Article: What A Miguel Sano Long-Term Contract Might Look Like

[nicksaviking]

 

Thanks, so there is some risk but more for pitchers probably. Seems like the extensions for position players tend to fall somewhere between "good deal" and "stupidly good deal" with very rare exceptions (Gyorko and... any others?)

 

Jose Tabata and Starlin Castro. Again, just off the top of my head though. 

 

Still, I'd rather crap out on a deal like this to a youngster than a veteran.  I'd guess the Cubs have a better chance of moving Castro and his ugly contract than the Twins do of moving Hughes, Santana or Mauer.  (Not to praise the Cubs, they found it just as difficult to move Edwin Jackson)

[nicksaviking]

 

Nick Blackburn? Or was he already in his arb years when he signed his deal,

 

I don't think so, good one.

[nicksaviking]

 

 

I think that's because elite position players stopped hitting the market, not due to any reluctance in offering a $30m a year contract.

 

It's hard to offer Mike Trout a $300m deal when the Mike Trouts of the world get locked up for 8+ years the moment they hit the show.

 

A-Rod was 25 when he signed that monster deal with the Rangers. We simply do not see players of his calibre hit the free agent market at age 25 anymore. Hell, we rarely see them hit the market at age 28 anymore.

 

Who's the best player to switch teams in a monster deal in the past few years? Cano? Sure, he's an elite player but he was 32 years old and he's elite, not legendary... A-Rod was a legendary-type player and was worth ~20 WAR over Cano during their first ten seasons in MLB.

 

And with the PED era in the rearview mirror (knock on wood) teams realized the foolishness in giving these monster contracts to players in their mid-30s.

[Willihammer]

 

Jose Tabata and Starlin Castro. Again, just off the top of my head though. 

 

Still, I'd rather crap out on a deal like this to a youngster than a veteran.  I'd guess the Cubs have a better chance of moving Castro and his ugly contract than the Twins do of moving Hughes, Santana or Mauer.  (Not to praise the Cubs, they found it just as difficult to move Edwin Jackson)

I'd almost say those are two examples proving the risk is not so bad if you sign early enough. Tabata's expires after next year and while he's only been worth 1 WAR to date, that's just a $15m gamble. Castro has been paid $17m to put up 3.4 WAR so far. He is owed another 4/40. Had he not signed the extension he would be a FA  this winter. What would he have signed for? My guess is someone would have given him a 2 year deal at least. So again, fairly marginal compared to late-signed extensions eg. Andrus.

 

edit: correction, Castro wouldn't be a FA til next winter.

Edited August 20, 2015 by Willihammer

[markos]

 

Salary inflation at the top end is not very well understood.  Most think it is much higher than it actually is.

 

In 2000, the highest paid player was A-Rod at $25M.  It took seven years for another contract for a position player to top that one, A-Rod Again at $27.5M per year.  It took seven years for the top player to get paid 10% more.

 

Fast forward seven more years, the top position player is Miguel Cabrera at $29.2M per year.  It took another seven years to move the top salary 6%.

 

If the inflation from A-Rod's $25M in 2000 was 8% per year, the top player in 2007 would have made $42.8M and in 2014 $68M.

 

Now the risk of Sano becoming a markedly better player than Cabrera and A-Rod is very low.  That is why throwing out numbers in the $30M range per FA year seems like we aren't getting a real discount.  Just prepaying the guy and taking all the risk.

If you strip away the A-Rod contract (and remove the Roger Clemons one year deals), the broader upward trend holds. 

 

1) Highest AAV in 2000 was Kevin Brown at $15MM.

Highest AAV in 2009 (again, non A-Rod) was CC Sabathia at $23MM. 

Increase of 53%, which is ~4.5% increase per year

 

2) Highest AAV in 2009 (again, non A-Rod) was CC Sabathia at $23MM.

Highest AAV in 2015 is Cabrera at $31MM

Increase of 38%, or 5.1% per year.

 

3) Cabrera signed his first big deal in 2008 with a $19MM AAV. He just signed an extension that is a $31MM AAV.  63% increase in only 7 years (7.2% per year).

 

4) Only 6 players in 2010 had ever reached an AAV over $20MM. Now there are 39 players. 

 

I will concede that 8% salary inflation is probably too much, but I definitely think that at least 5% is what we are seeing right now. If trends continue, I don't see why good-but-not great players won't be getting $30MM AAV in 6 years, just like how $20MM AAV contracts are given today to players like Choo, Porcello and Sandoval.

