Gerrit Cole throws the hardest fastball in the NL by a half mile an hour. He leads the majors in wins heading into the All Star Break, giving the Pirates and their fans reason to really celebrate each Gerrit Cole day. He’s sixth in the NL in innings pitched, fifth in ERA, and seventh in strikeouts. If traditional stats just aren’t your thing, he’s fifth in xFIP and SIERA and sixth in regular FIP. No matter if you’re a kid looking at the back of a baseball card or a SABR nerd pining over piles of advanced data, Gerrit Cole is pretty good at baseball.
In the last few years, the Pirates have managed to lock up some of their young, controllable talent to team friendly deals. The first to sign was Jose Tabata who penned a 6 year / $15 million contract that caused his agent to quit and has since made the bizarre right fielder look like a genius, even if he’s getting paid in the Hoosier State rather than one that has a major league team or two. Andrew McCutchen signed next, accepting a six year deal for $51.5 million with a team option in 2018 that the Pirates are all but certain to pick up. The deal was signed in March of 2012 and it paid for itself by June or July the following summer, assuming six million dollars in value per fWAR. By now, the deal has paid for itself three times over. Starling Marte, who received next to no bonus when he signed as an amateur out of the Dominican Republic, signed earlier in his career than McCutchen and for less (6 years/$31 million). However, a pair of options could escalate the value of the deal for Marte while keeping him under the Pirates’ control. Josh Harrison cashed in on his excellent 2014 campaign by signing a deal that guarantees him $27.3 million over his arbitration years and his first year of free agency. The Pirates locked in two option years that provide value if J-Hay only manages to stay an average player. The lone pitcher the Pirates have signed to an extension is Charlie Morton (3 years/$21M, with an option in 2017), and at the moment his is not looking like the steal they got from a few of the position players.
When describing extensions signed by the Pirates’ players, I used the descriptors like steal, value, and team friendly. The Pirates often use the phrase “sharing the risk”, meaning the Pirates wager that the player signing the extension will continue to be reasonably productive, while the player assumes some of the risk of injury or that their production will decline over the course of the deal by taking below market value salaries and reasonable options.
I wouldn’t expect a Gerrit Cole option to be team friendly nor do I expect him to “share the risk.” I say this for a couple of reasons. Cole received an $9 million dollar signing bonus as the first overall draft choice in 2011, the largest to that point in draft history. That’s more than three times the value of McCutchen, Harrison and Marte’s entry level contracts combined. Cole has financial stability that others did not. Second, he’s represented by super agent Scott Boras and while he’s not as irrational in his dealings as many fans credit him, value is not in his vocabulary and the risk is mostly on the team’s side. In general, his clients go year to year through arbitration and only a handful sign deals that cut into prime free agency years. Most of those sign towards the end of their arbitration years, the exception being Carlos Gonzalez who signed after his breakout third stint in the majors. He hasn’t enjoyed the same success since.
Breaking Gonzalez’s deal down, there was some risk sharing, a little less than half to be exact. In order to calculate this, I averaged his first three seasons of WAR prior to signing his deal as simply using his 5.8 win age 24 season, which led to him looking like a once in a generation type player on our aging calculator. Using the same formula, McCutchen assumed about sixty-seven percent of the risk*. Keep in mind, I assumed five million dollars per win for both players even though the price per win was likely slightly higher for McCutchen.
Conservatively speaking, I assume Cole wouldn’t accept a level of risk greater than that absorbed by Gonzalez when I consider how few Boras clients actually sign extensions. I also would assume that he’ll be signing at a market value of $6.5M dollars per win. On top of that, I would only use his projected full season 2015 fWAR of 4.8 rather than averaging his first three seasons as his current year numbers lead to a reasonable curve. Based on that, his market value over his three arbitration season and his first two years of free agency would be $108.6 million. Taking on 45% of the risk and adding in a four million dollars in signing bonuses and salary for next season, the total value of the deal would be worth around 63.5 million over 7 years. At 35% of the risk, the deal would be 7 year / $74 million.
This is just one way to value Cole. The other would be to look at similar contracts, but contracts where that little risk is assumed by pitchers are rare. After struggling to get full traction in the majors, Corey Kluber broke out in a big way during his age 28 season in 2014. He signed a 5 year, $38 million deal heading into the 2015 with two team options. Kluber will be 34 when the original deal wraps up. Cole projects to outperform Kluber over the next five years even if the Indians pitcher’s 7.2 WAR spike holds up. I find it difficult to believe that the Tribe’s front office and even the player calculated that it would when signing this pact. Julio Tehran projected to outperform Cole slightly in his arbitration and first two years of free agency when he signed for 7 years/ $32.4 million or roughly 77% of the risk in the final five years of the contract.
In the end, I think it will be difficult to get a deal done with Gerrit Cole this year or before next season. You have a player that doesn’t need to secure his financial future and who can afford to gamble his future earnings thanks to money already in the bank. Market rate extensions for comparable players have the pitchers, rather than the team, assuming a vastly greater percentage of risk. He also has an agent with little history of negotiating long term extensions early in his client’s career.
I think it would take between $63 and $74 million over seven years to lock Cole up right now and I’m not sure the Pirates would or should do it. Any deal with Cole is likely to be deferred down the road and I suspect he may go to arbitration once or twice before his signing an extension becomes a serious option for the Pirates. This may not be a bad thing as it would allow them to control their risk for him needing Tommy John surgery with what would likely amount to a shorter deal. If he were to sign for seven years tomorrow and need the surgery in the offseason, it’s highly unlikely that he’d be able to pitch the for the remainder of the contract. Waiting would also allow them to avoid setting the precedent of the club taking on more risk than the player early in their career. It makes sense for the Pirates to retain Cole provided he stays healthy into free agency, but it may also make more sense to the player, his representation, and the team to complete that deal a little later.
* formula used to calculate risk
(Total value of contract – signing bonus – prearbitration salaries)
Average Arbitration WAR Projection * 5 * .6 + Post Arbitration WAR Projection * 5
This ignores pre-arbitration production as market price is not factored into determining the salary that season. Any salary received is therefore also removed.