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Let’s take a look at Span’s new contract!

This weekend, the Twins signed Denard Span to a five year extension for $16.5M guaranteed — it covers two pre-arbitration years and all three of his arbitration years, plus an extension for his first year of free agency in 2015.

The terms of his deal are as follows:

  1. $0.75M (second pre-arbitration year, age 26)
  2. $1M (final pre-arbitration year, age 27)
  3. 3M (first arbitration year, age 28)
  4. $4.75M (second arbitration year, age 29)
  5. $6.5M (third arbitration year, age 30)
  6. $9M (team option for first free agent year, age 31)

I’ve always read on Fangraphs that the arbitration years are typically set at 40%/60%/80% of a player’s market value; but that doesn’t seem to be the case here. If the option is his full market value, this contract gives him 33%/52%/72% … but if the option represents a 10% discount (which would not be unusual at all), his arbitration years are paying him just 30%/47%/65%. At first blush, this contract seems like a highly team-friendly deal even before considering how Span is being valued.

But that raises the interesting question: How is Span being valued? We’re all familiar with his story by now: a minor league track record that looked a lot like a first-round bust, a fourth-outfielder; shows up in the majors and has a breakout rookie campaign, compiling 2.6 WAR in a partial season; establishes himself as a star-caliber player with 3.9 WAR in his first full season. It’s possible that 2009 was a career year, and he can’t keep up that pace … but he was 25 years old and it’s also possible that he hasn’t even reaching his peak yet.

CHONE projects him at 3.3 WAR, which would peg the market value of a win in this contract at $3M/win. If CHONE is being optimistic and he’s actually, say, a 3 WAR player, the Twins are paying $3.3M/win. If CHONE is being way too conservative and Span’s true talent level is actually 4 WAR, then the Twins are paying just $2.5M/win (which is way too low, I think, implying that Span is being paid as a 3.3 WAR player at most).

I’ve seen mixed reactions to this contract since it first hit Twitter yesterday. Many people are thrilled that the Twins have “locked up” Span for the next 5 years, ignoring that he was already under team control for all five of those years. I saw one opinion, from Thrylos98, claiming that the Twins are paying him too much (I can’t understand how he could back that claim up, though). And I’ve seen others who seem to think this deal is pointless except for the option year covering his first free agent year, giving the Twins none extra year of control over Span’s career.

But let’s take a look at it from the perspective of risk — risk is the reason players sign extensions like these, and it’s also what teams have to worry about when offering them. Span could have simply declined to sign this extension and go year-to-year through his arbitration years, trying to maximize the amount he gets paid,* though by doing so he’d risk a career-ending injury or a collapse of his skills. So he gives up some money in return for the security of the long-term contract — but typically not that much.

* And given the low percentages of his value he’s being paid, it’s a good assumption that he’d make quite a bit more year-to-year even if you don’t think that either he’s going to continue producing star-level 4 WAR seasons OR the economy will recover even a little bit over the next five years.

From the team’s perspective, there are more risks involved. If they didn’t offer the extension and were going to go year-to-year, they’d still have Span on the team for the next five years, but would be risking the following:

  • 2009 was not Span’s peak, and he continues to improve in his age 26 and 27 years
  • The economic environment in baseball improves, driving up the cost of wins so they’d have to pay him more even if he stops playing as well
  • He successfully adapts to CF, driving up his value (a CF is a lot more valuable than a corner OF)

On the other hand, by offering this contract they open themselves up to these risks:

  • 2009 was Span’s peak, and his 4+ WAR upside is an illusion
  • He gets injured and can’t play (or can’t play at his normal level)
  • He can’t handle CF and has to move back to a corner, causing personnel problems or at least reducing his actual value

Obviously the downside here is bad — you don’t want to be stuck paying a guy millions of dollars not to produce. But I think it’s fair to say that the Twins determined that the upside outweighs the downside. The Twins get cost certainty, they ensure that Span will be affordable for the next six years, through his age 31 season. If they want to cut payroll in the future, it’s very likely that this contract will be extremely tradeable — teams would love to snap up a CF in-or-near his prime on a team-friendly contract.

Instead of looking at this as the Twins having locked Span up, it’s better to see it as having him locked in. But how much money did they just save, over what would have happened if they’d gone year to year?

Assuming Span is a 3.3 WAR player and standard 40%/60%/80% arbitration and $3.5M/win, his arbitration years and first year of free agency would have looked like this:

  • $4.6M
  • $6.9M
  • $9.2M
  • $11.5M

Or, if he keeps putting up 4 WAR seasons:

  • $5.6M
  • $8.4M
  • $11.2M
  • $14M

So the Twins saved themselves somewhere between $9M and $16M over 2012-2015, not taking economic recovery or salary inflation into account. Whether you think that amount of money is worth taking on the risk of the longterm contract is a judgement call, and obviously the Twins’ front office thought it was worth it.

Me? I think this is an even better deal than the Blackburn contract, and I’m glad to see the Twins locking in their players at affordable salaries for years to come. This is yet another sign that the team expects to contend for the foreseeable future; they’re using their assurance of steadier revenue for good rather than simply lining their pockets; they’re taking advantage of the economic climate to get good deals and lock in a lower cost per win than normal.

But perhaps most of all, Denard Span will be a Twin for at least 5 more years. I think it’s time to make my “Span Fan” t-shirts that I’ve been thinking about for a while.

2 comments

2 Comments so far

  1. FunBobby March 15th, 2010 2:00 pm

    I don’t have a huge problem with the Twins doing this. They clearly place a pretty high value on cost certainty, and I’m guessing they don’t want to have many arbitration cases after the sign Mauer to a mega-deal.

    For some reason it really bothers me that people think Span was due to become a free agent soon. Do your research, people.

  2. sirsean March 15th, 2010 2:08 pm

    One thing I wish I’d found a way to fit into this post is Span’s service time.

    He has 1.111 years of time served (that’s 1 year and 111 days in MLB lingo), which is why he’s under team control for 5 more years instead of 4, despite having been in the majors for what sure seems like 2 years.

    I wonder if he would have hit Super-2 status and been arbitration-eligible in 2011? It’s possible, but it’s impossible to know for sure until after this season (since there are a certain number of Super-2 guys every year, or something, and the line keeps shifting around).

    If it turns out that Span would have been a Super-2 guy and hit arbitration after this season, the contract becomes even better (saving the Twins millions of extra dollars).

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