[spanman2]

If I am the Twins I do the deal yesterday...if I am Sano the question I am asking myself is do I want the 72 or so million GUARANTEED or do I want to go year to year? If as Seth suggests at 30 he signs ANOTHER contract (assuming good health etc.) by that time Sano could be a 35-40 mill/year or so player. I would imagine he could get a 7 year deal at 30 years of age. 8yrs/72 mill 7yrs/245 mill 317mill/15=about 21mill/yr avg for his career. Not such a bad gig. Obviously we are all dealing in 'what if's". But if I am the Twins I would go for it. Eventually Mauer/Santana/Nolasco are off the books in the few upcoming seasons. I can't imagine Hunter being back next year. The $$$ should not be the issue. We have heard/been sold who the future is. I like the Longoria approach. WIN TWINS

[spanman2]

If I am the Twins I do the deal yesterday...if I am Sano the question I am asking myself is do I want the 72 or so million GUARANTEED or do I want to go year to year? If as Seth suggests at 30 he signs ANOTHER contract (assuming good health etc.) by that time Sano could be a 35-40 mill/year or so player. I would imagine he could get a 7 year deal at 30 years of age. 8yrs/72 mill 7yrs/245 mill 317mill/15=about 21mill/yr avg for his career. Not such a bad gig. Obviously we are all dealing in 'what if's". But if I am the Twins I would go for it. Eventually Mauer/Santana/Nolasco are off the books in the few upcoming seasons. I can't imagine Hunter being back next year. The $$$ should not be the issue. We have heard/been sold who the future is. I like the Longoria approach if you are truly all in on his future and believe in him. WIN TWINS

[Brock Beauchamp]

 

Salary inflation at the top end is not very well understood.  Most think it is much higher than it actually is.

 

In 2000, the highest paid player was A-Rod at $25M.  It took seven years for another contract for a position player to top that one, A-Rod Again at $27.5M per year.  It took seven years for the top player to get paid 10% more.

 

Fast forward seven more years, the top position player is Miguel Cabrera at $29.2M per year.  It took another seven years to move the top salary 6%.

 

If the inflation from A-Rod's $25M in 2000 was 8% per year, the top player in 2007 would have made $42.8M and in 2014 $68M.

 

Now the risk of Sano becoming a markedly better player than Cabrera and A-Rod is very low.  That is why throwing out numbers in the $30M range per FA year seems like we aren't getting a real discount.  Just prepaying the guy and taking all the risk.

The problem with your analysis is that you're not taking into account three things, all revolving around A-Rod:

 

1. He was 25 years old when he became a free agent, which is absurdly young.

 

2. He was nearly a shoe-in for the HoF at age 25. He was that good. Free agents of his ability come around maybe once a decade and almost never at his age.

 

3. The Rangers went absolutely insane and bid against themselves during negotiations. They had the top two or three offers on the table IIRC.

 

As Markos pointed out, remove A-Rod's special circumstances and you have a much more linear upward graph for the elite players in baseball.

 

To imagine the 2000 A-Rod situation and compare it to a theoretical situation, pretend it's 2017 and Mike Trout is a free agent. He's 25 years old and is coming off yet another 8-9 WAR season. Can you imagine a situation where he doesn't get a 10 year, $350m+ deal in that situation? Stanton got $325m and he's not even close to Trout in ability. Kershaw has a contract that bought out his free agency years at roughly $35m AAV and he's a friggin' pitcher.

 

That was the A-Rod situation in 2000. A-Rod was an outlier that should be removed entirely because he screws up the entire curve, just as this hypothetical Trout would in 2017.

[Jham]

Tobi, extremely good point and well stated. Nice to be talking about locking up am elite talent. But yeah, it puts into perspective the twins flaws in their unwillingness to sign elite free agent talent. Your advantage in growing your own, might be only for a year or two if you plan to keep them anyway.

[Jham]

Brock, excellent counter point,trout still looks like a bargain at this point. Is that an argument for waiting until arb though?

[Brock Beauchamp]

 

Brock, excellent counter point,trout still looks like a bargain at this point. Is that an argument for waiting until arb though?

Ultimately, I don't think it matters. After the absolute steal the Rays got with Longoria, I don't see players giving huge discounts to sign super-early. If Sano signs today, I don't think it's a huge savings over signing him 14 months from now. Maybe $5-10m. Spread out over 5+ years, that's not enough to get worked up about.

 

But I'll be disappointed if the Twins haven't approached Sano by November of 2016 if he continues to produce the way he has thus far.

[Oxtung]

A couple of points. First, it is important to keep in mind that Sano has a BABIP >.400 and when that comes back to earth so will the rest of his stats (not that he will be bad just that he is going to regress some). So while he is playing very well, and hopefully will continue to improve there will also be a natural decline do to his BABIP. Just something to take into account.

