What would a Mike Trout contract extension take?

In March, Sam Miller of Baseball Prospectus posed this question on twitter:

I attempted to answer that question, in an article for Beyond the Box Score. I projected that deal would cost $274 million with a projection of Trout being worth 40.2 wins above replacement (Baseball Prospectus) over his career. It sounded crazy at the time, mainly because giving any player $274 million in guaranteed money is insane, especially when the player only has 135 career plate appearances. But obviously the entire analysis/projection was a fantasy scenario, because a 20-year contract is nuts, even for baseball’s number one prospect.

At the time of that article, Trout was in spring training and already aware he would begin the 2012 season in Triple-A. We all know by now that Trout did not stay in Triple-A, and is well on his way to winning both the MVP and Rookie of the Year awards, this season. He has already been worth 7.6 WARP and looks poised to pass the 40.2 career WARP that was used in my original analysis.

A 20-year contract proposal was quite clearly a fantasy world idea, but at that time a realistic contract extension for Trout was not out of the question, despite his lack of major league experience. Miller wrote his own take on Trout and long-term extensions for Baseball Prospectus. In that article, he cites deals signed by Matt Moore, Salvador Perez and Evan Longoria as recent long-term contracts that were signed by players with very little major league experience. A deal similar to theirs for Trout was a possibility before this season, but is way out of the question at this point.

The problem for the Angels is that Trout’s 2012 campaign has been unprecedented; his value, which was already extremely high before this season, has risen exponentially. A Longoria-esque six-year $17.5 million deal with three club options, is no longer within the realm of possibility. Trout has been too good and it would take so much more than that to lock him up.

About a month ago, Kevin Goldstein wrote a phenomenal article about contractual options for Trout and the Angels, which appeared at both Baseball Prospectus and ESPN. Goldstein polled industry executives and scouts on how they would approach a Trout extension and came out with three distinct “theories” of what the best decision would be for the Angels:
{exp:list_maker}Theory 1: The cautious route. Which would mean no extension
Theory 2: Fair market value. Which would be a contract similar to the ones recently signed by Andrew McCutchen, Starlin Castro and Carlos Gonzalez
Theory 3: The all-in. Which would be an extension unlike anything we’ve ever seen before {/exp:list_maker} There are arguments for all three options, and I think there’s no way of knowing which is the right option, because it’s an extremely complex situation.

Right now, the Angels have Trout under team control for the next five seasons. Players typically don’t make a ton of money over their pre-arbitration and arbitration years, but Trout could a different case. Trout’s arbitration projections, according to Goldstein’s sources, were between $52 and $55 million. That sounds about right to me. So let’s assume, for the sake of this analysis, that Trout is essentially under a five-year $54-57 million deal with the Angels right now. “The cautious route” would be for the Angels to stick with that deal and attempt to negotiate another contract when Trout is 26 years old and entering free agent eligibility.

It’s hard to argue against that move. Trout is in all likelihood going to bring the Angels ridiculous production over the next five years, and it’s hard to imagine him not being worth well over $57 million. With where the two sides stand at the moment, Trout would have to be worth only around 9 fWAR over the next five years for the Angels to break even, and Trout has been worth 8.3 fWAR just this season.

There is the risk that the Angels won’t be able to retain Trout if he hits the open market, or that they would have to sign him to a record deal to keep him. But I wouldn’t be surprised if some people in the Angels’ front office think that the surplus value that the Angels will get from him in the next five years outweighs the free agency risk.

As for Theory 2, I personally don’t see much benefit for Trout. In Goldstein’s article, an NL exec gives a contract proposal that reflects “fair market value”:

“I’d be aiming at eight years at $85 million with two option years at $20 million and each with a $5 million buyout,” explained an NL exec. “That guarantees $95 million for eight years with the potential for $115 million over ten.”

