Stephen Strasburg’s Extension Is a Win-Win
Last night, in the middle of his start against the Detroit Tigers, news leaked out that Stephen Strasburg had agreed to a seven year, $175 million extension with the Washington Nationals. As Jeff Sullivan noted last night, this is seen as surprising news, as Scott Boras clients usually end up testing free agency, and Strasburg was four months away from being not just the best free agent on the market this winter, but the only high-end pitching option available.
And it’s not like the Nationals broke the bank to keep Strasburg away from free agency. The 7 year, $175 million total essentially matches the contract figures that Justin Verlander and Felix Hernandez received in their long-term extensions three years ago, except Strasburg’s actual contract is valued significantly less than those two, because it also includes $70 million in interest-free deferrals. Once you account for the payment structure of Strasburg’s deal, the net present value is $135 million, which is the NPV a player would get if he signed a 7 year, $158 million contract without backloading or deferrals.
That total puts Strasburg south of not only Hernandez and Verlander (not even accounting for the inflation that has happened in MLB salaries since those deals were signed) but even less annually than Jon Lester, who got $155 million from the Cubs for six years. Lester was selling his age 31-36 seasons when he signed with Chicago, while Strasburg would have been selling his age 28-34 seasons had he entered the market this winter; combined with his superior stuff and the dearth of alternatives on the market, I would have guessed that Strasburg would have been able to do significantly better than this as a free agent.