Andrew McCutchen’s Extension Value
One of the big topics this off-season is whether the Pittsburgh Pirates will extend their top player, Andrew McCutchen. McCutchen is entering his final year of league minimum pay. He will be arbitration eligible in 2013, and will be eligible for free agency after the 2015 season if no extension is reached.
The topic of a McCutchen extension came up again this past weekend. In a radio interview with Bob Pompeani, Pirates’ General Manager Neal Huntington was asked about the extensions talks with McCutchen. You can draw what you want from Huntington’s response. When it comes to contract negotiations, I’ve always felt that any public statement is just part of the negotiation process. Justin Upton’s extension was brought up in the interview. If Huntington were to say “yeah, the Justin Upton contract could be a fair comparison”, then that’s pretty much the end of the negotiations. Good luck trying to get McCutchen for less than six years and $51.25 M.
Huntington did make a few comments talking about players who were comparable in the $30-40 M range. He was given the comparison to Upton, and the extension given to Jay Bruce was also thrown out there (six years, $51 M). Upton’s deal bought out his first two free agent years. Bruce’s deal bought out his first two free agent years, plus an option for his third year. I will point out that I still think the urgency to sign McCutchen by December 12th, 2011 is a bit over-stated. I don’t think the Pirates can wait a year or two, but McCutchen’s value doesn’t change between now and Opening Day, which means that there’s no difference between an extension today, or an extension in March. The irony here is that McCutchen is being compared to Upton, who signed an extension right before his final league minimum year. Upton’s deal was signed March 3rd, 2010.
The Pirates have plenty of time this off-season to reach a deal. The question becomes: what is a McCutchen extension worth? If I’m only looking at how valuable Andrew McCutchen is – both to the Pirates and in comparison to the rest of the 25-and-under players in the majors - I’d say six years and $51 M sounds like a fair deal. I wouldn’t want anything less than two free agent years from McCutchen, otherwise an extension is pretty much pointless.
It’s hard to say what kind of value McCutchen would have by going year to year, just because not many players like McCutchen go year to year. That’s not to say that star players don’t go year to year. Prince Fielder didn’t sign an extension to buy out any free agent years. Tim Lincecum hasn’t taken a long term deal. But it’s hard to compare each player with McCutchen. Matt Kemp could be a comparable player. He signed an extension this off-season, although that extension was more of an early free agent deal, since Kemp would have been eligible for free agency next off-season. His arbitration years combined for $20.95 M.
Kemp didn’t exactly go year to year. His first two years were covered under one deal, and his third year was part of his recent eight year deal, buying out seven free agent years. If we say that McCutchen could receive the same amount on a year to year basis (and we’re projecting that McCutchen continues to improve over the next four years), then he would be set to make something in the $21.5 M range from 2012-2015.
A guy I’ve always compared McCutchen to is Carl Crawford. He might end up being better than Crawford, since McCutchen’s numbers at ages 22-24 are similar to Crawford’s numbers at ages 24 and up. Crawford got $20 M a year on the open market. Kemp pretty much got $20 M a year with his recent extension. It wouldn’t surprise me to see McCutchen getting $20 M a year on average when he eventually becomes a free agent. Again, this is assuming he continues progressing from his numbers at ages 22-24. If McCutchen gets an average of $20 M a year, then he’s looking at making around $61.5 M from 2012-2017 if he goes year to year.
The thing about an extension is that there’s risks on each side. The team is taking a risk that the player stays healthy. In exchange, the team potentially gets the player at a value. The player is also taking a health risk, because if he stays healthy, he could be leaving money on the table. The trade off is that the player gets guaranteed money. If McCutchen has a career altering injury next year and doesn’t sign the extension, he’ll end up with about $3.5 M in career earnings, with his signing bonus from the 2005 draft included. On the flip side, if he gets hurt and the team does sign an extension, then the Pirates are looking at a huge amount in dead weight.
Because of the risks from each side, there has to be a discount involved. McCutchen might get $61.5 M over the next six seasons going year to year, but that’s not fair value for an extension. At the same time, an extension can’t be too low, because then it’s not worth it for McCutchen to sign the deal, as he could make more money going year to year. So where do the two sides meet?
Upton’s contract is convenient, but McCutchen isn’t exactly comparable to Upton. They both bring different strengths to the table. Upton has put up much better offensive numbers in his young career. McCutchen plays good defense at a premium position. Upton started putting up his elite numbers at the age of 20-21, and his extension runs from ages 22-27. McCutchen’s performance so far has come during the ages of 22-24. Upton had the numbers to earn a lot more through arbitration than McCutchen, especially if he improved on his numbers from ages 21 and 22.
You could argue that McCutchen isn’t worth six years and $51.25 M, but I don’t think the total is much lower than that. His value is definitely higher than the $30-40 M range, since you could make the argument that he’s worth $21.5 M if he goes year to year through his arbitration years. You could probably place his value closer to the $40-45 M range. That amounts to $1-2 M less per year.
If the Pirates had to go to $51 M, it wouldn’t break the bank. We don’t even know if McCutchen wants $51 M. For all we know, he could want $61 M, which wouldn’t give the Pirates any incentive to do a deal. We also don’t know what the Pirates are offering, only assuming that they’re in the $30-40 M range due to the recent comments. Regardless of what either side is offering, there’s no urgency to complete a deal this instant. I don’t think there’s any real urgency until McCutchen reaches arbitration. The longer the Pirates wait, the more McCutchen will cost, which might make it beneficial to try and get a deal done this off-season. We’re a little less than four months from the start of the regular season, so there’s definitely time on the clock for both sides to find some middle ground in the negotiations.