Chris Archer, Jose Quintana, and Risk Valuation by Dave Cameron April 3, 2014 The rise of the early career contract extension has, in some cases, made it clear just how much impact one contract extension can have on future contract negotiations. For instance, nine months after Justin Upton signed a six year, $51 million contract with the Diamondbacks, Jay Bruce signed a six year, $51 million deal with the Reds. A year after that, Andrew McCutchen signed a six year, $51 million deal with the Pirates. A couple of years ago, Madison Bumgarner, Jon Niese, Derek Holland, and Chris Sale all signed long term deals with very similar parameters at similar levels of service time. Even just a few weeks ago, Starling Marte signed a $31 million contract that is almost exactly a clone of the deal Paul Goldschmidt signed last spring. This is basically how the extension market works. There are parameters in place that drive the fundamentals, but by and large, a lot of the negotiation boils down to making sure that the deal is in the same range of what the last few similar players signed for. And so it’s not surprising that the two most recent extensions for young, early career pitchers come with almost exactly the same terms. Here’s a basic breakdown of the contract signed by Chris Archer yesterday, and by Jose Quintana with the White Sox on March 24th. Player Pre-Arb Pre-Arb Super Two Arb 2 Arb 3 Arb 4 FA option FA option Buyouts Quintana $.85M $3.40M $5.40M $7.00M $8.85M $10.50M $10.50M $2.00M Archer $1.50M $1.00M $2.75M $4.75M $6.25M $7.50M $9.00M $11.00M $1.75M Worth noting: the salaries listed are the ones that Quintana will earn if he ends up qualifying as a Super Two at the end of the season; if he misses the Super Two cutoff, then his total payout goes down by $5 million. Archer is basically a guaranteed Super Two, though, so his deal didn’t need to have that provision, and his deal was likely structured to be similar to Quintana’s Super Two version. The first thing to note is that Quintana had a full year of service time and Archer did not, so Quintana was a year closer to both arbitration and free agency. In that regard, he had more leverage, since he was closer to earning some real salaries and had to throw fewer pitches in order to get to the years where the money becomes significant. However, Quintana is already on this third organization — he joined the White Sox as a minor league free agent just a few years ago — while Archer was a top prospect who features a 95 mph fastball, and whether fair or not, there is a perceived difference in upside between the two. Quintana has performed over a longer period of time, and if you take park factors into account and give some of Archer’s hit prevention credit to his teammates and coaching staff, you could make a case that Quintana’s even been the better pitcher to date. Going forward, I think most people in baseball would probably take Archer — 95 mph as a starter has a very strong allure — but arbitration salaries are determined based on performance, not trade value. Quintana’s performance base is already better (or at least longer) than Archer’s, and he was a year closer to arbitration and free agency, so it’s probably fair to state that his deal is a little more team friendly than Archer’s. But really, these are the kinds of deals that make sense for everyone involved. As we’ve seen nearly frequently early in the spring, pitchers arms can blow up with little or no warning, and the attrition rate for even the best young hurlers is actually pretty high. While the historical return on early career extensions for position players is almost entirely positive for the teams, there are plenty of examples of pitchers coming out on the better side of these kinds of deals. As Jason Collette wrote back in November, from 2008 to that point, there had been 24 long term deals signed with pitchers who hadn’t yet reached free agency. Included in those deals are big wins for the teams, such as the contracts for Jon Lester, James Shields, Cole Hamels, and what look like big future wins in Chris Sale and Madison Bumgarner. But there are a lot of deals that didn’t work for the teams either. Nick Blackburn says hello. Ricky Romero. Brett Anderson. Cory Luebke. Ian Snell. Pitchers go sideways, even ones who look very promising. But these deals are cheap enough that when they the pitcher does break down or regress, it isn’t a significant burden on a team’s payroll. These are small losses, and the rate of success is still high enough to justify betting $20 or $25 million on the chance to keep a pitcher from getting to the point where he’s pulling in $15 million a year via arbitration. Even with young pitcher attrition rates, these prices make sense, because the amount of savings from the guys who stay healthy is still generally a bit larger than the money lost on the Romeros and Andersons of the world. And, of course, if you’re Archer or Quintana, the specter of your future earnings disappearing on any given pitch are very strong motivation in order to guarantee your first $25 million. At the press conference, Archer spoke openly about the recent spate of Tommy John surgeries incentivizing him to take this deal, and there’s no question that pitchers like Archer are absolutely unloading a significant amount of risk by signing early. If Archer turns into David Price 2.0 and stays perfectly healthy over the next six years, then this deal will probably cost him something like $40 or $50 million in potential earnings over the life of the contract, but that’s the exception, not the rule. Most pitchers don’t stay perfectly healthy and dominate for the first six years of their career. Archer probably won’t either, and this contract prices in some expected road bumps. Toss in the lower prices pitchers command on the open market compared to hitters, and these deals make plenty of sense for both pitchers. I might quibble with good young hitters taking a similar contract, but if you make a living by slinging the ball to the plate, taking the money the first time you can get it isn’t such a bad idea.