 

Second, does the fact that the Twins were unable/unwilling to buy out any of Doziers FA years have any impact on these negotiations? Does that add leverage to Sano?

[mickeymental]

 

Ultimately, I don't think it matters. After the absolute steal the Rays got with Longoria, I don't see players giving huge discounts to sign super-early. If Sano signs today, I don't think it's a huge savings over signing him 14 months from now. Maybe $5-10m. Spread out over 5+ years, that's not enough to get worked up about.

 

But I'll be disappointed if the Twins haven't approached Sano by November of 2016 if he continues to produce the way he has thus far.

one thing to keep in mind: you can bet we're talking about a young man who's just itching to get his hands on some of the big money. does it really matter if it's $18 million or $78 million or anywhere in between? especially when there's likely to be endorsements and another giant payday down the road? i know if i was ever in THAT line, i'd rather have it now than wait a few years ...

[Otto von Ballpark]

Ultimately, I don't think it matters. After the absolute steal the Rays got with Longoria, I don't see players giving huge discounts to sign super-early. If Sano signs today, I don't think it's a huge savings over signing him 14 months from now. Maybe $5-10m. Spread out over 5+ years, that's not enough to get worked up about.

 

 

The difference might not be evident in total money, but just whether he is willing to sign such a deal at all.

[Brock Beauchamp]

 

The difference might not be evident in total money, but just whether he is willing to sign such a deal at all.

True. I suppose there is a possibility of that, though I think it's unlikely. Given Sano's young age, he can take the financial security today and still hit the free agent market as a 29/30 year old. That's kind of the best of both worlds for him.

[d-mac]

 

Player salaries have eclipsed inflation by several magnitude over the past 40 years.

 

Time value of money has nothing to do with inflation. It's about opportunity cost. #Economisted

[Brock Beauchamp]

Time value of money has nothing to do with inflation. It's about opportunity cost. #Economisted

A fair point. I know I kick myself for sitting on money for too long and investing later than I should have invested.

[Otto von Ballpark]

True. I suppose there is a possibility of that, though I think it's unlikely. Given Sano's young age, he can take the financial security today and still hit the free agent market as a 29/30 year old. That's kind of the best of both worlds for him.

True, he will still be 2 years away from arb after 2016. Twins have historically been pretty gun shy from early extensions, though -- they even waited until the most obvious extension candidate in the world Mauer was eligible for arb and already won a batting title.

 

Would be nice to see some more aggressiveness locking up elite talent early, even if it is ultimately only $5-10 mil savings. It would be a good sign for this FO.

[d-mac]

 

 

I will concede that 8% salary inflation is probably too much, but I definitely think that at least 5% is what we are seeing right now. If trends continue, I don't see why good-but-not great players won't be getting $30MM AAV in 6 years, just like how $20MM AAV contracts are given today to players like Choo, Porcello and Sandoval.

 

If that's the case is why don't we see more good to elite players forgo pre-arb contracts in order to maximize their free agent earnings? Other than Scott Boras clients, that is.

 

My thoughts are that: A.) 2019 dollars are may be only worth 80 cents in today's dollars. Intuitively most people understand that and don't have to be an economist or finance expert in order to do so. $30(.8)= $24.

 

B.) Financial security and stability is strongly valued, especially so in such a high risk profession as professional athletics.

 

And C.) Law of diminishing returns show up. $10 million is a lot of money to all of us, but the difference between $20 and $30 million is not that great. Even after taxes are removed, all a family's needs and wants that are satisfied at $30 million can be satisfied for $20. 

 

Taking these factors into account lead me to conclude, that given a choice between a big payday today or an even bigger payday in the future, even when accounting for inflated baseball salaries most people would choose the money today.

 

Furthermore, the assumption that baseball salaries will continue to outpace inflation by a magnitude of 2 to 3 times means that team revenues must continue to grow at least an equivalent rate indefinitely. While certainly possible, if not likely, we logically know that is not a certainty.  

[d-mac]

 

A fair point. I know I kick myself for sitting on money for too long and investing later than I should have invested.

 

Hindsight is always 20/20. But you aren't wrong in that inflation is a consideration in the time value of money, but it's not the guiding principal of the concept.

 

Opportunity Cost means that time is a resource. It's the question of "If I do X instead of Y, what do I give up by doing so?" People's time on on God's green earth is limited. So as a practical example- if I choose to go see a movie tonight at 6:30, I won't be able to watch the Twins game. The opportunity cost of going to the movie (beyond the financial cost of the ticket, popcorn and soda, and the gas I spent to drive there) is that I give up the opportunity to watch the Twins game. In financial terms that means that even after assuming zero inflation and zero interest rates, $1 today is always worth more than $1 tomorrow. I can exchange that dollar for goods and services sooner (and have more time to enjoy said good or service) than if I waited till tomorrow. 

