Rockies’ Arenado Gets His Mountain of Money

Earlier this month, I made the case for the Rockies to sign Nolan Arenado to an extension that could rival Miguel Cabrera’s eight-year, $248 million deal for the largest average annual value of any position player contract. My suggestion wasn’t coming out of left field, as the going-on-28-year-old third baseman had just set a record for an arbitration-eligible player by agreeing to a $26 million salary for 2019, and had reportedly indicated a willingness to work out a long-term deal. That willingness has resulted in the completion of an eight-year contract reportedly worth $260 million, the fourth-largest guaranteed salary in MLB history.

The exact breakdown of Arenado’s contract has not been reported at this writing, but the deal replaces or incorporates the aforementioned $26 million salary for this year and runs through 2026, for a $32.5 million AAV, the highest of any player besides Zack Greinke ($34.17 million). The dollar value currently trails only those of Giancarlo Stanton (13 years, $325 million), Manny Machado (10 years, $300 million), and Alex Rodriguez (10 years, $275 million) in terms of overall value, though according to Craig Edwards’ inflation-adjusted conversions of MLB’s biggest deals into 2019 dollars, the amount would place just 19th. Taking account of Rockies history, that’s three spots behind the current $277 million valuation of Todd Helton‘s nine-year, $141.5 million extension, which covered 2003-11, and six spots ahead of the current $248 million valuation of Troy Tulowitzki’s 10-year, $157.75 million extension covering 2011-20. Arenado’s contract includes an opt-out after 2021, which would allow him to become a free agent after his age-30 season, and also gets him full no-trade protection now instead of waiting until the point in early 2023 when his 10-and-5 rights would kick in.

Arenado’s record-setting AAV gives free agent Bryce Harper (and agent Scott Boras) yet another target to shoot for in closing a deal. His deal also takes the player who likely would have headed next winter’s free agent class out of circulation. Depending upon the exercise of opt-outs or the completion of extensions over the next eight months, that class could still include the likes of Xander Bogaerts, Josh Donaldson, Paul Goldschmidt, Yasmani Grandal, and J.D. Martinez on the position player side, with Gerrit Cole, Chris Sale, Stephen Strasburg, and Justin Verlander on the pitching side. Arenado’s signing also leaves the Yankees — who were said to be targeting the pending free agent, either this summer (if the Rockies were to fall from contention) or next winter instead of pursuing Machado — in need of another solution if they don’t stick with incumbent Miguel Andujar, who made a solid rookie showing in 2018.

Reiterating a few of my points about Arenado’s recent performance, he’s coming off a strong 2018 season (.297/.374/.561, 132 wRC+, 5.7 WAR) in which he led the NL in home runs (with 38) for the third year out of the past four. That feat owes something to Coors Field (he has an 87-71 home/road home run split in that span), but improved plate discipline has helped Arenado increase both his wRC+ and WAR every year since his 2013 rookie season. Last year’s career-best 10.8% walk rate more than doubled his 2013-15 mark (5.0%); that increase has keyed a 52-point rise in on-base percentage from his first three years (.318) to his last three (.370). On the defensive side, he’s a six-time Gold Glove winner and a perpetual human highlight reel for his dives, spins, barehanded grabs, and seemingly impossible throws. While UZR doesn’t value his defense nearly as highly as DRS does (career totals of 37.6 and 109, respectively), the two marks converged last year (5.8 and 5, respectively).

In an interview with USA Today’s Bob Nightengale, Arenado said that he prioritized comfort with his current surroundings and optimism regarding the Rockies’ direction ahead of “searching for the biggest contract in the game.”

“I grew up here in this organization, so it feels like home in a way,” said Arenado. “I’ve been here since the tide has changed, and that’s a really good feeling. I was part of that change.”

As to that change, though the Rockies have never won an NL West title in their 26 seasons, they’re coming off back-to-back Wild Card appearances for the first time in franchise history. They’ve assembled an impressive nucleus of young, affordable starting pitching (Kyle Freeland, Jon Gray, German Marquez, Tyler Anderson, and Antonio Senzatela), which has been a major key to the team’s recent success, as has the development of shortstop Trevor Story. That core is under club control through 2021 and ’22, years for which the team had relatively little money committed prior to this deal — $40 million and $23 million, respectively, according to Cot’s Contracts, with the bulk of that money slated for Charlie Blackmon, who signed a six-year, $108 million extension last April. What’s more, the team just extended manager Bud Black’s contract through 2022. Black has overseen the development of the young rotation, and he appears to have a strong relationship with the star third baseman.

Meanwhile, the Rockies’ TV revenue situation is better than has been previously reported, with the team currently making $40 million per year instead of $20 million, which was tied for last among the 29 US teams in Edwards’ 2016 roundup. Negotiations for a new deal are expected to begin this summer, as the current one expires after 2020.

Previously, I ran Arenado’s numbers through our internal contract estimation tool with very conservative parameters — $8.0 million per WAR (a number that’s empirically supported according to the recent work of Eno Sarris) and just 3% average annual inflation, as opposed to $9 million or more, and 5%. Even then, his valuation over that timespan approached $300 million.

Using ZiPS projections provided by Dan Szymborski, with the same financial parameters, yields a considerably different picture:

Here it’s important to note that the first estimate offers no information about playing time, simply scaling WAR to the aging curve shown at the bottom of the table. ZiPS starts with a 154-game projection for 2019, and from the data Szymborski has provided, lops off an average of seven games per year for the rest of the deal (104 games in 2026), so if Arenado proves more durable, the falloff would be less than what is shown above. Likewise, a 5% inflation figure more in line with recent norms would boost the valuation as well, though with that and a rosier estimate of playing time featuring an average decrease of three games per year (133 games in 2026), we’re still talking about a boost of “only” about $15 million worth of value over the eight years beyond the estimate above. The bigger boost in valuation would come with an assumption of $9 million per WAR (still well below Matt Swartz’ 2017 estimates), which would kick the valuation to $233.3 million using a 3% rate of inflation and $245.8 million using a 5% rate.

Still, splitting the difference between the two estimates from the tables puts us right in the ballpark of where the Rockies and Arenado ended up. If they’re paying a premium to keep a franchise cornerstone and fan favorite at a time when they project to be on firm financial footing, it’s tough to fault them, likewise, if Arenado is landing a record-setting salary while staying in his preferred place of employment, without enduring the scrutiny, nitpicking, and rancor that can come with a trip through free agency during a time of labor strife. There are no guarantees that come with this size of a deal besides the money, but both sides did just fine, and Rockies fans have reason to smile about securing one of the game’s top 10 players for the long term.