An eight-to-10 year deal worth between $95 and $115 million makes market sense based on similar extensions. The Angels would most likely win this deal and they’d be getting a steal to have Trout for three to five years of his free agent-eligible years, at a cost of just $40 to $60 million more than they are already going to spend on him.

With this move, Trout would receive as much financial security as a pre-arbitration player could hope to get, and still would enter free agency at a fairly young age (between 28 and 30). It is also perfectly conceivable that Trout could still receive a Pujols-ian contract when he hits free agency at a later age. But I think that deal would seriously pale in comparison to the one he’d receive if he became a free agent at age 26.

Joey Votto is 28 years old and his current contract with the Reds is for 12 years and worth $251.25 million. Coming into this year, Votto had been worth 22.8 fWAR in his career. Let’s assume that Trout regresses a good deal from his historic 2012 season, and is worth 4 fWAR on average over the next five seasons. That would bring his career fWAR total up to almost 30. Thus, when Trout hit free agency he’d be two years younger than Votto and have been worth seven wins more over his career. Oh, and did I mention that Votto’s contract with the Reds was an extension, and not a free agent contract?

A lot can happen in five years, but I could see Trout receiving a 15-year, $350 million contract if he became a free agent after the 2017 season. That proposal would be the largest contract in baseball history, but the crazy thing about it is that it could be an underpay. Superstar free agents now typically make around $25 million on the open market, and this projected deal would be paying Trout less than that. When inflation is considered, he could be making even more.

Does it make sense for Trout to risk not receiving that record-breaking contract for just three more years of financial security?

I really don’t think so, which is why I think if the Angels are serious about keeping Trout in Anaheim for his prime, they’re going to have to go “all-in”.

Goldstein’s brief paragraphs about what it would mean and what it would take for the Angels to give Trout a monster contract do a great job of capturing why this type of deal could be the only way for Trout to sign an extension:

And that’s the problem. In the midst of a historic season, and clearly a remarkable talent, and obviously so incredibly young, would Trout even entertain anything but an equally historic offer at this point? “You might need a 12-15 year contract for it to make sense from Trout’s side,” explained an AL executive. “Otherwise, why not dominate your arbitration years and test free agency at 26?”

Even with those parameters, many team officials were interested. When one NL scout was asked how much he’d offer Trout, he simply responded “whatever he wants.”

“I don’t think anything is too much for Trout,” said another NL official. “It’s just such a different situation given the leverage. If I’m the Angels, I’m looking to do something historic, and we’re talking those 12-15 years, to make sure he is the man for our franchise for as long as possible.”

I think the Angels and Trout could agree on something along the lines of a 12-year $175 million deal with all of the money guaranteed. That offer would almost have to be too good for Trout to pass up and would be enough to keep him from dreaming of the $300+ million deal that he could possibly have made on the open market.

I understand that $175 million guaranteed sounds completely insane for a player who only one season of plate appearances under his belt. But Trout could be a legend. The Angels would be receiving all his prime and if Arte Moreno has the money, that’s honestly too good to pass up.

Trout is going to regress next year. Trout may never have a season like this one again in his career, but maybe he doesn’t have to. His .383 batting average on balls in play (BABIP) will regress, but he has a plus-plus speed, so I could easily see him having a .330 to .340 BABIP over his career. Also, I don’t think that Trout’s 21.7 percent home-run-to-fly-ball rate is sustainable, but it doesn’t have to be. He isn’t going to hit 25+ home runs every year, but scouts peg him as a 15-20 home run-guy, which still is very good. Also, I think that his plate discipline will improve.

Trout has had a 0.41 walk-to-strikeout rate (BB/K), which isn’t horrible, but based on his youth and his mature plate discipline that scouts have raved about, I’m almost certain that number will improve.

