Monday, April 2, 2012

Matt Cain extended for 5 years and the Giants probably overpaid


Matt Cain and the Giants have just agreed to the largest deal ever for a right handed pitcher.

The team hasn't announced the exact figures of the deal but it has been reported that it extends his deal for five years with a club/vesting option. The five years will be for $100 million, but the deal also includes a $5 million signing bonus and a $7.5 million buyout if the option doesn't vest or is declined. In addition, the deal has a full no-trade clause.

The total value of the deal (including this season) could reach seven years and $141 million.

Matt Cain shouldn't have to worry about money for a little while one would think.

Was this a good deal? Honestly, from a PR perspective, I don't know how they could have let Cain go when they talked the entire offseason about needing to lock up the pitching staff. That being said, they just plunked down a lot of money, so let's take a look at how that breaks down.

First, our assumptions: Cain's true talent level in 2013 will be 4.5 WAR. We will assume that there will be a five percent inflation rate in the cost of wins above replacement given that a win is worth $5 million in 2012. Finally, we will look a few different scenarios on how he will age over the life of the contract.

Optimistic:


In this scenario we assume that Cain is a 4.5 WAR player beginning in 2013 and that as he ages his performance will fall by 5 percent every season.

WAR
$ WAR
Value
AAV
4.5
5.00
$ 22.50
22.5
4.3
5.25
$ 22.44
22.5
4.1
5.51
$ 22.39
22.5
3.9
5.79
$ 22.33
22.5
3.7
6.08
$ 22.28
22.5
111.9
112.5

Over the life of this contract, Cain will be worth just under $112 million, so he is paid pretty much exactly what he is worth.

Middle of the road:

In this scenario, we assume Cain is a 4.3 WAR player (that is actually the average of his last three seasons, according to Baseball-Reference) and we will assume that as he ages, his performance will fall by seven percent every season.

WAR
$ WAR
Value
AAV
4.3
5.00
$ 21.25
22.5
3.9
5.25
$ 20.64
22.5
3.6
5.51
$ 20.05
22.5
3.4
5.79
$ 19.47
22.5
3.1
6.08
$ 18.91
22.5
100.3
112.5

Over the life of this scenario, Cain will be worth just over $100 million and be paid slightly more than he is worth. At the beginning of the deal, it won't be that bad, but he will likely be making more than he is producing at the end of the deal.

Pessimistic:

While I labeled this "pessimistic" I think that this is a pretty fair guess of what will happen. My own opinion is he will be somewhere between the last two scenarios. Anyway, the assumptions here is that Cain is a 4 WAR player and that as he ages, his performance will fall ten percent a season.

WAR
$ WAR
Value
AAV
4.0
5.00
$ 20.00
22.5
3.6
5.25
$ 18.90
22.5
3.2
5.51
$ 17.86
22.5
2.9
5.79
$ 16.88
22.5
2.6
6.08
$ 15.95
22.5
89.6
112.5

Over this scenario Cain will be worth around $90 million and pay him $22 million more than he is worth. Even from the start of the deal, he will be paid more than he is worth and it will only get worse from there. It wouldn't exactly be Zito bad but it could have some negative impacts on the Giants budget.

Conclusion:

I am happy the Giants signed Matt Cain, but as with any long-term deal, this is a big risk for the team. I like Cain quite a bit but this just looks like a situation where there is little room for upside for the team and there is always the chance that it turns out like Zito.

Some of the positives for this are that Cain's numbers are trending in the right direction, his walk rate is going down while he is maintaining an above average strike out rate. He is still a freak of nature at preventing home runs, which I hope can continue and I hope that he really does know some black magic that makes him immune to regression towards league average. There is also the possibility that with all the TV money flowing into the game that contracts will explode, making this one look reasonable in hindsight.

On top of it all, this is still only going to his age 27 season, so he should have many healthy years left.

Ultimately, I am happy to have Matt Cain on the team but I think that the Giants paid a premium to keep him around and not allow him to test free agency. The Giants didn't get a deal on this extension but in the end, they get to keep a very good player playing for the black and orange for six more seasons at least.

Become a fan on Facebook and follow The Crazy Crabbers on Twitter. There is lots of good stuff going on there. Sign up for our free newsletter!

No comments:

Post a Comment

Post a Comment