Saturday, March 30, 2013

Contract Analysis: Justin Verlander

Teams just keep signing their players to extensions.

This time Justin Verlander Summits Money Mountain.

Verlander signed a 7-year $180 million extension with the Tigers.  It's more complex than that, with Verlander's current deal being over-written, a vesting option, some incentives, etc, but that's basically the deal.

Projections available on FanGraphs have Verlander throwing 229 innings with 8.8 K/9, 2.3 BB/9, a 2.96 ERA and 5.5 WAR this season.

As with all the other contracts I've looked at this off-season (Carlos Gomez, Kyle Lohse, Adam Wainwright) I'll assume a $5 million market value for 1 WAR and 5% inflation.  I'll also apply a standard aging decline of .5 WAR per season after Verlander's age 31 season.
YEAR       ProjWAR          SALARY      WAR VALUE
2013         5.5              $20       $27.5
2014         5.5              $20       $28.9 
2015         5.0              $28       $27.6
2016         4.5              $28       $26
2017         4.0              $28       $24.3
2018         3.5              $28       $22.3
2019         3.0              $28       $20.1
TOTAL       31.0             $180      $176.7

Using those parameters I expect Verlander to put up about 31 WAR worth $176.7 million while being paid $180 million.

Verlander is basically being paid what he's expected to produce.  The Tigers didn't get any real discount.  With these types of long-term deal the team usually gets a discount because they assume the risk - the player gets paid regardless of performance.

Per the article I linked to above, anything can happen with Verlander, and nobody knows what will happen.  Deals for pitchers are, generally, more risky than deals for position players.  Verlander has been (one of) the best pitcher on earth over the last few seasons and there's no real reason to expect anything different over the next few seasons (Well, maybe Clayton Kershaw will change that).

Verlander is approaching Tiger icon status.  I can certainly see why Detroit would want to keep him around.  He's on a Hall of Fame trajectory.  There's no reason to think that trajectory is going to significantly change over the next two seasons.  The Tiger are also in win-now mode.  They have Verlander, Cabrera and Prince Fielder in their primes.  They have a some good to very good players backing them up.  The Tigers should be very good for the next 3-5 seasons.   Now they have the best pitcher in baseball locked up for that time frame.

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