Martin Perez and Extensions For Young Pitchers

Last week, the Texas Rangers caught many off-guard when they announced they had signed young left-hander Martin Perez to a four-year deal that guarantees the pitcher $12.5 million dollars. Perez has thrown just over 162 innings at the major league level, but the club made him the fourth member of its current rotation that now under team control through the 2016 season.

The benefits for Perez are obvious. The contract eliminates any financial risks that come from injury, a frequent occurrence with younger pitchers. Perez willingly sacrifices potential greater income knowing that he can take care of himself and his family with his new contract. The deal also gives Perez the potential to stay with the organization that has drafted and developed him through the 2020 season. For the Rangers, the deal allows them to control the costs of a pitcher they obviously think very highly of should he continue to show the improvements he did in the second half of the 2013 season.

The deal comes a full two seasons before Perez would have been arbitration eligible, but is a sign of the organization’s  faith both in talent and in personality. The contract is set up in such a way that there is strong potential for it to be a win-win for both the team and the player. That is how each of these types of deals begin, but they do not always come to a mutually beneficial conclusion. Since 2008, there have been 24 different starting pitchers that have signed long-term deals before reaching free agency for the first time, according to the useful MLBTR extension tracker.  Seven of those deals came to their conclusion by the end of the 2013 season.

Pitcher Years $$ WAR
Scott Baker 4 15.3 9.2
Nick Blackburn 4 14.0 -0.1
Gavin Floyd 4 15.5 13.5
Cole Hamels 3 20.5 11.7
Roberto Hernandez 4 17.8 4.0
Ubaldo Jimenez 4 14.8 18.7
Ian Snell 3 8.1 1.2
Total 26 105.9 58.2

The only truly regrettable deals of the group belonged to Snell, Hernandez, and Blackburn.  The only skill Snell had demonstrated prior to his extension was durability in 2006 and 2007 and even that skill left him within a season of signing the contract extension. Hernandez was given his deal when the Indians thought he was the younger Fausto Carmona but missed time in 2008 due to an injury and 2009 due to a demotion to the minors. Blackburn had demonstrated an ability to take the ball every fifth day and an extreme inability to avoid bats yet Minnesota guaranteed four years into what became the de facto face of the “pitch to contact” era in Minnesota. In the end, the Twins gave $14M to a below replacement level pitcher.

In terms of dollars per win above replacement, Ubaldo Jimenez’s contract has been the best of the bunch as he produced 18.7 wins above replacement over the past five seasons while costing just $14.8M. He wisely opted out of his final year to jump into what should be a lucrative free agent market for starting pitching this off-season. Floyd’s deal worked out so well for the White Sox from 2009 to 2012 as he made at least 29 starts in each season before getting a final pay raise this season that ended after five starts with an elbow injury.  Conversely, the Twins were once again snake-bitten with extending a pitcher as Baker began to break down in the second year of his four year deal and did not even throw a pitch in the final year of it which diminished what had been a solid return on investment.

Not counting Perez’s new deal, there are currently 16 long-term deals for pitchers that have yet to enter the free agent market.

Pitcher Years $$ WAR
Brett Anderson 4 10.7 4.6
Clay Buchholz 3 9.6 5.8
Madison Bumgarner 1 0.8 3.7
Trevor Cahill 2 9.0 3.8
Wade Davis 3 4.7 3.7
Yovani Gallardo 4 17.2 11.7
Matt Harrison 2 8.2 3.6
Derek Holland 2 4.2 6.4
Hisashi Iwakuma 1 6.5 4.2
Jon Lester 5 29.8 22.6
Cory Luebke 2 1.5 0.7
Matt Moore 2 2.0 4.3
Jonathan Niese 2 3.8 3.8
Ricky Romero 3 13.5 2.7
Chris Sale 1 0.9 5.1
James Shields 6 25.3 22
Totals 43 147.5 108.7

The deals signed by Brett Anderson, Cory Luebke, and Ricky Romero reflect three levels of the worst case scenario for Texas. Anderson has been mostly effective when on the mound, but has missed considerable time with Tommy John surgery and recovery as well as a serious ankle injury. Luebke has started just five games since signing his deal in March of 2012 due to Tommy John surgery and a complicated rehab process that did not permit him to return in 2013 as many expected. Assuming this latest setback is behind him, the good news is that this happened during the very affordable years of the deal.  Romero is what every team hopes to avoid in these contracts and that is a player who stays healthy, but loses both his skills and the strike zone with multiple guaranteed years still to come.

Conversely, Jon Lester and James Shields represent the best case scenario for these deals. Both players recently had the final options of their initial contract extensions exercised and both has remained healthy, productive, and profitable. Other teams are hoping that their investments do the same and there is still a substantial amount of guaranteed money to be paid in the current long-term deals for pitchers. To date, teams have paid these pitchers $147.5M in guaranteed salary but there is still a minimum of $307.4M to be paid to these pitchers and that number could rise if team options are exercised.

There are certainly some caution flags for Perez to watch as this deal matures. He will be just 23 years old as the 2014 season begins which puts him well within the injury nexus that has entrapped the likes of Anderson, Baker, Harrison, and Luebke. Another concern would be the lack of strikeouts. While Perez is no Nick Blackburn, he has been below league average in terms of strikeouts per nine innings since advancing past Double-A.  In 212 innings of Triple-A experience, Perez had a 5.7 K/9, and that rate sits at 6.0 in 162 innings of major league experience. Perez has shown an ability to generate frequent swings and misses, but has not shown the same frequency in putting those batters away.  It is strange to see a talented 22 year-old’s strikeout rate in line with someone like Mark Buerhle, but that is where Perez is right now. That can change, as it did for Jon Lester and James Shields as they gained more experience pitching at the major league level.

Rays manager Joe Maddon often talks about the five stages of the major league career.  Stage 3 is, “I belong here. I can do this.” When Perez spoke to Jon Daniels on the phone as this deal was being finalized, T.R. Sullivan of reports the following conversation:

“When he got on the phone, Martin said, ‘Nothing is going to change.'” Daniels said. “He said, ‘Money is not going to change me. It gives me security, but nothing is going to change.’ Then he talked about his long-term goals.”

That anecdote shows that Perez is firmly in Stage 3. His performance last season teased the potential that was responsible for Perez being a top 100 prospect by Baseball America each of the previous five seasons. This deal, as nearly every other long-term extension, looks fantastic in its infancy. How it matures depends on how Perez continues to matures his craft to avoid the injury and performance pitfalls that have spoiled what has otherwise been a beneficial process for organizations.

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9 years ago

Madison Bumgarner has been worth 6.7 WAR over the past two years, 3.7 is his value for 2013 alone.