Greinke Extended

Alternate title: Exalt to the heavens! The Royals got one right.

The news broke early today that Zack Greinke had signed to a four-year extension, buying out a pair of arbitration and free agency years each. Unsure of when the financial details would be leaked, I went ahead and started out sketching out the projection for Greinke’s value.

The first, and hardest step, in pitcher evaluation is settling on a projection for him. As per my usual course of action, I sampled a couple different systems, notably CHONE and Marcel and then threw in some looks on his past xFIPs and tRA* values. Greinke is one of the more rather difficult cases to project because his playing time has been all over the map, but not completely due to physical injuries. How do we project his innings pitched going forward? Do we apply the same sort of emotional/mental risk as we normally do with physical injuries for other pitchers?

Luckily, CHONE and Marcel provide, based on the couple other areas that I surveyed as well, perfect bookends to what I consider the reasonable projections for Greinke going forward; Marcel being the most optimistic and CHONE the most pessimistic. The league average FIP was right near 4.40 in 2008, so assuming that the projection systems maintain that the league will repeat itself, I plugged the FIP and innings pitched estimates from CHONE (3.97 over 137 IP) and Marcel (3.67 over 160 IP) into the winning percentage formula that I noted in my review of Brian Fuentes.

The resulting win totals were 3.5 wins out of Marcel and 2.5 out of CHONE. My own projection system for pitchers pegged Greinke at a tad over 3.0 wins itself so I feel pretty comfortable about the 2.5-3.5 range as a projection. Granted, I think that’s a projection with more possible room for upside than downside so the dollar figures are going to be a touch on the conservative side given that most systems are going to be skeptical about Greinke’s ability to log high-quality innings based on his years prior to 2008.

Salaries have stagnated this offseason and so I have been maintaining the use of $4.5 million per win as the general cost to teams on the open market. It might turn out to be a bit higher or lower once the market wraps up, but I don’t think it’s hitting the $5 million market that many thought at the onset of the offseason. With those parameters, plus the known 40/60/80 breakdown for arbitration values, I arrived at a fair market payout of $34 million to $48 million.

That is a pretty big range, but remarkably the Royals came in close to the bottom rung of that, with the AP reporting that the contract is worth $38 million guaranteed. The Royals are paying Greinke like a sub-3 WAR pitcher and for someone of Greinke’s capability, that’s a steal. The trend continues of extensions through arbitration years being a boon for teams and free gent signings being a mostly bust.