As I have been preparing the annual Top St. Louis Cardinals Stories of The Year countdown being unveiled at The Cardinal Nation blog, I just posted about the virtual passing of the baton of the ace of the St. Louis Cardinals pitching staff from Adam Wainwright to Carlos Martinez.
After several successful years as a major leaguer, Martinez is now where Wainwright was nine years ago – having reached arbitration eligibility for the first time. Of course, that means he will still be with the team three more seasons, but with a rapidly-escalating salary each year.
That leads directly to an approach the Cardinals followed with Wainwright and a number of others – to offer a long-term contract that covers all three arbitration years plus some number of subsequent seasons when the player could have tested the free agent waters instead.
The tradeoff is that the player receives financial security for the first time - going from making the MLB minimum salary of roughly half a million per year to a team commitment of tens of millions over the next four to six years.
The risk-reward opportunity for the team is to potentially tie up a future superstar at a below-market price. However, if he busts or is habitually injured, it could turn into a huge financial mistake. Setting the annual salaries over the long-term contract have to reflect the risks being taken on both sides of the table.
In researching this article, I found a great example to illustrate these challenges. One year ago at this time, Ben Humphreys of Viva El Birdos wrote a piece looking into what it might take for the Cardinals to tie up both Martinez and Michael Wacha on long-term contracts. 12 months later, as Wacha’s health questions mount, his current chances of earning such a financial commitment from the team are only slightly better than mine.
Martinez remains on the table, however, representing a major opportunity.
How much might be a fair offer be for Martinez covering the next four to six seasons?
That is the question I want to try to answer here.
As you may know, the way arbitration values are set is through looking at comparable contracts to others with similar years of experience and roughly the same past results.
While a number of first-time arbitration-eligible pitchers have received multi-year contracts extending into their free agent years, the older examples are less relevant in an ever-changing market where top-tier player salaries continue to increase.
Let’s look at the recent cases of two pitchers in a comparable place as Martinez in their careers, but even more highly celebrated – with a Cy Young Award each. One took a long-term deal, but the other has not – at least as of yet.
The Contract of Kluber
Just two years ago, Cleveland’s Corey Kluber was coming off a 7.4 fWAR season, after which he won the American League Cy Young Award. He was one year behind Martinez’ current experience level and heading into his age 28 season.
That off-season, Kluber agreed to terms with the Tribe on a five-year, $36.5 million deal that covered his final pre-arbitration year at $1 million, his three arbitration years plus one year of free agency. So taking off the first year, the comparable amount to where Martinez is now would be four years, $35.5 million.
On top of that, Kluber’s deal includes also two option years, covering years two and three of his potential free agency. The final four years would go up to $37.5 million if the Indians bought out the two option years at $1 million each. That represents Kluber’s minimum take.
On the other hand, if the final two years are exercised (and still leaving out the one pre-arbitration year), he could earn $64 million over six years. That covers his three arbitration years plus three free agent years.
Here is the basic math with the annual salaries listed.
4.5+7.5+10.5+13+13.5+14 = $64 million
However, there are also accelerators in the contract that increase the value of the three free agent years by up to $4 million each if Kluber places high in the annual Cy Young Award vote. So that could add another $12 million maximum to the above total, making Kluber's very best case six years, $76 million.
4.5+7.5+10.5+17+17.5+18 = $76 million
It is the largest contract for a pre-arbitration eligible pitcher in MLB history.
The year after Kluber took home the American League Cy Young Award, another pre-arbitration player emerged to win that same hardware, Houston’s Dallas Keuchel, who logged a 5.9 fWAR season in 2015. At that point, 12 months ago, Keuchel was at the same point in his career as Martinez is now – having just reached his first arbitration year. However, at age 28, the Houston star was three years older.
There was considerable talk, including from Houston general manager Jeff Luhnow himself, that the Astros would try to negotiate a long-term deal with Keuchel. That led to analysts trying to determine that that contract might look like.
Dayn Perry of CBS Sports estimated Keuchel’s services could be worth $30 million for his three arbitration years. (Remember, that compares to Kluber’s $22.5 million actual.) Interestingly, based on Keuchel’s age and experience, one of the comps Perry referenced was Lance Lynn, though the latter has never performed at a Cy Young level – nor has Martinez, for that matter. (Martinez’ best season was 3.4 fWAR in 2015. His mark last season was 3.3.)
Perry’s colleague Mike Axisa agreed that the $30 million was in the ballpark. He went further, suggesting Keuchel’s best possible upside may have been $33.75 million ($7.25 + $11.25 + $15.25). However, he quickly added that would be discounted down to the range of Perry’s estimate when taking into account the guarantee and injury risk.
What happened was that Keuchel and the Astros did not come to agreement on a long-term contract, instead settling on a one-year, $7.25 million deal for 2016. It was a new record for a starting pitcher in his first year of arbitration eligibility. The previous record was $4.35 million, shared by Dontrelle Willis and David Price. (The later collapse of Willis' once-budding career offers yet another point of caution.)
