponents. (Kershaw, also this year, is the other; we are witnessing greatness.)

Still, it could have easily gone a different way. Hernandez has had to compensate for decreased velocity, an issue that has derailed more than a few careers. Fortunately for the Mariners, the response to a loss in power was to develop the nastiest changeup in baseball.

Meanwhile, Troy Tulowitzki has done nothing but hit for the Colorado Rockies. In 2014, he has posted a career-best 172 wRC+ (weighted runs created plus) and proved himself to be the best shortstop in baseball. Of course, he’s again on the disabled list, and, considering he turns 30 in October, it’s not likely his repeated health issues are going to go away. This one looks OK for now but could easily turn.

Disaster zone

We’ve already talked about how awful Ryan Howard‘s deal has worked out, so rather than spend much more time on it, let’s take a moment to clarify that his poor performance has not entirely been because of the aforementioned Achilles injury.

Howard’s production was declining long before his ankle popped, with his OBP/SLG dropping from .360/.571 in 2009 to .353/.505 in 2010 and then to .346/.488 in 2011. Howard has been merely a replacement-level player, and he still has two years left on his deal. He’s been so bad that the Phillies might be ready to give up on their investment; we’ve heard whispers this year that they’re considering releasing Howard outright.

Ryan Zimmerman‘s deal was signed after a four-year stretch in which he’d had two phenomenal seasons (2009 and 2010) bookended by mediocre years ruined by injury (2008, shoulder; 2011, abdomen). He bounced back decently in 2012 and 2013, but continued right shoulder injuries ruined his throwing ability and turned a once-excellent defensive third baseman into a liability. Things got so bad that Zimmerman’s been forced out to left field this season. The Nats’ third baseman also missed nearly two months of 2014 because of a broken thumb, and he might miss the remainder of this season because of a hamstring injury. Soon to be 30, with an extensive injury history and with Anthony Rendon ready to take over third base, Zimmerman is still owed the bulk of his contract.

Storms on the horizon

The other deals on the list are either just getting started or haven’t begun yet, but there’s reason for concern about all of them.

The first year of Joey Votto‘s extension has been ruined by repeated quad injuries. Ryan Braun is still productive, but his value and playing time have been limited by a thumb injury, an oblique injury and his well-publicized off-field issues — yet his extension somehow still doesn’t start for two more seasons. Evan Longoria is having the worst year of his career; his .398 slugging percentage is barely higher than Dee Gordon‘s. And he’s still a full five years from his extension kicking in!

Elvis Andrus is still valuable because of his speed and defense, but, after hitting .283/.348/.370 in the two years leading up to his agreement, he’s at .272/.327/.339 in the two years since.

Then there are the two Detroit Tigers deals, neither of which has even started yet and both of which could be the most problematic of all. Justin Verlander‘s velocity has fallen off a cliff — he once dominated with his power but has averaged only 92 mph in his past two starts — as has his production. Incredibly, he might be the Tigers’ fifth-best starter now that David Price is in town. You have to think the Tigers wish they still had Verlander under his original contract, which paid him $20 million this year and guaranteed nothing after.

Miguel Cabrera is having another excellent year, although not quite by his usual standards; his 143 wRC+ is outstanding, but also the lowest it has been since 2009. He’ll keep hitting for some time. But the Tigers already had him locked up through next season. That they decided to guarantee $248 million in new money through his age-40 season was jaw-dropping.

The best gauge of whether these future extensions make sense is to speculate which teams would still offer them knowing what they know now. The best guess is that a vast majority of them wouldn’t.

Sentimental value aside, it simply doesn’t make sense to guarantee players the value of a small private island when they’re already under contract. In doing so, GMs forfeit the opportunity to gain more information and certainty on their investment — and subject themselves to any number of things that could go wrong. And yet, even as the wreckage of ill-advised deals piles up across the league, one team after another continues to take the dive.




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Mike Petriello used to write here, and now he does not. Find him at @mike_petriello or MLB.com.
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Yancy Eaton
Member
2 years 13 days ago

The Evan Longoria/Dee Gordon comp made me cry inside.

Jason
Member
Jason
2 years 9 days ago

That these sorts of contract extensions usually end up problematic is not exactly news. The more interesting question is why they happen. Two of the teams that issued the problematic contracts (the Nationals with Zimmerman and the Tigers with Cabrera and Verlander) have among the best front offices in baseball, front offices that seem to consider every angle, and as a result have built teams that have had a good recent run of excellence. What would make a front office that seems to always make smart, defensible decisions, give out these sorts of contracts? Surely the riskiness, and seeming lack of necessity of these types of contracts cannot have been lost on front offices this good. No offense, but I just don’t think this post is revealing anything new to Mike Rizzo or Dave Dombrowski.

As a fan, we just look at a player’s on-field production, compare it to his contract, and decide whether that player is worth it. But maybe it’s not so simple. Maybe these contracts provide value to teams, irrespective of the fact that the player’s on-field production is unlikely to justify the contract. These contracts are given to exceptional players, not marginal talents. All of these players have provided a tremendous amount of excessive value to their teams prior to these contract extensions. Maybe these teams recognize that they got these players at below-market rates for years, and are willing to balance that out by paying them above-market rates for the remainder of their careers? Maybe these teams want to signal to the rest of their players that they are willing to reward excellence, and aren’t just about penny-pinching and squeezing every bit of leverage they have over their players, and that signal is really worth something inside baseball, even if, as outsiders, we can’t really see it? Or maybe it’s just a case of smart people making a rare bad decision, and throwing millions of dollars away unnecessarily. But I’m not so sure about that, and I’m more interested in the question of why these deals happen than in a piece that points out the obvious, which is that they seem not to be worth it.

Aaron (UK)
Member
Aaron (UK)
2 years 5 days ago

Blimey, what’s Ryan Zimmerman done to deserve the disaster zone over and above the likes of Votto and Verlander?

Sure, it’s not looking a brilliant contract, but it’s “only” at $17m pa for 6 years, and a move to 1B at some point was well anticipated (though the Nats would have been hoping for 2016). If he can manage LF instead, so much the better – it will let Werth play 1B.

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