The Carlos Martinez extension is great. It’s great for Martinez. It’s great for the St. Louis Cardinals. I know it, you know it, everybody knows it. Great!
I’m sure you’ve read plenty today about Carlos Martinez place among MLB pitchers over the last two seasons. If you hadn’t made the obvious conclusion before, by now you have most likely realized Carlos Martinez is the St. Louis Cardinals ace, and he would be the ace on most MLB teams. Oh, and he’s just 25 years old.
Here are my favorite parts of Martinez shiny new 5 year, $51M contract, in no particular order.
- The contract includes two option years, which could take Martinez through his age 31 season, including four free agent years.
- The contract is underpaying Martinez significantly, relative to his projected value. The remainder of this article is about this point.
- If Carlos Martinez is worth only 1.2 fWAR per season, he justifies being paid the first five years of his contract.
- If Carlos Martinez flops, gets injured, or comes down with a case of the yips, the Cardinals can manage to swallow ~$10M per year. Most fans want them to do that with Peralta in 2017, anyways.
OK, actually they were ordered starting with my most favorite.
The Cardinals are getting a lot of surplus value.
Had Martinez gone through arbitration, he likely would have received $4.25M in 2017. Using the 25/40/62 rule developed here, this implies he would have received $17M as a free agent, once eligible.
To project surplus value (in other words, Martinez value in excess of the amount he is paid by the Cardinals), I took Carlos Martinez Steamer projected WAR in 2017, then applied an average aging curve over the length of the contract. The average aging curve uses data from 2006-2016, tracking the change in WAR any time a pitcher threw consecutive seasons. Keep in mind this is an average, and that any single player will vary to some extent from the curve.
Next, to determine a dollar value in each season, I started with the generally accepted cost of $8.5M per WAR for this offseason. I then applied a 5.5% inflation rate, determined based on average MLB payroll increases over the last five seasons. Here is the result:
As you can see, while the Cardinals are overpaying Martinez relative to his projected arbitration salaries, they cut a deal on his implied free agent value in 2017 and 2018. Overall, the first five years are worth $5.1M in surplus value. Additionally, if the team picks up the two club options, the contract is worth another $16.5M in surplus value.
However, I think this contract actually undervalues what Martinez could have earned both in arbitration and in his free agent seasons. Using the average aging curve to determine Carlos Martinez free agent value in 2020 and the 25/40/62 rule to project his arbitration salaries, we get the following.
As you can see, the base salary in year 1 of arbitration nearly doubles. While he would not be paid this amount in arbitration after filing at $4.25M, he is projected to be worth this much under the standard arbitration rule. The surplus value based on these projections over the first five years of the contract is $51.2 million. Yes, more than he is getting paid. Add in the two option years, and you have a total surplus value of $67.7 million.
If Martinez follows the average aging pattern, this deal will already be a steal for the St. Louis Cardinals. If he develops into an ace? Then John Mozeliak looks like a mastermind. This is, by far, the best signing of the offseason, and sets the club up well for future investments.
Of course, there is always the risk that Martinez doesn’t pan out (it’s hard to believe, I know). But injuries do happen, especially to pitchers with smaller frames. Martinez does struggle mightily against lefties, so if his dominance against righties regresses even slightly, he might look like a different pitcher. These likely factored into the determination of his contract value.
At the present, however, this is a big win for the St. Louis Cardinals and Carlos Martinez. The St. Louis Cardinals lock down their ace at minimal risk. Martinez is guaranteed $51M of life-changing money. If he continues along his developmental path and becomes an even better pitcher, then he will still be in line for a monster payday in 2024 at age 32.
Just please, Carlos, don’t let your Twitter account get “hacked.”