Sunday, April 22, 2007

You have GOT to be kidding!

Why Santana will be worth $200 million

Johan Santana’s a free agent after next year, and there isn’t a Twins fans who doesn’t want to see his contract extended into the next decade. The popular refrain is that the Twins ‘just need to get it done’.

But what is “it” exactly? And just how much will “it” cost?

In April of 2003, the Red Sox picked up an option year in the contract of Pedro Martinez. Doing so allowed them to keep him through the 2004 season, the same season that the Red Sox won the World Series. It also meant that they opted, of their own free will, to pay Martinez $17.5 million, which was the most ever to a pitcher in major league baseball.

But in the last year, three major league pitchers have signed for more than Pedro’s high water mark. They reflect a reality where major league clubs’ revenues are exploding and where risks can be accepted that previously were unthinkable. For Twins fans who are hoping for an announced extension between the Twins and Johan Santana, each reflects a changing reality that will make retaining Santana more and more expensive.

Barry Zito – Seven years/$126 million

Zito is a poor man’s Johan. He’s left-handed, young, and a Cy Young award winner. But he won that award in 2002, and he hasn’t received a single vote for one since. He also hasn’t posted an ERA south of 3.70 over the last three years. That didn’t stop the Giants from committing to him, on average, $18 million per year over the next seven years.

For Twins fans, those last two words should hurt the most. Zito’s contract shocked baseball because pitchers are notoriously prone to injury, and thus usually sign shorter contracts than their offensive colleagues. Zito has stayed healthy and was only 28 years old when he became a free agent. In fact, Cot’s Baseball Contracts reports that the contract includes an eighth year that automatically vests if Zito pitches 200 innings in the seventh year.

Johan has stayed just as healthy, will be just 29 years old when he’s a free agent, and has been infinitely more effective than Zito over the last three years (and counting). He’s likely to receive at least eight guaranteed years if he tests the free agent waters. If the Twins want to talk about an extension, any offer less than five years would seem naive.

Daisuke Matsuzaka – 6 years/$52 million (or $103 million)

If you look up Matsuzaka’s salary in GameDay (salaries are on the statistical insert) when the Red Sox come to town, you’ll likely think the Red Sox received a bargain when they added him to their rotation for just $6 million. But the actual price that Red Sox paid for the 26-year-old was far higher, and the risk they took may have been greater than the Giants took for Zito.

When a player comes over from Japan, before any team can negotiate with him, the Japanese ballclub must be paid. So major league ballclubs each bid for the right to negotiate with the player, and only the team with the high bid is allowed to negotiate. That obviously means the winning ballclub has a fair amount of leverage with the Japanese player, but it also means they’re on the hook for much more than the salary they’ll pay.

When “Dice K” came across the pond, the Red Sox paid over $51 million to the Seibu Lions for the right to negotiate with Matsuzaka for 30 days. Or rather to negotiate with Scott Boras, Matsuzaka’s agent, who was also responsible for Alex Rodriguez’s monster deal and Zito’s contract. He not only negotiated another $52 million guaranteed for his client, there are at least $8 million in incentives attached to it.

Add all that together, and Dice K’s services could be worth $112 million, meaning the Red Sox would be paying more per year than the Giants. And they had to pay half of it before they even had a deal in place. All for a guy who not only hadn’t won any Cy Young awards – he hadn’t pitched a single inning in the major leagues.

Roger Clemens - 1 year/$22 million

So far we’ve been talking about players who are young and perceived as great pitchers, but aren’t in Santana’s class. Clemens is the opposite – seemingly old as Methusalah, but has recently been as dominant as Santana. Clemens, like Santana, won a Cy Young Award in 2004 and finished third in 2005.

Unlike the others, the length of contract isn’t important, but it’s telling just how much clubs are willing to pay on an annual basis. Clemens signed a 1-year, $22 million contract with the Astros last year, but only made a little over $12 million because he didn’t start pitching until June 22nd. By the time you read this, it’s likely he will have announced whether he’s pitching in 2007 and the bidding could be fast and furious for him once again. If so, his 2007 salary could provide some real clues to what Santana could receive in an annual salary, since it’s expected that the New York Yankees would be included in the bidding, which really wasn’t the case for either of the two pitchers above.

Johan Santana - ? years/$?? Million

So now you know what the agents and general managers know about the pitching market. Before Santana becomes a free agent at the end of next year, there will likely be some new names that can be included (such as Mark Buehrle, the left-handed White Sox starter who threw a no-hitter earlier this year), but you already have enough data to make a reasonable guess.

For instance, would anyone be surprised if Santana received an eight-year guaranteed contract starting at $18 million per year, with a $1 million raise per year? Add in a ninth year that can be automatically vested and a couple of incentive bonuses, and suddenly a $200 million contract is within reason. That’s not only twice as long as the Twins like to guarantee contracts, it’s also equal to about three times their current payroll. In fact, it’s darn close to the amount that Forbes recently estimated the entire Twins franchise is worth ($216 million).

Which isn’t to say that the Twins can’t sign Santana to an extension. Or that it won’t be worth the commitment, as Pedro’s contract in 2004 might attest. But it’s one thing to say “they need to get it done”. It’s another matter entirely to say it when you find out exactly what “it” is going to cost.

The preceding article will be available in the May issue of GameDay, the independent baseball program sold across the street from the Metrodome. Look for the guys in the red vests.

1 comment:

Beach64 said...

So what is a guess for the contract. I agree that anything over 4 years is risky. With the current state of the Yankees rotation, you may see that 200 million dollar figure and a rotation of Santana, Hughes and Wang. Also, by that time Clemens may only be pitching the post season for 15 million a month.