Extending Older Free-Agents-to-Be Like Adrian Beltre

There are rumors that Adrian Beltre, a potential free agent next winter, might sign a contract extension with the Rangers this spring, potentially taking him to the end of his career. Jose Bautista in is a slightly similar situation with the Blue Jays. Dave Cameron discussed the potential of signing him to a contract extension one year out. Edwin Encarnacion and Carlos Gomez are also among those veteran players who have previously signed contract extensions but who are eligible for free agency after the 2016 season. Those players could conceivably sign extensions before hitting the free-agent market. If they do, how will the contract look? Will the signing team extract any extra value from signing it? Or is it distinctly an advantage for the player?

On Friday, we looked at players who were bought out before taking their very first crack at free agency — players who signed their first extension just before reaching their free-agent years. Generally speaking, teams paid free-agent prices for those players and received typical free-agent results.

I wondered if the same form would hold true for more veteran players who have already received an extension somewhere along the line or had even already participated in free agency. On the one had, such players are older and thus more prone to decline earlier on in the contract. On the other, the signing teams would already have familiarity with these players and these players might be better given the previous investment, perhaps mitigating the influence of any age-related decline.

Much like I did on Friday, I consulted MLB Trade Rumors and looked for players who signed an extension within a year of free agency. This time, I considered only players who had amassed at least six years of service time, indicating that he’d already signed a previous free-agent contract — either that, or at least signed an extension that bought out a certain number of free-agent seasons. For the most part, these players had been made a priority by their current team or a previous one and their current team decided to make a significant investment in their future and convince them to skip the allure of free agency.

For players still under contract for 2016, the FanGraphs Depth Charts projections were used. If the player still has money owed beyond 2016 (all players have completed at least half of their contracts), then 0.5 WAR was removed from their 2016 projection every year. For value, $8 million per WAR was used for 2016 with a $250,000 adjustment per year. The chart below reveals all extensions found from 2007 through spring of 2013. Where players are owed money beyond 2016, they are highlighted in blue.

We have an interesting set of players and an interesting set of results. Twelve of the 22 players provided a positive return relative to free-agent prices — compared to just nine of 26 for the group of players who had under six years of service time from last Friday’s post. When we looked at the younger set of pending free agents, we found a decent amount of results grouped relatively close to break-even. With this group, there are fewer players around zero. We find five players on the positive side within $10 million and another couple up to $20 million. On the negative side, however, we have no deals that come close to breaking even on a dollar scale, although percentage-wise, Joe Mauer, David Wright and Josh Beckett look a little better.

Matt Cain could stage a major turnaround, but even a couple four-win seasons over the next two years will only raise his total production to about half of what his total contract would suggest. Cain signed the deal coming off a six-year period where he averaged four wins per season and never recorded less than 3.4 WAR, including a five-win season right before he signed the contract. The first year after he signed the contract, for which the Giants would have had him for anyway, Cain produced another solid season with 3.8 WAR. In that first year of his new deal, however, he managed just 1.5 wins and has been unhealthy over the past few years, failing to produce above replacement-level. If he does not turn things around, this contract will be worse than the mega-deal Barry Zito signed and not too far off of the pitcher equivalent of the Ryan Howard deal.

Edwin Encarnacion, along with Jose Bautista, have proven to be brilliant signings by the Toronto Blue Jays. Both players had trouble succeeding elsewhere but discovered a power stroke in Toronto. The Blue Jays signed both before either could establish himself with a lengthier track record. Also of note on the successes side (for the clubs), the St. Louis Cardinals signed three players to contracts just prior to free agency in Adam Wainwright, Yadier Molina, and Kyle Lohse. The former two have proven to be great assets for a Cardinals team that has made the playoffs five straight seasons, while even Lohse proved to be worth a bit more than his contract.

The charts below add a little more insight to the contracts, providing the percentage of the total contract the player provided in value as well as the cost per win.

Despite a few of the differences noted above regarding the greater number of positive results among the older players — as compared to those with under six years of service time — the groups look very similar in aggregate. The younger players provided a 92% return on the total amount paid, compared to this group’s 88% figure. The cost per win was nearly identical, at roughly $8 million per WAR. Relative to the younger group, this set of players is better overall, with an average contract roughly $20 million higher and average WAR per player during the contract also several wins higher.

Teams constantly look for ways to maximize the number of wins while spending as little as necessary to do so. Locking up players early in their careers is one way to do that. Excelling in the draft or in the international market is another way. In free agency, finding value can be difficult. While a few teams, like the Cardinals and Blue Jays, have benefited from signing would-be free agents — and while there’s some evidence to suggest that bringing back veterans pays off more often than their younger peers — there appears to be no overall financial benefit, besides cost certainty, to signing players early. The amount paid is substantially similar to the amount paid on the free-agent market.