[Shane Wahl]

If I were Sano and my agent even mentioned an 8-year, $73.3 million deal I would fire that agent on the spot.

[drjim]

They should make sure to sign him before Harper hits the market. I think he'll be the deal that really shifts the high end.

 

Probably over $500 mil.

[drjim]

I think John Sickels is on the extend Sano now bandwagon:

 

http://www.minorleagueball.com/2015/8/22/9189335/miguel-sano-superstar

[Shane Wahl]

I said somewhere 10/$175 million. I don't think the conversation even begins before then (nor should it). These low, low numbers are just completely ridiculous to talk about. It's 2015.

[kab21]

 

I said somewhere 10/$175 million. I don't think the conversation even begins before then (nor should it). These low, low numbers are just completely ridiculous to talk about. It's 2015.

Talking 10 years is ridiculous.  The best thing for Sano is to become a FA before he turns 30 and can potentially get a 300+M contract that takes him through the end of his career.

 

He will probably be game to sell one of his FA seasons for a lot of guaranteed money but that is probably all.  2 very hopeful but 3 is unrealistic.  4 is a complete fantasy.

[Brock Beauchamp]

Talking 10 years is ridiculous. The best thing for Sano is to become a FA before he turns 30 and can potentially get a 300+M contract that takes him through the end of his career.

 

He will probably be game to sell one of his FA seasons for a lot of guaranteed money but that is probably all. 2 very hopeful but 3 is unrealistic. 4 is a complete fantasy.

100% agreed. It makes no sense for Sano to take a ten year deal. If he hits FA, he'll want to do it at 29/30, not 32/33.

[61in61]

Discussion of a long term contract for someone who has not even faced every team in the American League a second time may be fun and interesting, but it's also very premature. Before we put Sano in the Hall of Fame, let's see how he reacts to all of the forthcoming adjustments, shifts, etc. Way too soon for this discussion.

[tobi0040]

 

The problem with your analysis is that you're not taking into account three things, all revolving around A-Rod:

 

1. He was 25 years old when he became a free agent, which is absurdly young.

 

2. He was nearly a shoe-in for the HoF at age 25. He was that good. Free agents of his ability come around maybe once a decade and almost never at his age.

 

3. The Rangers went absolutely insane and bid against themselves during negotiations. They had the top two or three offers on the table IIRC.

 

As Markos pointed out, remove A-Rod's special circumstances and you have a much more linear upward graph for the elite players in baseball.

 

To imagine the 2000 A-Rod situation and compare it to a theoretical situation, pretend it's 2017 and Mike Trout is a free agent. He's 25 years old and is coming off yet another 8-9 WAR season. Can you imagine a situation where he doesn't get a 10 year, $350m+ deal in that situation? Stanton got $325m and he's not even close to Trout in ability. Kershaw has a contract that bought out his free agency years at roughly $35m AAV and he's a friggin' pitcher.

 

That was the A-Rod situation in 2000. A-Rod was an outlier that should be removed entirely because he screws up the entire curve, just as this hypothetical Trout would in 2017.

 

I can't argue with #3.  But Manny signed a year after A-Rod.  Manny actually had a higher career OPS than A-Rod did at the time.   His $20M a year to Cabrera's deal in 2014 is about 3% a year.

 

Cabrera in 2007 had an OPS in A-Rod's range (.967 vs. .935) and he was 25 at the time.  Again $20M a year.

 

I think people get carried away about salary inflation.  Case and point, Harper and $500M.  His career OPS is .883 vs. Stanton's .909.  Stanton received 13/325

 

 

[nicksaviking]

One variable we should probably also consider is that Miguel Sano looks like he might have a pretty similar contemporary in Kris Bryant.  Bryant is represented by Scott Boras and plays for the big pocketed Chicago Cubs.  It may behoove the Twins to work out a deal with Sano first as the Cubs have a lot more room to offer a cartoonish contract.

[tobi0040]

 

One variable we should probably also consider is that Miguel Sano looks like he might have a pretty similar contemporary in Kris Bryant.  Bryant is represented by Scott Boras and plays for the big pocketed Chicago Cubs.  It may behoove the Twins to work out a deal with Sano first as the Cubs have a lot more room to offer a cartoonish contract.

 

I think that is a good point.  But Boras almost always goes year to year and takes his guy to market. If the Twins do that with Sano he is a 6-7 year player for us and nothing more.  So naturally a Sano deal is before a Bryant deal anyway.  Or he will be fitted for pinstripes, Dodger blue, or eating clam chowder.

Edited August 24, 2015 by tobi0040