So Trout may never have a season like this one again. He’s 21 years old and still could improve, but the numbers he’s put up have been out of this world. If Trout comes down to earth significantly (his batting average and home runs regress while his plate discipline improves) he could still average four WAR per season over this 12-year proposal. If he can do that, this deal would be an obvious win for the Angels:

Year (Age) Salary WAR $/WAR Production Value
2013 (22) $0.55 4 $5.25 $21.00 $20.45
2014 (23) $0.55 4 $5.51 $22.05 $21.50
2015 (24) $12 4 $5.79 $23.15 $11.15
2016 (25) $15 4 $6.08 $24.31 $9.31
2017 (26) $18 4 $6.38 $25.53 $7.53
2018 (27) $18.41 4 $6.70 $26.80 $8.39
2019 (28) $18.41 4 $7.04 $28.14 $9.73
2020 (29) $18.41 4 $7.39 $29.55 $11.14
2021 (30) $18.41 4 $7.76 $31.03 $12.62
2022 (31) $18.41 4 $8.14 $32.58 $14.17
2023 (32) $18.41 4 $8.55 $34.21 $15.80
2024 (33) $18.41 4 $8.98 $35.92 $17.51
  $175 48   $334.26 $159.29

For this model, I began with $5.25 million as the price of one win next season. I’ve heard very strong arguments that the market price of WAR is higher or lower than that number, but I think this estimate fits nicely in the middle. I then assumed a consistent five percent inflation rate for the next 12 seasons. Based on this model, if Trout is worth 48 WAR over the course of this contract, then it’d be a huge, $160 million, win for the Angels.

I find it strange that a 4 WAR season is well above-average and would go a long way in helping the Angels, but it actually feels like an under-projection for what Trout may do over the next dozen seasons. The break-even WAR for this deal is 25.1 WAR or an average of ~2.1 WAR per season, but the Angels would be hoping for much more than that, or else they wouldn’t venture into this contract.

This deal might sound great right now, because Trout is in the midst of a super-human rookie campaign. And it definitely feels like he’ll easily outstrip 48 WAR over the next 12 years. But at the same time, he’s literally only accrued about 220 days of major league service time. Given the ridiculously small sample size of Trout’s major league experience and the fact that so much can happen over the next decade that is not under Trout’s or the Angels’ control, this deal may still feel very risky.

So to give us a better idea of what we can maybe expect from Trout in the future, I looked at players who put up Trout-esque numbers in their careers before they turned 22.

Just 22 position players (other than Trout) in major league history have been worth 9+ WAR before they turned 22.

Trout has been worth 9 WAR, but he doesn’t turn 22 until next August, so he has a full season to accrue more WAR before his 22nd birthday. WAR does have a playing time component, so I factored plate appearances (playing time) out of the equation in an attempt to account for the fact that Trout still has a full season left to play.

Below are the 23 9+-win batters sorted by their WAR/PA:

Player Age-21 WAR WAR/PA Age 22-33 Total WAR
Joe Jackson 10.9 1.42% 56.1
Mike Trout 9 1.39% ???
Rogers Hornsby 15.4 1.28% 111.6
Ted Williams 15.5 1.16% 79.7
Jimmie Foxx 14.6 1.12% 96.6
Mel Ott 21.5 1.04% 81.2
Frank Robinson 14 1.04% 80.8
Eddie Matthews 12.8 1.00% 88.1
Ty Cobb 17.7 0.96% 106.5
Andruw Jones 11.3 0.93% 59
Alex Rodriguez 14 0.92% 90.5
Mickey Mantle 14.2 0.91% 96.8
Sherry Magee 15.2 0.90% 58.5
Arky Vaughan 10.5 0.87% 61.5
Ken Griffey Jr. 15.5 0.86% 67.1
Al Kaline 16.5 0.85% 66.1
Johnny Bench 10.7 0.83% 68.2
Vada Pinson 11.5 0.76% 43
Cesar Cedeno 12.3 0.75% 40.7
Bill Mazeroski 9.4 0.65% 29.1
Tony Conigliaro 9.8 0.59% 6.7
John McGraw 9.9 0.59% 40.8
Buddy Lewis 10.1 0.47% 23
Average Total     66

Shoeless Joe Jackson is the only hitter on this list who had a higher WAR/PA before his 22nd birthday than Trout. Trout’s WAR/PA ranks ahead of some of the greatest to ever play the game. Rogers Hornsby, Ty Cobb, Ted Williams, Jimmie Foxx, Mel Ott and many more rank behind Trout.

