Homer Bailey and His Peers

Extension season continued today, with the Reds announcing the six year, $105 million contract for Homer Bailey that’s been rumored for the better part of the last week or so. Jeff already wrote up Bailey’s 2013 improvements, and there’s no question he was a significantly better pitcher last year than he had been previously. If those improvements are real and sustainable, Bailey won’t have any problem justifying this extension, and he certainly would have landed a much larger deal as a free agent next winter. There’s certainly upside here if he continues to pitch as he did last year.

That said, it’s also a pretty big bet on what amounts to one year’s performance at this level, and we can’t ignore what Bailey was before 2013 in projecting what he’ll do going forward. Using forecasts that account for multiple years of performance, Steamer projects Bailey as a +2.5 WAR pitcher in 2014, while ZIPS is a little more optimistic, coming in at +3.5 WAR. The always optimistic FANS projections are agree more with ZIPS, but they’ve generally been 15-20% too high across on the board — rose colored glasses and all that — and if you adjust all the FANS projections down to a more reasonable baseline, Bailey would come out at +2.9 WAR. I think it’s fair to say that Bailey is roughly a +3 WAR pitcher at the moment.

But this winter, we’ve seen a bunch of +3 WAR starters hit the free agent market, and none of them got anywhere close to $105 million over six years. One could certainly make the case that Bailey is more attractive than pitchers like Matt Garza (health concerns), Ubaldo Jimenez (lack of consistency), Ervin Santana (ditto), and Ricky Nolasco (ERA/FIP differentials), each of whom have signed — or in Santana’s case, are likely to sign — for roughly 4/$50M. The Reds essentially bought five of Bailey’s free agent years for an AAV of $19 million per season, while similar-if-not-quite-as-attractive actual free agents were only able to command $12 or $13 million per year with one fewer guaranteed year. Even if you prefer Bailey to these free agents — I do too, for the record — I’m not sure how to justify the gap at $6-$7 million per season, plus an extra guaranteed year, especially considering Bailey wasn’t actually a free agent yet.

This contract basically says that Bailey is a full win per season better than these guys going forward, and that the extra leverage that the Reds had of forcing him to wait an additional year to hit the open market had little or no value. Even if you think Bailey’s a +3.5 WAR guy going forward, you have to be fairly down on all of the Garza/Santana/Nolasco/Jimenez group to make that case. Which isn’t totally crazy, as they each have their own issues, but of course, it’s not like Bailey has been a dependable model of excellence either. Just as the Reds are betting on Bailey’s upside, the Orioles on bidding on Jimenez’s upside, and both have established similar top-end performances over the last few years. Maybe Bailey comes with less downside, but I don’t know that it’s significantly less, and the Orioles bet is less than half of the guaranteed money that the Reds just gave Bailey.

Clearly, Walt Jocketty knows more about the trade value of trying to sell teams on acquiring Bailey on a one year, $10 million contract, especially since trading him now would essentially have been an admission that the Reds didn’t think Bailey was worth the price he was asking for. It’s tough to ask an opposing GM to give up a bunch of talent in return for a single year rental of a player that you yourself won’t extend at the price he’s asking. So maybe the Reds wouldn’t have gotten much for Bailey’s walk year.

But given the other options available for $10M in salary — that’s Dan Haren/Bartolo Colon/Josh Johnson territory, essentially — it’s hard for me to imagine that the Reds couldn’t have extracted some real value in return, especially since the acquiring team would know that they could at least use a qualifying offer next winter to regain some future value even if they weren’t going to extend him themselves. Could the Reds really not have talked the Yankees into doing some version of the Bailey for Brett Gardner rumor that kicked around all winter? Or what about sending him to Seattle for displaced 2B prospect Nick Franklin, giving themselves an in-house replacement for when they eventually give Brandon Phillips away?

Maybe there wasn’t that kind of interest in Bailey from other GMs. Maybe the Reds really were best off keeping him at $19 million per year rather than spending $12 or $13 million on an inferior pitcher, even if the gap isn’t that huge. Free agents who change teams regularly underperform their projections, so maybe the available hurlers are more likely to be +2 WAR pitchers than +3 WAR pitchers going forward, and the Reds will be better off with a younger, better hurler than the free agent alternatives. There are plenty of scenarios where this deal works out just fine, and even if the Reds decide in a year that $19 million per year might not be such a bargain after all, it’s not such an egregious overpay that he wouldn’t still be movable if need be.

Given what we know about Bailey and about what the free agent market just said about good-not-great hurlers with some inconsistencies in their track records, this feels like a pretty steep price to pay, however. Maybe it was the best path forward for the Reds, but I wonder if in a year’s time, they don’t look back and wonder why they paid $100 million for their above average starter when everyone else was paying $50 million for theirs.