What A Miguel Sano Long-Term Contract Might Look Like

Yeah, I'd do that deal. I'd probably go more than $73.3.

Ideally the twins could go more like 10 and 100 and entice sano by overpaying more in the front years.  Is the deal laid out really saving the Twins much money?  I just don't see the value in "certainty", when you are locking him at Stanton or Trout rates.  I suppose you effectively sign him to a FA deal in the 3-68 range, which is something that wont' be available later.  You get fewer years but not a huge annual discount.

I do 10-100 if I was the twins because his floor is incredibly high. 10 and 100 averages to 10m a year. Have we any doubt that his bat alone is going to be worth that as a DH, even if he does not become a perennial MVP candidate? give him 600 AB's and he will hit 30 HR and walk 80 or more times. That is an incredible floor and makes it very unlikely this would backfire.

that sure beats the $4.11/hour he was making in Elizabethton.

Ideally the twins could go more like 10 and 100 and entice sano by overpaying more in the front years.  Is the deal laid out really saving the Twins much money?  I just don't see the value in "certainty", when you are locking him at Stanton or Trout rates.  I suppose you effectively sign him to a FA deal in the 3-68 range, which is something that wont' be available later.  You get fewer years but not a huge annual discount.

I do 10-100 if I was the twins because his floor is incredibly high. 10 and 100 averages to 10m a year. Have we any doubt that his bat alone is going to be worth that as a DH, even if he does not become a perennial MVP candidate? give him 600 AB's and he will hit 30 HR and walk 80 or more times. That is an incredible floor and makes it very unlikely this would backfire.

I think the deal that Seth laid out has a strong probability of saving the Twins a ton of money. Just looking at the arbitration years, Chris Davis just make $25MM over his three seasons, and he only had one superstar year and was actually pretty bad during his pre-arb seasons. Davis's arb seasons were in 2013-2015, whereas Sano's arb seasons will come in 2019-2021. Baseball salary inflation is pretty fast (8%-ish), so it wouldn't shock me that $25MM in 2013-2015 is $40MM in 2019-2021. And that is the baseline of a decent slugger with one great season. Imagine if Sano is actually really good, and then the arb numbers are probably $50MM-$60MM. Seth's deal limits his arb years to $25MM, which I think is easily a $15MM saving, and likely a $30MM or more.

Has there ever been a bad pre-arb extension in the history of these deals?

...before other agents and players start getting to him.

I think it's already too late for that. I'm sure his agent has already done the same research as Seth and more, and I'm sure players everywhere know what this young man can do to a pitched baseball. It's not a question of whether he gets a big long contract, it's when.

Jedd Gyorko, Dontrelle Willis and the Twins very own Joe Mays come to mind.

 

I'd do the deal, though I'd feel a lot more comfortable with the risk if the team wasn't already on the hook for Santana, Hughes, Nolasco, Suzuki and Mauer for what seems like an eternity.  Fortunately if Sano were to bust, he should still have options for the duration of most of those contracts. 

 

Do Sano, do Buxton, Berrios, May, Rosario, Hicks or whoever else looks like a good gamble in the next couple years, just no more long term deals to vets.

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?)

How about the sheer fact that we have reason to even talk about this sort of thing. Would it not be awesome if the Twins had a top Offensive players? Ryan Howard in his prime struck out a lot but would you have not taken his production in his prime years? 

One thing to keep in mind is the uncertainty around the CBA, which expires next year.  While I doubt it results in any major changes, it might make it harder to do something before 2017.

One thing working for a deal is that Sano's agent (Rob Plummer) has bootstrapped his way.  He also wants money sooner rather than later.  I suspect they will both want to have the Twins guarantee his controlled years.  Doubt they will sacrifice any years of FA.

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?)

Here are a couple of articles on Fangraphs about recent extensions. 

http://www.fangraphs.com/blogs/the-freddie-freeman-deal-as-a-market-correction/

http://www.fangraphs.com/blogs/the-perfectly-reasonable-christian-yelich-extension/

In the first article, Cameron points out maybe 6 total deals in the last few years (out of 50 total) that could be considered fails. 

Also, 8/$73MM to someone with less that 2 years of service time would be really close to other deals. Looking over the list of extensions, the biggest contract for someone with less that 2-years is Andrelton Simmons with 7/$58MM. Other deals for the likes of Yelich or Rizzo are more in the range of 7/$40-$50 with at least one additional option year. Sano's deal is a little more expensive, but given baseball salary inflation and the extra year, it isn't way out of line.

Here are a couple of articles on Fangraphs about recent extensions. 

http://www.fangraphs.com/blogs/the-freddie-freeman-deal-as-a-market-correction/

http://www.fangraphs.com/blogs/the-perfectly-reasonable-christian-yelich-extension/

 

In the first article, Cameron points out maybe 6 total deals in the last few years (out of 50 total) that could be considered fails. 

 

Also, 8/$73MM to someone with less that 2 years of service time would be really close to other deals. Looking over the list of extensions, the biggest contract for someone with less that 2-years is Andrelton Simmons with 7/$58MM. Other deals for the likes of Yelich or Rizzo are more in the range of 7/$40-$50 with at least one additional option year. Sano's deal is a little more expensive, but given baseball salary inflation and the extra year, it isn't way out of line.

Yeah, and 4/6 of the fails were pitchers.

This is why I would try to get a deal done this winter.

 

 

The argument in favor of those contracts was always that a lot could happen in six years, but Freeman’s deal shows that even waiting just an additional year or two will lead to significantly higher payouts, and the risk of injury or performance decline for many of these players over 12-24 months is just not that high.

The Freeman deal might look like the outlier right now, but I think it is more of a market correction that is going to become more common. Good young players are worth far more than they’ve been settling for over the last few years. The extension prices of the past few years were simply too slanted in favor of the teams, making a fair deal like the Freeman one seem like an overpay in comparison. Given how much money MLB teams have now, though, I don’t think they’re going to be able to force the genie back into the bottle; the Freeman deal is probably more of a trend than an outlier.

For reference, the deal was 8/135, signed after 324 games.

Freddie Freeman.

I think the deal that Seth laid out has a strong probability of saving the Twins a ton of money. Just looking at the arbitration years, Chris Davis just make $25MM over his three seasons, and he only had one superstar year and was actually pretty bad during his pre-arb seasons. Davis's arb seasons were in 2013-2015, whereas Sano's arb seasons will come in 2019-2021. Baseball salary inflation is pretty fast (8%-ish), so it wouldn't shock me that $25MM in 2013-2015 is $40MM in 2019-2021. And that is the baseline of a decent slugger with one great season. Imagine if Sano is actually really good, and then the arb numbers are probably $50MM-$60MM. Seth's deal limits his arb years to $25MM, which I think is easily a $15MM saving, and likely a $30MM or more.

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.

Time value of money. A dollar today is always worth more than a dollar tomorrow.

I don't know that the time value of money concept really applies in most sports contacts.  That assumes the players are saving a majority of their salary and investing it wisely.  In practice that seems to be the exception.

I am guessing what happen in most cases is the team owners calculate the value based on NPV analysis and prefer to backload the contracts. Conversely, players typically want their riches up front, not because they have a financial advisor ready but because they want to buy things.

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

From the 60's to the 90's that was the case. But the high end has not moved much  annually  since 2000