Of these players. 14, are in baseball’s Hall-of-Fame. If Jackson hadn’t been banned from baseball he would’ve been a lock for Cooperstown and Alex Rodriguez and Ken Griffey Jr. will be admitted someday.

If we don’t count Bill Mazeroski (who shouldn’t be in the hall) but assume that Jackson, Rodriguez and Griffey are HoFers, then the total rises to 16 of the 22 (73 percent), in Cooperstown; which is pretty absurd.

These players averaged 66 WAR over their age 22-33 seasons (the years of my Trout contract proposal); which is well above my 48 WAR semi-projection for Trout. Only six players failed to reach 48 WAR and those were the six players with the worst WAR/PA on the list.

In no way am I’m attempting to say that Trout is a shoo-in for the hall with only one season’s worth of PAs to his name, but he is a once-in-a-generation talent, who was ranked as the top prospect in baseball and is going to win an MVP award.

At this point, it seems that nothing short of a record-breaking deal for a pre-arbitration player is going get Trout to sign an extension. It is up to Moreno and Jerry Dipoto to decide whether that is really the road they want to travel.

But if you care about my opinion, I’d be sprinting down that road.

References & Resources
All WAR data comes courtesy of FanGraphs

Print Friendly
 Share on Facebook0Tweet about this on Twitter0Share on Google+0Share on Reddit0Email this to someone
« Previous: Do two wild cards make 2012 more exciting?
Next: The power of power »

Comments

  1. Glenn DuPaul said...

    That deal worked out great, seeing as it ended after the 2010 season.  Over the course of that deal A-Rod won three MVP’s, a World Series and was an All-Star nine times.  He was worth 71.5 fWAR over the course of the deal; which is greater than 7 wins per season, so I would say it worked out really well.

    However, the 10-year $275 million contract that bought out the last three years of the original deal, is a completely different story.

  2. tz said...

    How about a 4-year $100 million deal, followed by the Angels getting 8 consecutive 1-year options at $15 million/year?

    The Angels run the risk that Trout gets injured badly early in the deal and isn’t worth nearly this much money (they could probably get insurance for this).  In exchange for making Trout set for life, the Angels have the flexibility to keep him for as long as he is productive in his prime.

    The problem with most big contracts is that they are back-loaded to pay most of the salary after the player has begun his decline.  If the Angels are willing to pay a lot right at this moment, they might be able to avoid the worst-case scenario of a big-contract albatross.

  3. Glenn DuPaul said...

    That contract would be revolutionary, but I’m not sure if Trout would risk it (yes, Trout, not the Angels).  The contract would be revolutionary, because eight options years is unheard of. It is an interesting thought though.  I think that Trout wouldn’t risk this, because it’s true that he’s only projected to make about $20-$30 million over the next four years, which pales in comparison to $100 million. 

    But if he’s almost definitely going to make $20-$30 (which is still a ton of money), why would he put his last two years of arbitration and first six years of free agency in the Angels’ control, when he could take control of them (the last six, of course) and make so much more?

  4. Richard Stahl said...

    Glenn,

    As an economist, I have one small quibble with your model: your assumed inflation rate of 5%.

    That is VERY high.  The standard assumption that has been used lately by my fellow economists that compute economic impact estimates is 2%.  This is also in-line with the publicly announced preferred inflation rate of the Federal Reserve.

