I will start off this blog entry by saying that I have absolutely no insight into how the negotiations between the Nationals and Stephen Strasburg’s agent/lawyer Scott Boras will go. But I think it’s worth pointing out how the two sides could agree on a deal that would make Strasburg the highest-paid draftee ever while still allowing the Nationals to save money in the long run.
There have been some analyses that suggest Strasburg should be treated as if he were a free agent, and that his value should essentially be based on what he’d get on the open market. But that’s sorta silly, because he’s not a free agent and won’t be for seven years.
A better examination would take a look at what Strasburg might make if the Nationals were to pay him on a year-to-year basis until he becomes a free agent.
Most players are essentially paid the league minimum or a bit more for three years, then they go through three years of arbitration, then they become free agents. It has become commonplace for teams and players to agree on a contract that buys out at least one or two of the arbitration years, and possibly a free agent year as well. Teams like these kinds of deals because it gives them cost certainty. Players like them because they get immediate financial security, even if they theoretically are leaving money on the table.
What if the Nationals were to offer Strasburg this type of long-term contract now? It would be unprecedented, of course, for a player with no major league experience to get such a deal. But it wouldn’t be that different from the six-year, $17.5 million contract signed by the Tampa Bay Rays’ Evan Longoria after playing just four games in the majors.
How much should Strasburg get in such a deal? To figure this out, you basically need to make an educated guess as to what Straburg would earn in his arbitration years. I’m not sure there’s any great way to determine it, but the Nationals may be best off operating on the assumption that he will be a league average pitcher. (Yeah, he could be a superstar, but he could also bust out early. That’s the risk with young pitchers.)
So Strasburg’s year-by-year salary might go something like this:
2013: $7 million in arbitration
2014: $9 million from arbitration
2015: $10 million from arbitration
2016: Free agent.
So under this scenario, Strasburg would be looking at $27-30 million over the course of his first six years.
We’ve heard reports, of course, that Boras wants $50 million over six years. He’s not going to get that. But what if he’s agreeable to a contract about half as big? It would be, by far, the most ever offered to a drafted player. But it could also be a bargain for the Nationals if Strasburg turns into a superstar, and there is value in having the guy locked up without having to worry about contentious arbitration proceedings or a more expensive long-term contract down the road.
Under the back-of-the envelope analysis I’ve presented here, it seems that the Nationals could sanely agree to any six-year deal worth $25 million or less. If he turns out to be a bust, the Nats are on the hook for $4 million per year over the course of the deal, which doesn’t seem like much when you consider that the team spent $5 million last year on a hurt Paul Lo Duca and is paying $2 million this year to Wily Mo Pena.
The Nationals certainly don’t want to waste money, but if Strasburg turns into anything around league average or better, they could end up with one of the best bargains in baseball.