Johan Santana Injury Is the Reality of Risky Contracts

The New York Mets announced some incredibly sad news regarding Johan Santana this evening. Via Adam Rubin:

New York Mets pitcher Johan Santana has a probable re-tear in an anterior capsule in his pitching shoulder in which he previously had surgery in 2010, the team announced Thursday.

Santana underwent surgery on Sept. 2, 2010, to repair the capsule in his left shoulder — a rare procedure in baseball — and it took more than a year for him to return to the major leagues.

“A second surgery is a strong possibility,” general manager Sandy Alderson said.

The Mets signed Santana to a six-year, $137.5 million contract prior to the 2008 season. Santana got almost halfway through the contract before breaking down. From 2008-10, Santana posted an aggregate 2.85 ERA in exactly 600 innings of work. However, he had elbow surgery in September 2009, but he was ready in time for the start of the next season. He had shoulder surgery in September 2010 which forced him out of 2011 entirely.

Things were finally looking up for Santana in 2012 as he was able to start on Opening Day and even threw five shutout innings. He threw a no-hitter — the Mets’ first in franchise history — on June 1 against the Cardinals, but then the cloudy skies covered up the sunlight. After the no-hitter, he posted an 8.27 ERA in 49 innings, missing 20 games in July and August due to an ankle sprain, then 43 games between mid-August and the end of the season due to back inflammation. And now we have the unfortunate news of a re-tear in his throwing shoulder, which likely ends his career as a Met, and potentially his career entirely.

This is, sadly, the reality of signing players to lengthy, big money contracts, particularly when they’re older. The Phillies are seeing that now, with a declining Roy Halladay playing out the last of a three-year, $60 million contract (on which the right-hander actually gave the Phillies a discount). They are in the third year of Cliff Lee‘s five-year, $120 million contract, and recently signed Cole Hamels to a six-year, $144 million contract.

Each of those contracts given out by the Phillies was met with near-universal appeal, as was the contract given by the Mets to Santana. Still, the risk is there and you never know what could go wrong. This past off-season, the Dodgers signed Zack Greinke to a six-year, $147 million deal; the Mariners extended Felix Hernandez at seven years, $175 million; the Cardinals just extended Adam Wainwright at five years and $97.5 million. The Phillies are not alone in their valuation of elite starting pitching. But you have to wonder if the reward of obtaining at least a few years of elite pitching is worth the risk of having a $20 million-plus albatross on your payroll. Given the unpredictable nature of injuries, this is an inexact science at best and is in reality glorified coin-flipping.

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26 comments

  1. Pencilfish

    March 28, 2013 10:21 PM

    Bill,

    No question giving a long-term contract to a pitcher is incredibly risky, but some teams actually buy insurance on these contracts. If you read Sandy Alderson’s comments when announcing Santana’s latest shoulder injury, the Mets have NO insurance on Santana’s contract. He’s due $25.5 million this year and a $5.5 million buy out next year. A cool $31 million the Mets payroll will have to absorb somehow.

    Kevin Brown and Mike Hampton come to mind as examples of bad long-term contracts. I’m not sure if I can think of a good long-term contract for a pitcher, too.

    On the other hand, these long-term contracts are part of the market for these guys. What would have happened if the Phillies did not give Hamels the big contract? I’m sure some other teams would, without even blinking…

  2. Pencilfish

    March 28, 2013 10:32 PM

    Sorry, forgot to add that the elite pitching (even for a few short years) means winning and filling the stadium with fans. That translates into $$$ for the owners. I think most teams rather do the coin-flip than become franchises like the Pirates or Marlins, eternally drafting, building the team with youngsters and then blowing it up when the players reach their peak years and become expensive.

  3. pedro3131

    March 28, 2013 10:40 PM

    It depends what you define as long term contracts. The contract Pedro Martinez signed in Boston for 6 years / 75 million with a 7th year option was one of those risky contracts the unequivocally panned out well for the team.