  5. Glenn DuPaul said...

    I agree with you that standard inflation for the United States is 2%.  But the baseball market does not act in the same way that all of the other markets do.  The change in salary (or in the case the price of WAR) is higher than 2 percent.  5% could actually be an underestimate based on certain models. This article shows that over the 20 years prior to 2011, prices in the US grew by 3%, but baseball salaries grew on average by 7%: http://www.fangraphs.com/blogs/index.php/predicting-salary-inflation-for-2011/

  6. jj said...

    Can his price go up any more in 2 years? Talk about buying high. The only reason to sign him now is to try to save some money in the future and lock him up. At this point I’m not sure there would be any saving going on so why do it? I doubt they will get a Longoria type of deal.

    He has no real leverage until 2 more years anyway so why not wait and see just how good he is and then buy out his arb years and 3 -5 years of his FA or if you think he is that good, then go all in.  Sure he looks to be something special at this point and he indeed might be, but if you have 2 years to figure it out why not use them.

  7. mike said...

    I have news for everybody: He will regress. He will get old. He will get injured.

    Remember when we were saying A-Rod was underpaid with his (original) 10 year, $250 + deal? How’s that one working out now?

  8. Bill said...

    Trout’s game is based a good part on speed, so come early 30’s a lot of that game will have gone and he will need to do some Bonds’ing and bulk up to make up for it with power to maintain a $20+ mil contract. If I were the Angels I would ride out his contract years and go for broke in the meantime while they have with the Pujols/Wilson contract. In fact spend that long term Trout money on a couple more short term big contracts (Hiroki Kuroda style ones) and go big for 3/4 years before Pujols wears out. Reassess at 26 and see where the club is at, it would suck to have $20 mil tied up in a player for a generation if he got injured, no matter how good he is.

  9. dcs said...

    Why try to lock any player—even Baba Ruth-up for 20 years, Why pay for his decline years. Why not offer him a similar deal to what the Cubs just did with Castro—they signed him thru his pre-peak and peak.

  10. Glenn DuPaul said...

    @dcs I am in no way suggesting that any team should try to lock any player (even Babe Ruth) into a 20 year contract.  That was a fantasy idea, I addressed in another article, and I was in no way being serious.  I don’t think you should pay for Trout’s decline. I think the Angels would love to do a similar deal to what the Cubs did with Castro, but at the same time I don’t think Trout would do that right now.

    Which is why I suggested that maybe only a 12+ year contract would be something that Trout would agree to.

  11. Bruce Markusen said...

    As great as Trout has been, it’s still only one season. I would wait to see how he does in year two, and how he deals with the adjustments that AL pitchers will make against him.

    If he’s as good in year two as in year one, then by all means offer him an extension.

    I’ve seen too many guys come back to Earth to go all “gaga” over a rookie season. Just look at Fred Lynn. As a rookie, he looked like a Hall of Famer. By the end of his career, he had been a fine player, but nothing close to Hall of Fame caliber.

  12. Glenn DuPaul said...

    @jj I said in the article that the Angels wouldn’t be wrong to wait and see.  Getting Trout for about $1 million total over the next two seasons if definitely not a problem.  There’s still some uncertainty now though, which makes me think they could get some savings on an extension.  If Trout is a 5-win player the next two seasons, it’s going to be really tough to lock him up at a fair price.

    @Bruce If he’s good again in year 2 though they’re going to have to offer him an even larger extension, that has more chance of ending up being a loss for the Angels.  And as for Lynn, if he was signed to the 12-year contract I proposed in the article, after his ROY/MVP season, he would’ve been worth a total of 42.2 WAR; which of course, isn’t amazing but would still make the deal a win for the Angels.

    @Bill That’s not a bad idea.  I agree that his game is based on speed so he’ll have to make adjustments to it in his early thirties.  But I’m only really suggesting the Angels sign him until then.

    Your strategy though of going for broke when Trout gives them room to invest over the next few years does make a lot of sense.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Current ye@r *