The Rangers received a sound thrashing by their intrastate — and now intradivision — rivals, the Astros, in the opening game of the 2013 baseball season. Nonetheless, their Sunday night wasn't a total loss, as Fox Sports' Ken Rosenthal reported that the team and shortstop Elvis Andrus were close to completing an eight-year, $120 million contract extension. The exact specifics aren't entirely clear, though they're apparently not an April Fools' joke, as the agreement has since been confirmed by several other outlets.
On the heels of last Friday, when the Tigers, Giants and Diamondbacks announced more than $300 million worth of extensions for just three players (Justin Verlander, Buster Posey and Paul Goldschmidt) — with rumors of one for the Dodgers' Clayton Kershaw floating by as well — the Andrus extension is yet another testament to the game's financial health. It's also the latest hit to the post-2014 free agent market, part of a growing trend of teams locking up their homegrown players. Furthermore, it's a move that will tie up one of the game's most talented young players at a premium defensive position while carrying longer-term ramifications for Texas' logjammed roster.
Spurred by a $3 billion, 20-year television deal with Fox Sports Southwest signed in late 2010, the Rangers have become one of the game's financial powerhouses, a team with the ability to hold onto the fruits of their productive player development system. From 2010 to 2012, their Opening Day payroll more than doubled, from $55.3 million (27th in the majors, according to USA Today's figures) to $120.5 million (sixth), though after a winter in which they failed to land any of their top free agent targets, they'll only rank ninth at $125.3 million according to Cots Contracts' estimate.
Beyond their local revenue, the Rangers and the rest of the industry are awash in cash resulting from new national television contracts and other lucrative assets such as MLB Advanced Media. A trio of eight-year deals with ESPN, Fox and TBS and will go into effect in 2014, bringing each team an average of $52 million a year through 2021. According to the latest annual Forbes report on the industry's finances, that's twice the value of the expiring TV deals. Furthermore, MLBAM, baseball's digital arm co-owned by the 30 teams, generated an estimated $650 million in revenue last year, nearly $22 million per team. Forbes says that in 2012, overall revenue rose by 7 percent, more than twice the 3.2 percent increase in the average player salary, while the magazine's estimates of franchise values rose by 23 percent over 2012 estimates. In other words: Don't weep about the bottom lines of the owners handing out these monster nine-figure deals.
Rather than trigger an increasing wave of impulsive free agent spending, this flood of money is helping teams hold onto their homegrown players, a class that historically represents a lower level of risk than externally-acquired free agents; teams are privy to far more information about their own players when it comes to their health and how they fit into the specifics of a team's environment. As Cliff Corcoran pointed out in his Posey analysis, the past 12 months has brought a horde of extensions of five years or longer, most of which effectively buy out the remaining peak years of a player's career. Andrus, who debuted as a 20-year-old back in 2009 and won't turn 25 until Aug. 26, is one of the youngest players in a group that includes Madison Bumgarner, Matt Cain, Starlin Castro, Allen Craig, Andre Ethier, Goldschmidt, Cole Hamels, Matt Harrison, Felix Hernandez, Adam Jones, Ian Kinsler, Evan Longoria, Miguel Montero, Jonathan Niese, Brandon Phillips, Posey, Chris Sale, Carlos Santana, Verlander, Joey Votto, Adam Wainwright and David Wright.
As with the extensions of Verlander, Posey, and many of the other aforementioned players, Andrus' extension won't go into effect until after the 2014 season. He still has two years and nearly $11.3 million remaining on a three-year, $14.4 million deal signed in February 2012. It's worth noting that by locking in extensions a year or two early, teams not only guarantee themselves some amount of cost certainty on their balance sheets, they also lower the impact of such deals with regards to the luxury tax, which is computed via the average annual value of each contract. Thus instead of an eight-year, $120 million deal with an AAV of $15 million, Andrus' deal is effectively a 10-year, $131.3 million one with an AAV of $13.1 million. While the Rangers are well under the 2013 and 2014 luxury tax thresholds ($178 million and $189 million, respectively), the lesser AAV theoretically makes him more attractive on the trade market, should Texas consider dealing him at some point.
That said, the specifics of the final deal, which won't be announced until Andrus clears a physical later this week, aren't yet clear. The Dallas Morning News' Evan Grant has reported that the contract will include an opt-out clause that would allow Andrus to hit the free agent market as a 30-year-old (i.e., after the 2018 season), as well as a vesting option that could add another year to the deal, keeping him a Ranger through 2023, when he'll be 35.
The money may be surprising to some given that Andrus isn't a major offensive force. He's a career .274/.342/.352 hitter who set across-the-board highs with a .286/.349/.378 line in 711 plate appearances last year, though he hit only three home runs and stole a career-low 21 bases. In Texas' hitter-friendly environment, that was good for just a .255 True Average — an expression of his runs created per plate appearance, adjusted for park and league scoring levels and translated to a batting average scale, with .260 as average — but even so, that was six points above the major league average for all shortstops.
Andrus brings more to the table than just a bat that's slightly above average for the position — and, due to his youth, likely to improve as he heads into his prime. He's an outstanding runner who ranked 10th in the majors in Baseball Prospectus' Baserunning Runs last year, at 5.8, 0.2 above his annual average. He's also an above-average fielder; last year, he was eight runs above average according to both Defensive Runs Saved and Ultimate Zone Rating, more or less in line with his career average. Overall, he was worth 3.7 Wins Above Replacement according to Baseball-Reference.com's recalibrated WAR figures (which lower the replacement level to place them on the same scale as FanGraphs' WAR), and has averaged 3.2 WAR per year by that standard. The going rate per win under the recalibrated system appears to be around $3.7 million (I'll let the hardcore number crunchers confirm that figure), so in order to be worth the money, he'll have to maintain a similar level of production — not a bad bet for a player who still hasn't entered his peak years, but not a certainty, either.
How this will play out with the rest of the Rangers' infield has yet to be seen. Andrus' deal appears to block 20-year-old shortstop Jurickson Profar, by consensus the top prospect in baseball but recently sent down to Triple-A Round Rock to bide his time. The possibility of moving Profar over to second base was considered during the winter, but that would have required shifting Ian Kinsler, who's under contract through 2017, either to leftfield or first base, something the three-time All-Star expressed reluctance to do, at least in the near term. Meanwhile, third base is blocked — in a good way — by Adrian Beltre, who is under contract through 2016.
While the team could shift Profar to the outfield, his value would take a significant hit, since he's perfectly capable of manning the middle infield while carrying an above-average stick for the position (he hit .281/.368/.452 with 14 homers and 16 steals in 526 PA at Double-A Frisco as a 19-year-old in 2012) if not necessarily an above-average one for a corner outfielder. Barring injury, what this may do is increase the team's willingness to use Profar as a trade chip, either to acquire another frontline pitcher or a middle-of-the-order slugger, with the Marlins' Giancarlo Stanton the most enticing target — a possibility I addressed back in January. In any event, even with Opening Day as a soft deadline for such mega-extensions — since many players would prefer not to negotiate once the season starts — we shouldn't be surprised if a handful of other deals that were near completion by the end of spring training are announced in the next several days, perhaps including one for Kershaw, who was said to be nearing an eight-year, $200 million contract with the Dodgers. The trend is clear, particularly with industry-wide controls on draft and international free agent spending and the gutting of the free agent market. More than ever, teams believe their best bet is to reinvest their TV windfalls in their brighest young talents. Given the high cost of free agent busts, it's tough to disagree.