Why the MLB free agency hellscape has made contract extensions popular

Teams, players opting for certainty amid tepid free agent market

Free agency has been neutered in Major League Baseball, and one of the byproducts of this is players seeking security wherever they can find it. Contract extensions have been the rage this week, with Yankees pitcher Luis Severino and Phillies ace Aaron Nola signing multi-year deals to avoid salary arbitration.

Severino and Nola weren’t alone, with the Twins also locking up outfielder Max Kepler and shortstop Jorge Polanco to five-year deals, too. The contracts:

• Nola: 4 years, $45 million, plus 2023 club option
• Severino: 4 years, $40 million, plus 2023 club option
• Kepler: 5 years, $35 million, plus 2024 club option
• Polanco: 5 years, $25.75 million, plus 2024-25 club options

All four deals bought out every salary arbitration year for these players, plus at least one year of free agency for Nola, Kepler and Polanco. Severino, who qualified for Super Two status this season — among the top 22% of players with at least two but not yet three years of major league service time — had his four arb years covered, with the club option for what would have been his first free agent year in 2023.

Those contracts also match the total number of four-plus year deals signed in free agency this offseason. Pitchers and catchers have reported for all 30 teams in spring training, and several high-profile free agents remain without a team, including the two biggest prizes of this offseason — Bryce Harper and Manny Machado.

This is the second cold winter in a row for baseball free agents, with a sharp downturn in spending raising questions about potential labor strife before the current collective bargaining agreement expires in December 2021.

These four contracts all seem to fit the rubric of a player taking a little bit less than what he might have potentially earned in exchange for long-term security. None of Severino, Nola, Kepler nor Polanco made more than $605,000 in a season before signing these deals, so it’s understandably hard to turn down life-changing money rather than the uncertainty of going year to year.

If baseball is a casino, teams are the house, able to absorb the risk for some cost certainty. Teams are more than willing for these pre-free agency players because their salaries are still artificially depressed. Using FanGraphs’ estimation that teams pay $8 million per Win Above Replacement on the open market, all four of these players are remarkable values based on their current production:

Trevor Bauer won his salary arbitration case this week, and will earn $13 million in 2019, his third of four arbitration seasons. Bauer has vowed to only sign one-year contracts throughout his career, even after reaching free agency, making him unique in that regard among players.

Bauer, who like Severino was a Super Two, will have earned $23.075 million through his first three arbitration years, per Cot’s Contracts. “I’m going to set the record raise and record salary in arbitration for a starting pitcher next year,” Bauer said on Thursday, which would be the $19.75 million David Price signed for in 2015 with Detroit.

If Bauer gets near that Price number in 2020 his four arbitration years will have paid him over the $40 million Severino is guaranteed through his four arb years.

Nola will be paid $25.75 million through his three arb years, after finishing third in National League Cy Young voting last season. His current teammate Jake Arrieta went year to year with the Cubs in salary arbitration and earned just shy of $30 million through those three seasons, which included a Cy Young win after his first arbitration year.

Dallas Keuchel won a Cy Young before his arb years, then earned $29.6 million from 2016-18 by going year to year with Houston.

The knee-jerk reaction to these long-term extensions is that the players took less money than they could potentially get on the free market, but these past two winters have been fertile grounds for seeds of doubt. Keuchel, for instance, is one of the many top-shelf free agents still without a new team.

This winter was supposed to be a bonanza for baseball free agents, yet spring training camps are open with Harper, Machado, Keuchel, Craig Kimbrel, and more unsigned. Another of the would-be free agents, Charlie Blackmon, signed a six-year, $108 million extension last January amid the first of two frigid baseball winters.

Blackmon saw the writing on the wall. Severino, Nola, Kepler and Polanco aren’t near free agency at all, but they saw it too, and opted for certainty in an uncertain time for baseball.

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