Arb Year Three is Pricey
Speaking of Price, pegging arbitration year three values are a challenge as salaries near free agent market value. In 2015, the lefty fetched a record $19.75 million in his third and final arbitration year. However, he was coming off a 6.0 fWAR season between the Rays and Tigers, with one Cy Young Award and a second place finish to date in his career.
MLB Trade Rumors does the most extensive job of estimating arbitration-related salaries. There is a current case of note. Yet another former Cy Young winner, Jake Arrieta, is viewed to be in line to make $16.8 million in 2017 if he goes to hearing with the Chicago Cubs in his arbitration year three.
As a reminder, these are high end comps, as Martinez has yet to match any of Arrieta’s last three years. The Cubs star posted fWARs of 5.0, 7.3 and 3.8 in the 2014-2016 seasons. As noted above, Martinez was at 3.4 and 3.3 fWAR, respectively.
The Free Agent Price is Expensive
Price also offers one of the high-ceiling examples of the free-market value of pitching today. On the open market, the left-hander fetched an average annual value of $31 million on his seven-year deal with the Red Sox. However, he is deservedly again at the top end of the salary scale, having since added a second second-place Cy Young finish to his resume. Others in that $30 million AAV stratosphere are Zack Greinke, Max Scherzer and Clayton Kershaw.
The next tier down of MLB starting pitching is in the $25 million AAV range. In that group are Stephen Strasburg, Jon Lester, Justin Verlander, Felix Hernandez and Cole Hamels.
In the $20 million vicinity are Johnny Cueto, Jordan Zimmermann, Matt Cain, Rick Porcello… and Wainwright.
The Basic Structure
Let’s put this all together to see what kind of offer the Cardinals might make that could be aggressive enough to be accepted by the Martinez camp, but would not be considered reckless.
I think the basic structure the team would favor is four years with two team options. The pair of options are not unlike what they did in Wainwright’s original extension, signed in 2008, and later with Jaime Garcia. That would give the club protection to get out early if performance drops.
What about Carlos’ Arbitration Years?
We will start with years one through three. MLB Trade Rumors peg Martinez’ year one arbitration value at $5.3 million for 2017. That would be about $2 million less than Keuchel last year, a reasonable difference for a lesser performer at their comparable points in time.
(In another yellow flag reminder, Keuchel did not sustain his 2015 performance into 2016, registering just 2.7 fWAR this past season. That has led MLBTR to peg his year two arbitration estimate at $9.5 million.)
Using Axisa’s rough scale and MLBTR’s base, I would estimate Martinez over his three arbitration years at $5.3 + $8.9 + $13.3 or a total of $27.5 million. That is more than Kluber ($22.5) and slightly less than Keuchel ($30 estimated) over the same career timeframe. Note that Martinez’ arbitration year three is quite a bit below the Arrieta-Price scale, but he has yet to show he belongs up there.
Setting Martinez’ Free Agent Value
For the three free agent years, I would start with the Cueto tier and ramp up to the Strasburg tier. $20 + $22.5 + $25 million – but it is important to note that it would represent my absolute maximum.
To even make this offer, one has to assume that we have not seen the best of Martinez to date, but that could be a two-edged sword. He could fall short or exceed expectations down the road. To hedge against the downside, I could envision the Cardinals building Kluber-like incentives into the trio of free agent years.
Specifically, give Martinez guarantees of $16 + $18.5 + $21 million with an additional $4 million opportunity each year on a scale to be based on his Cy Young Award ranking. Include club buyouts of $2 million each year for the final two option years of the contract, doubling Kluber’s buyouts to anticipate market inflation.
Getting to the Bottom Line (finally)
In summary, here is how my Martinez offers would cost out.
Base deal (2017-20): 5.3+8.9+13.3+16+4 (buyouts) = four years, $47.5 million guaranteed
Base with two options exercised (2017-22): 5.3+8.9+13.3+16+18.5+21 = six years, $83 million
All incentives reached (2017-22): 5.3+8.9+13.3+20+22.5+25 = six years, $95 million
At the completion of this six-year period, after the 2022 season, Martinez could become a free agent. At age 31, he would be youthful enough that he could cash in for an even larger deal to potentially close out his MLB career.
This contract could offer reasonable amounts of both risk and reward to both sides. Waiting longer from the Cardinals’ perspective, as the Astros have done with Keuchel, could potentially mean cost avoidance later – but only if Martinez is not going to approach his considerable potential. Otherwise, the price of pitching - and the price for the services of the team’s ace pitcher, specifically - is only going to escalate.
Whether you agree or disagree, head over to The Cardinal Nation's insiders' forum to share your views on Martinez' contract - and any other Cardinals topic of interest!
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