The Rays just signed Evan Longoria to a contract extension after his sixth game in the majors. Sounds a little crazy, right? It’s certainly never happened before. But I love it. Nothing’s for certain, obviously, but the Rays are set to save a lot of money over the next six years more likely than not.
The base deal is for $17MM over six years. Had Longoria gone year to year with Tampa Bay, his contract would have been dictated to him for the first three. Then he would have battled for three years in arbitration. Thanks to Tom Tango, we know approximately what arbitration payouts are: 40% of free agent value the first year, 60% the second, and 80% the third.
Therefore, Longoria would likely have been paid the league minimum the first three seasons, with perhaps a small bonus to build good will. That’s $500,000 per season or $1.5MM total, leaving $16MM over the final three years of arbitration.
Let’s translate what $16MM worth of arbitration money means on the free agent scale. The average arbitration payout is 60% of what a player would earn as a free agent, so the Rays are paying Longoria like a $27MM player ($16MM/.6) — that’s $9MM per year. Teams are currently paying $4.5MM per free agent win, meaning Longoria’s being paid as though he’ll be a two-win player during his arbitration years.
How good is two wins? It’s league-average. Longoria’s fielding should be worth half a win, meaning he can be a below-average hitter (.320 OBP and .400 SLG?) and still be worth his contract.
Sure, there’s always a chance that he crashes and burns, but is there anyone out there who doesn’t think Longoria will put those numbers to shame? The Rays’ new management is among the best in the game, and this is just one more big example why. (I haven’t even mentioned the three option years that the team will hold. Those can only be a positive.)
That being said, why would Longoria sign this deal if he could probably earn more money going year to year? Financial security. The first $17.5MM he earns in his life will be more important to him and his family than the next $50MM. Putting that money at risk (to injuries, to a crazy manager) just isn’t worth it.
Update: Here’s a look at the three option years of Longoria’s contract, which make it an even bigger steal for the Rays. And here are some answers to common questions about the whole situation.
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Sky is a baseball fan and racket sport afficianado living in upstate NY. His favorite color is orange and is just about ready to give up on his life-long dream to become the next Magnus ver Magnuson (World's Strongest Man). His favorite baseball teams are the Yankees and Red Sox, proving that there's hope in the Middle East.
April 19th, 2008 at 1:21 am
[…] Skyking162 does some Evan Longoria math in light of the rookie’s new contract, and finds some sense in the dollars. Longoria will be getting paid as if he’s a 2 win player per year throughout his arbitration years. There’s a huge chance he’ll be a lot better then that right now. (Thus, I was lucky enough to add him on my fantasy team, a team which already is feeling like a lost cause, btw. Curse you, Erik Bedard and your cranky hip!). So why am I talking about this? The same thing could possibly happen to Colby. Look at what the Cardinals have done in locking up Adam Wainwright and Yadier Molina during their arbitration years. […]
April 19th, 2008 at 8:19 am
Sky - This was a great move by the Rays. The message it sends to the fans has enormous value, financially, too.
For Longoria, he gets incredible financial security, and can invest larger amounts today, so he could end up ahead of the game, too.