Should MLB teams opt for Contract Extensions or Free Agency

In my last article, I went over all 100M + free agent signings from 2007-2014. From that, we learned that in order to succeed as an MLB franchise, you should not pay retail. Drafting and fine tuning your players is the most successful path to take. You can then pay that player to extend his contract while he is still under club control, while maintaining a certain degree of leverage.

This is likely to be seen with current players such as Kris Bryant and Kyle Schwarber on the Cubs, Michael Fulmer on the Tigers, and upcoming players such as Gary Sanchez and Greg Bird on the Yankees. Simply, clubs want to lock up good players when they have them. But does signing large 100M+ extensions have any more efficacy than 100M+ free agent signings? To evaluate this, let’s look at the 100M+ contract extensions from 2007-2014. With a few exceptions, an average WAR under 3 is considered a bad verdict.

Player Years Money (Mill) WAR Avg Per Year Verdict
Johan Santana 6 137.50 3.8 Bad
Vernon Wells 7 126.00 1.1 Bad
Miguel Cabrera 8 153.30 5.8 Good
Joe Mauer 8 184.00 2.9 Bad
Troy Tulowitzki 10 157.75 4.0 Good
Ryan Howard 5 125.00 -.8 Bad
Matt Cain 6 127.50 .9 Bad
Adrian Gonzalez 7 154.00 3.8 Good
Matt Kemp 8 160.00 1.1 Bad
Cole Hamels 6 144.00 5.2 Good
Justin Verlander 7 180.00 2.6 Bad
Felix Hernandez 7 175.00 5.3 Good
David Wright 8 138.00 3.0 Bad
Buster Posey 9 167.00 5.4 Good
Homer Bailey 6 105.00 .7 Bad
Ryan Zimmerman 6 100.00 .6 Bad
Clayton Kershaw 7 215.00 7.5 Good
Freddie Freeman 8 135.00 3.1 Bad
Joey Votto 10 225.00 4.8 Good

 

So, clearly, these results are not much better than the track record for free agent signings. This conclusion  may seem surprising, since extensions always seem to have positive feelings associated with them, making us think of the Yankees locking up a young Derek Jeter, or the Cardinals extending Albert Pujols. But, these halcyon memories are always quick to offset the bad memories of extending the contracts of players such as Ryan Howard.

Let us look at the combined verdicts for extensions and free agent signings 100M + from 2007-2014.

Total: 38

Good: 15

Bad: 23

The key thing to note here is this: More than 60% of these signings proved regrettable. Of course, it is easy to criticize them retrospectively. Any sane person would say the Cubs would be crazy to not extend Kris Bryant with a 150M + contract. As a fan myself, even after this evidence conclusively shows the risk is not worth it, I would still extend him. Because let’s be honest, when it’s our favorite team, we always believe our free agent will be the one who is different. Our free agent will be the one who ages well, and our guy will be the one to prove these statistics wrong.

On a final note, it is important to realize that these kind of mistakes (signing big money players), are not just miniscule problems. In fact, they pose massive problems. These signing errors will damage a team for years, causing them to misallocate a massive amount of cash, budget, and time to a player who takes up a position simply because benching him would cost too much. Even the seemingly endless pockets of the Yankees have struggled as a result of this. Jacoby Ellsbury, Alex Rodriguez, Mark Texiera, and CC Sabathia (almost 700 Million in salaries), have all performed at a less than 3 win average over the duration of their contracts, and have contributed to the Yankee’s need to rebuild as an organization.  So again, the lesson, do not sign a big money deal.

Daniel Ziarko

Sports Analytics and Business, Indiana University

Stats from baseballreference.com

(AP Photo/David Banks)

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Posted in MLB

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