Indians Go Long with Corey Kluber and Carlos Carrasco

The Cleveland Indians already had much of their team in place for many years on the position player side after extensions for Michael Brantley, Jason Kipnis, Yan Gomes, and Carlos Santana. In one weekend they solidified their future on the pitching side as well, locking up ace and Cy Young Award winner Corey Kluber as well as fellow rotation member Carlos Carrasco. Deals for pitchers are never a guarantee of performance, but with the cost to acquire pitching outside the organization so high, the Indians made out very well in securing potentially six years of free agent years with $60 million in guarantees.

Carlos Carrasco was not the player most likely to receive an extension, but he will now be guaranteed $22 million over the next four years with two club options after that believed to be worth around $10 million. Carrasco entered arbitration for the first time this year and was set to make close to $2.3 million this season. Extensions for players in their first year of arbitration are not common. Before this offseason, there had not been an extension for a player with between three and four years of service time since January 2011, when Johnny Cueto signed a four-year deal with the Cincinnati Reds for $27 million that included a team option and bought out two potential free agent years, per MLB Trade Rumors Extension Tracker. Even expanding the parameters a little finds few players close to Carrasco’s situation in the recent past. Gio Gonzalez signed his five-year, $42 million deal as a super-2 three years ago, and Jaime Garcia was about two months from arbitration when he signed his four-year $27 million in July 2011.

The nexus to reach a deal after a player hits arbitration is difficult. The player has gained some security through his first seven-figure contract and the team has control for three more seasons before free agency. Making major guarantees beyond that point, especially for pitchers, can be difficult for a team when the alternative is to go year to year. The St. Louis Cardinals and Lance Lynn found that to be the case this offseason. Lynn, with a better track record than Carrasco and in line for more money in arbitration, agreed to a three-year deal for $21 million that gave him security during his arbitration, did not delay free agency, and gave the Cardinals some cost certainty but little else.

Wade Miley, who signed a three-year contract extension with the Red Sox for $19.25 million with a $12 million club option, is the closest comp for a contract to Carrasco. However, Miley’s contract is much closer to Lance Lynn’s deal, buying out one year of free agency as opposed to the Carrasco deal which has the potential to buy out three free agency years and delay free agency until Carrasco is 33 years old. There is some risk for Cleveland as prior to 2014, Carrasco had made 40 unimpressive starts over several years, posting a 5.53 ERA, a 4.60 FIP and just 1.2 WAR over 224 2/3 innings pitched. In under 100 innings as a starter in 2014, Carrasco pitched brilliantly, striking out 28% of hitters and walking under six percent using a change without a comp. His 2.21 FIP and 2.67 ERA signalled a breakout, and Carrasco is cashing in on half a season’s excellence and receiving a guarantee ten times his current salary.

For Cleveland, if the breakout is real, they have bought out three free agent years rather cheaply and will have a bargain. If the breakout is a mirage or Carrasco is injured for much of the deal like Jaime Garcia in St. Louis, the Indians will still have paid very little. Cleveland is not paying $22 for production over the next few seasons. They are paying that money to secure at least one free agent year and risk-free options that could keep Carrasco in Cleveland for the next half a dozen years without resorting to free agency for a replacement. The deal makes sense for Carrasco after three years of poor performances followed by one good half-season, but for Cleveland this is a deal too good to pass up.

The Carrasco deal is not the headlining deal for the Indians, who signed Corey Kluber to a much more significant contract. Kluber’s situation, while considerably different from Carrasco, is also an unusual one. Kluber, whose deal is worth $38 million over five years with two options years is one year away from arbitration. The deal is not too far off from the five-year $32.5 million contract with two option years that Chris Sale received two years ago with the same service time, but Kluber was in line for a much bigger payday in arbitration than Sale or Carrasco. Arbitration pays award-winners handsomely, and coming off a Cy Young-winning season, Kluber might have been in line for a $10 million contract in 2016 that would escalate in the final two years of arbitration. Kluber, who will turn 29 later this week, bloomed late and free agency would not have been an option for him until he was heading for his Age-32 season even without an extension.

Kluber was going to have one shot at a big contract, and he gave up that shot for guaranteed money pretty close to what he would have made in arbitration. It was now or never for Cleveland reaching a long term deal with Kluber. The Cleveland ace was set to make the Major League Baseball minimum salary this season, but would have little incentive to give up free agent years after getting a big raise in 2016. Without an extension, Kluber risked an injury potentially destroying his future earnings and never cashing in on his 2014 season. Given the escalators in Kluber’s contract, if he continues to pitch well, he will be paid between $15 million and $20 million into his mid-30s. If he pitches poorly or gets hurt, he has the guaranteed $38 million to fall back on.

These deals could not have been easy ones for Cleveland to reach given the unique profiles of the two players, but in total, the team paid just $60 million in guarantees to have options on potentially six seasons of free agency at relatively low prices. Even if they pay out the contracts completely, which is the best case scenario for Cleveland, the team will pay just $130 million for 13 years of pitching. To some degree, Kluber and Carrasco are cashing in on unexpected breakouts and they have every right to do so, but the free agent years that Cleveland gains down the road are incredibly valuable. With Jason Kipnis, Michael Brantley, Carlos Santana, and Yan Gomes already signed to long-term contracts and Nick Swisher and Michael Bourn coming off the books in the next few years, Cleveland has the potential to take control of the American League Central the way they did in mid-90s when Kenny Lofton, Manny Ramirez, and Jim Thome had Jacobs Field rocking.





