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Dissecting Trout’s Record Extension

March 30th, 2014
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Let’s tear this thing apart.

Two rather large seismic events were felt throughout Southern California on Friday: The first was a 5.1 magnitude tremor that wreaked minimal damage; the second was a $144.5 million earthquake that will forever alter the baseball landscape. Mike Trout’s six-year deal might not appear earth-shattering on its face—especially in the wake of Miguel Cabrera’s monster eight-year, $248 million contract extension—but that’s because much of its impact is hidden right under the surface.

The specs: Trout will make $5.25 million in 2015, $15.25 million in 2016, $19.25 million in 2017, and $33.25 million each season from 2018-2020. He also gets a $5 million signing bonus—which effectively increases his ’15 salary to $10.25 million—has a full no-trade clause, and can earn $500,000 for each MVP1 he might win in the next seven years. By any normal standard that is an absurd amount of money for a 22-year-old to fall into. The deal not only sets Trout and his family up for this life and the next (and the next), though, it also raises the contract-extension and arbitration bar for every other player from here on out.

Despite the immensity of the deal, there are those who think that the contract is a “hilarious steal” for the Angels, and that Trout left a lot of money on the table by not going through the arbitration process year to year. The latter may be true to a small degree, but both contentions seem to overlook that this contract wasn’t written up in a vacuum. While Trout’s true “value” might lie somewhere closer to $50 million/season based on the dollars per win models2 that are in vogue right now, in reality there’s no way he would have gotten that money from any team given: 1) what’s occurred before him and 2) where he stands in the service-time window.

Before Mike put pen to paper Friday evening, the records for salary during regular arbitration years all belonged to Ryan Howard. The rapidly aged Phillies first baseman got $10 million, $15 million, and $19 million respectively in his first three years of arbitration eligibility, figures that Trout—not coincidentally—will surpass by exactly $250,000 in each of his arb years. Eclipsing arbitration records by a combined $750,000 doesn’t seem like that big of a deal in the Scrooge McDuck financial environment that is Major League Baseball, and it isn’t. However, Howard (and several other guys3 atop the arb-salary leaderboard) had the advantage of being Super Two players, meaning they all got a fourth year of arbitration to increase their leverage.

If we compare Trout’s figures against those who, like him, get/got only three years of arbitration, the gap between him and the next players widens considerably. In fact, not since Derek Jeter charmed and gift-basketed his way through the arb process at the turn of the century has the ceiling been raised so dramatically. Joey Votto, Miguel Cabrera, and Prince Fielder had the high water marks for non-Super Twos up to Friday, with arbitration sums around $33 million, but they’re no longer even close to the top. The $44.75 million4 Trout will receive from 2015-2017 gives him a nearly $11 million cushion over Votto, which is amazing when you consider that all other the players who set new arbitration benchmarks—Jeter, Howard, Votto, Tim Lincecum—had to exchange arb figures with their respective clubs at least once in order to up the ante. Trout, because he’s Trout, is raising the bar by a seven-figure sum while still a pre-arb player. So, sure, the Angels probably saved some money by not going through arbitration with him, but it’s not as though the union has anything to be upset about.

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In addition to setting new standards in arbitration, Trout’s deal also breaks new ground for free-agent years. Just two years ago, only Alex Rodriguez and Albert Pujols had broken through the $30 million/year threshold, and those salaries came—or are still coming, in Pujols’ case—after several years as nominal free agents—i.e. well into their 30s. Now, however, both Trout and Clayton Kershaw have achieved that $30MM mark in their very first years of free-agent eligibility—while not actually on the open market—which does god knows what to next winter’s free-agent crop. Additionally, the $33.25 million Trout will make in each of his first three FA seasons not only breaks Kershaw’s short-lived record for single-season earnings—once again, by $250,000—it also lines Trout up to become baseball’s first $40 million man when he eventually inks his next contract.

It’s easy to imagine Trout reaching the $40 million plateau three years earlier by going year-to-year with the remainder of his team-controlled seasons, but not without ignoring the unlikelihood of that avenue for players of his caliber. Of the 25 position players with the highest fWAR in the last five seasons, just five have hit (or will hit) the open market after the six-year minimum. The same holds true for the top pitchers, who come in at 18-3 in favor of waiting on the open market (with three large question marks still hanging over David Price, Max Scherzer, and Doug Fister). If you throw in a handful of newer and older guys who just missed the list—Howard, Jeter, Alex Rodriguez, Paul Goldschmidt, Chris Sale, etc.—the gap only increases (full list here). Altogether, just 15 percent of baseball’s current upper echelon opted to test the free-agent waters as soon as they could, and just nine percent spurned a multi-year deal of any kind while under team control. In other words, it was possible for Trout to hold out until 2018, but it was never very likely.

I know several Angels fans are bummed that the extension isn’t some 20-year behemoth that’ll keep Trout in Anaheim forever—and snooty others think he should have held out for ridiculous sums—but it’s evident that Trout’s camp didn’t want to go any longer than six years. The Halos reportedly offered up to eight years, but Mike turned that down and ended up without even a single option on the end of the deal. Trout got the deal he wanted and, as a result, we get to watch him dazzle for at least three extra years. There will be a lot of hand-wringing and finger-crossing to do as 2020 approaches, but we’re still a long way from there. For now, let’s just bask in Mike Trout’s glory.

 


1 The eternal optimist in me is banking on three. My more reasonable side is hoping against hope for at least one.

2 I fail to see how the $/win thing avoids the same pitfall as every other economic model ever: that past indicators are terrible at predicting future activity. If someone wants to explain me why this isn’t the case here, please do! I’m notably terrible at all things economics.

3 Tim Lincecum, Buster Posey, Cole Hamels, David Price

4 This includes his $5 million signing bonus. I wouldn’t count this usually, but everyone else is, so…

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Halos Daily

Dedicated to bringing you top notch Angels analysis!