So What Does a Mike Trout Extension Look Like Now?

Speculating about how much money it would take to sign Mike Trout to a long term deal has become something of a sport unto itself. Ever since he broke into the big leagues and almost immediately established himself as the best player in baseball, people have wondered aloud about what kind of deal he could command. The fires were stoked even further when the Angels decided to renew his contract for just $510,000 last year, allowing him to rack up another +10 WAR season and get even closer to free agency. Now, with just four years of team control remaining, the Angels are reportedly hoping to get Trout signed to a long term deal that will keep in Anaheim for the foreseeable future.

So, let’s play the Mike Trout Extension Game again. With Freddie Freeman resetting the extension market for players with three years of service time, we have a new data point to work with anyway, and so we probably need to update our prior estimates to reflect the new reality of extension pricing. So let’s work through the numbers and see what we can come up with.

The next four years are the easy part. While arbitration prices aren’t set in stone, they are not that difficult to model, as the system depends heavily on historical precedents. While Trout would likely be the best player to ever go to arbitration if he got there, the thing that makes him particularly extraordinary — that he’s this good at such a young age — is not eligible for consideration in an arbitration hearing. Trout’s extension will absolutely take into account his youth, but his arbitration prices will not, as they would simply be based on what he’s done relative to other players with similar levels of service time, regardless of the fact that he’s five or six years younger than some of his comparisons.

However, Trout would still likely be in line for record arbitration payouts, especially if his 2014 season results in another +9 to +10 WAR performance as the forecasts project. He might not have the MVP trophy that Ryan Howard possessed when he set the record with a $10 million arbitration award in 2008, but his back to back second place finishes still count in his favor and will carry a lot of weight, and of course, there’s some chance he’d win the MVP if allowed to play out 2014, so the Angels will have to factor that possibility into the price. I don’t think it’s a stretch to say that Trout would break every arbitration record if he was allowed to go year to year, and the Angels will likely have to pay prices that reflect that expectation in his extension.

For comparison, Howard’s four arbitration years went $10M/$15M/$19M/$20M, though the last three were bought out by an extension prior to the 2009 season. In total, though, Howard made $64 million before reaching free agency, and this was before the television rights explosion. Of course, he also had the benefit of going to arbitration four times, which Trout will not have, so he’ll have to make do with three record payouts instead of four. If we give him $15M/$20M/$25M, Trout would get $60 million over his final three arbitration years. The Angels might want to negotiate those down a bit in a long term deal, but that’s probably the expectation of what he’s likely to get if they go year to year, so we can speculate that an extension for Trout would have to be backed onto the $60 million he’s likely to get over the next four years.

So now the question becomes how many free agent years Trout is willing to sell, and at what price. Because Trout is so young, there’s an opportunity for both sides to reach a long term deal that doesn’t carry Trout beyond his 30th birthday, allowing him to get a chance at a second huge contract if he maintains his historic pace. As we’ve seen with recent extensions for Freeman, Clayton Kershaw, and Elvis Andrus, young players signing long term deals have put a real value on the chance to hit free agency again while still young enough to land a second monster contract. While there will likely be some speculation about longer term deals, I think a nine year deal that ends after Trout’s age-30 season is the right mix of security for Trout while also setting himself up to be a premium free agent for a second time.

A nine year deal means that Trout would be selling five of his free agent years. What should those years cost? This is where it gets a little trickier. The recent trend in early career extensions has been to essentially pay something close to current market price for future free agent years. Essentially, teams are buying out future inflation and paying for the right to not have to sign a long term deal that takes a player into his mid-30s, and in exchange for those benefits, the player gets something close to the $6 million per win market rate for their FA years.

Well, that presents a little bit of a dilemma with Trout, because $6 million per win for a +9 WAR player leads to a $54 million per year salary. As good as Trout is, he’s not getting $50+ million per year four years from free agency. Kershaw’s just-signed $215 million extension guaranteed him an average of roughly $32.5 million per year the six free agent years he sold, and while I believe that Trout will beat that AAV, we’re not going to see a leap from $33M to $50M, especially considering their relative proximity to free agency.

But as good and as young as Kershaw is, the reality remains that Trout is significantly better, projecting for roughly +4 WAR per season more than Kershaw going forward. In fact, Trout’s forecasts suggest he is, by himself, as valuable as Kershaw and Freeman put together, and they combined to sell their FA years for pretty close to that $54 million per year mark. While we could put together a reasonable argument that Trout is worth $50M per year for his free agent years, he’s not going to get that; it’s just too far removed from the norms of the day.

As crazy as it sounds, $40 million per year for those five years would actually represent something of a discount, given Trout’s expected production going forward. Even though it’s quite a bit more than Kershaw got, Trout is quite a bit better than Kershaw, and comes with less risk since he isn’t a pitcher. And the separation would be large enough that Trout would likely remain the game’s highest paid player even with future inflation, as that AAV in those years is unlikely to be surpassed any time soon.

Pricing those free agent years at $40 million apiece, in addition to the $60 million he’d be getting for his remaining years of team control, would bring the total deal to $260 million over nine years. The deal would fall short of being the largest contract in baseball history, but would easily be the largest deal for any player still under team control. If Trout was particularly interested in breaking A-Rod’s record, adding a 10th year to push the deal to $300 million in total wouldn’t be that difficult, and should still be something the Angels are interested in doing.

These numbers might seem insane for a non-free agent, but the longer the Angels wait, the more expensive this is going to get. If they want to avoid a bidding war that might eventually push Trout’s total contract up near $400 million, they should get him signed sooner than later. 9/$260M or 10/$300M might sound insane, but really, it would represent Trout taking a bit less than what he’s actually worth. That’s how good he is. And that’s why this deal is going to have to be enormous.