The Extension For Felix

The Mariners have reportedly agreed to a 5 year, $78 million contract extension for Felix Hernandez. Mariner fans (including this one) are obviously thrilled with the deal from an emotional standpoint. We’ve been attached to King Felix since he was 17, and after watching the likes of Randy Johnson, Ken Griffey Jr, and Alex Rodriguez depart, it is refreshing to see the team finally lock up a superstar to a long term deal.

But, I’ll keep my celebrating to a minimum over here. Let’s take a look at this deal from the perspective of what Hernandez surrendered by signing this deal.

As a second year arbitration eligible player, Felix was in line for a significant paycheck with or without this contract. Based on his 2009 salary of $3.8 million, his performance last season, and what comparable (yet still inferior) pitchers got in their second arbitration year, he would have been expected to come in around $9 or $10 million in salary for 2010.

So, in reality, his 5 year, $78 million deal is more like 4 years and $68 million, because he was already getting the first 10 million. Or something really close to it. How does $68 million over the next four years, or about $16.5 million per season, compare to what we think he would have gotten had he not signed this deal?

Given a realistic projection for his performance, you’re looking at something like a $15 million payout in arbitration next year if he stays healthy. Even if he gets hurt (non-labrum tear category), he’s likely looking at another $10M-ish payout, as we’ve seen teams offer arbitration to players like Brandon Webb and Erik Bedard even coming off lost seasons, because the upside is high enough to justify a one year contract.

Alternately, a healthy Felix could have opted to sign long term next year, following in the steps of Johan Santana in buying out his free agent years at the end of his fifth full season. Johan got 6 years, $137 million. Felix doesn’t have Santana’s track record, but he’s younger and has better raw stuff, so you’d have to think an extension after next season would have been in that neighborhood.

To buy his long term security a year earlier in an attempt to avoid what happened to players like Bedard, Webb, and Ben Sheets, Felix signed at a pretty significant discount. He turned ~$20 to $25 million in payouts plus free agency at age 25 (or $10 million in payouts plus a ~$20M/year AAV extension in a year) in exchange for about $53 million over his first three free agent years.

$17 to $18 million a year for three free agent years is a really large discount over what his expected payouts for those years would have been in in the future. He sold the risk of injury in 2010 for probably something between $5 and $10 million per season from 2012 to 2014.

Given the risks inherent with pitching, it’s understandable. Felix’s family is now set for life. But he left a pretty decent amount of money on the table by signing now. Not that I’m complaining.