Craig Edwards can be found on twitter @craigjedwards.

14 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Yirmiyahu
7 years ago

The MLBPA has to be seriously concerned with all these cheap extensions. Players aren’t only sacrificing their own future earnings for these cheap guarantees, they’re also bringing down salary benchmarks for the industry as a whole.

I also think the risk to future earnings is overstated in these situations. With an elite player like Kluber, even if he tears his UCL tomorrow, he’d still earn millions in arbitration the next year. And even if he spent a year on the DL and had a crappy year after that, history has shown us that teams are willing to bet millions on high ceiling players to see if they can return to form. And then there’s the safety net of the whole buying-insuring-on-yourself thing… I think the real appeal to players in pre-arb is cold hard cash. The promise of future earnings doesn’t pay the bills, and doesn’t buy you a nice place to sleep at nice.

Krog
7 years ago
Reply to  Yirmiyahu

I think that there is a huge incentive for the player agent to get his client to sign a pre free agent deal. The player is making a relative pittance and can change agents at will. The agent, who only makes a small percentage on each contract, might not ever see any guaranteed money. With a long-term contract signed, the agent has a guaranteed income stream. Even if the player switches agents, the initial agent still gets the cut from the active contract.

Tribe Fan in SF
7 years ago
Reply to  Yirmiyahu

Huh? I hardly think the players association is going to mind a pitcher getting a $38.5 million guarantee (plus options and incentives that could take this deal up into the $70’s) vs. the scenario of last year’s Cy Young winner getting league minimum this year, then let’s say he would tear is UCL tomorrow, and let’s say the Indians decide to not even offer him a contract next year. Sure, some team would probably take a flyer on him and pay him to rehab is now surgically repaired arm, but what if he never puts it all back together again? Even if he got $10 million in arbitration to be injured for a year, $10 < (way way less than) $38 million.

The "betting" you're talking about teams taking on a pitcher like this is true for the players too – they're betting on being healthy and successful year after year. Why gamble on this, when you can have life-altering, set-for-life money (and your children's and their children's lives), guaranteed, today. I do agree with your last sentence, which seems to contradict the rest of your entire comment. Cold, hard, guaranteed cash is indeed the real appeal. Why pass so much of it up?

Yirmiyahu
7 years ago

I think the union would be concerned because we’re seeing a lot of elite players making a relative pittance for some of their free agent years. Kluber is getting $13M in 2019 and $13.5 in 2020. What would he get as a free agent? These deals drive down prices throughout the market.

And the other point that I was making was that (for a player like Kluber) its not so much the security of the “life-altering, set-for-life money”. I think Kluber could get $10M over the next few years, without actually being an effective pitcher. I think the primary incentive is slightly different: cash flow.

And Krog makes a good point. Perhaps agents are pushing these extensions harder than they should for selfish reasons. I don’t know.

Tribe Fan in SF
7 years ago
Reply to  Yirmiyahu

I wrote a whole big long reply, but decided to delete it and simply replace with the old adage:

“A bird in hand is worth two in the bush.”

Simple as that.

Brian
7 years ago
Reply to  Yirmiyahu

I agree with everything SF Tribe said. I mean, just put yourself in Kluber’s situation. I’d want the security too. He never has to think about money again. Set for Eternity. Stress free, anxiety free life. Yeah, I’d take it.

Yirmiyahu
7 years ago
Reply to  Yirmiyahu

I’m not saying that Kluber should not have taken the deal.

I’m saying that there’s a recent phenomenon of a lot of elite players having their free agent years bought out for significantly less money than they’d get as free agents. And I’m saying that the union is probably concerned about it (or at least they should be). And I’m saying that, because it’s not just a matter of FUTURE earnings but also a matter of PRESENT cash, insuring yourself against injury doesn’t solve the problem.

jdbolick
7 years ago
Reply to  Yirmiyahu

It’s pretty crazy to describe these extensions as “cheap.” Someone makes this type of comment every time an extension is announced, as there seems to be a general assumption that the player will always maintain performance or improve, and therefore the team somehow got a steal. Sometimes teams reap the rewards on extensions and sometimes they go bust. The difference is that teams (as “the House”) can manage risk and reward such that they pay for contracts that go badly with the savings from ones that do well. Stating the obvious, players are individuals rather than a collective, so they don’t share the risk or the rewards. As such, it makes perfect sense for an individual player to seek financial security even if going year by year could theoretically yield substantially higher returns if everything goes well. Regardless, comments like yours ignore the many extensions that don’t work out for the team while generalizing about the ones that do.

baubo
7 years ago
Reply to  jdbolick

What you’re saying is essentially why people call these contracts “cheap.” If we look at, say, 50 players who signed prematurely and 50 similar players who went with the arbitration-FA route, the latter would collectively earn more, even if there’s more variance player to player.

Everyone understand why players do these deals, but that doesn’t change the fact that it drives the overall salary down because teams have less incentive to overbid on the FA market, when the players there don’t contribute to winning as much since many of the best guys are off the market already.

Tribe Fan in SF
7 years ago
Reply to  baubo
baubo
7 years ago
Reply to  baubo

Baseball teams are making more than the salaries are going up. The players are getting less of the baseball-related-income, which is traditionally how these things are considered.