    Can you imagine what a 25 year old right handed coming off his first Cy Young after posting a 1.78 ERA and a 300k season would have commanded in this years market?

  4. Ryan

    March 28, 2013 11:30 PM

    $400,000,000?

  5. NavyJoe

    March 29, 2013 06:22 AM

    Even if they have insurance, that money is still going to count against the salary cap, I believe.

  6. Pencilfish

    March 29, 2013 09:45 AM

    There’s no salary cap in baseball. You must be referring to the luxury tax threshold ($178 million in 2013 and $189 million beginning in 2014), but yes, it does count against the team payroll, so it does hurt the team in more than one way. Not having insurance, though, is adding insult to injury (no pun intended).

  7. NavyJoe

    March 29, 2013 09:58 AM

    Yes, I was referring to the luxury tax threshold.

  8. Phillie697

    March 29, 2013 10:19 AM

    @Pencilfish,

    No question that the market is the market and these pitchers are giving what the market is willing to pay. The better quest, which is what I think BB is asking, is that is it worth it from a purely objective and competitive point of view? Halladay was worth it because the dude has already produced 16.5 WAR as a Phillie, so anything from this point on is gravy, but that was with a discount. And that’s the reality of the situation. When you sign a pitcher to $25M a year, he BETTER be at LEAST a 6 or 7 WAR pitcher the first two or 3 years of his contract, or else you’re overpaying him over the length of the contract. Wouldn’t you be better off taking that money and finding better, more efficient ways of getting wins out of your limited budget?

  9. Pencilfish

    March 29, 2013 10:25 AM

    pedro3131,

    There have been other “good” long-term deals, such as Maddux (5yr/28M and 5yr/$58M), and other “bad” deals such as Zito (7yr/126M). Interestingly, most long-term deals have been made with position players, not pitchers, perhaps a reflection of the higher risk associated to pitching injuries.

  10. Pencilfish

    March 29, 2013 11:04 AM

    Phillie697,

    Don’t disagree with your or BB’s point. There are certainly other ways to do it. The Cards are one of the best examples of how to build via the draft and with a limited budget. Others such as the Rays, A’s, Pirates and Royals have done it too with mixed results.

    However, one has to understand that MLB is a business. Owners, players, coaches etc make a lot of money when compared to the average citizen, and fans (such as you and me) have enabled MLB’s business model to thrive. Teams such as the Phillies, Yankees, Angels, Red Sox, Rangers, etc spend money to make money. They are all profitable, even with the overpaid and underperforming contracts. Why should they change the business model when it isn’t broken?

    You may argue the Cardinals model is better, but is it more profitable? Iffy at best, IMO.

  11. Phillie697

    March 29, 2013 11:47 AM

    I’m not talking about profit. I’m saying if we have a limited budget, which we do because 1) we’re not the Yankees, and 2) there is a luxury tax, then wouldn’t it better off spending the money on players who are going to be bargains as opposed to overspending to get less per dollar?

    Obviously, for a rich team like the Phillies, there may be one or two contracts out there where it is worth to overpay, since we have found all of the bargains we can find and there are only in reality 13 or 14 positions (8 regulars and 5 starting pitchers, and maybe the closer) where you can plug in star-quality players. But if you think RAJ has reached that point with our roster, you haven’t been paying attention to his moves. You don’t, and shouldn’t, overpay for the sake of overpaying.

  12. Phillie697

    March 29, 2013 11:58 AM

    LOL case in point:

    espn.go.com/mlb/story/_/id/9111981/justin-verlander-detroit-tigers-agrees-deal-which-worth-202-million-sources

    Even though it is Justin freaking Verlander, there is virtually no way Detroit is going to get $180M worth of production out of him in the next 7 years. BUT, it IS Justin freaking Verlander, and very rarely can you generate that many wins out of a single position with your 13-14 available slots. So you ask yourself, is he worth it from a competitive stand point? That’s why GMs get paid the big bucks.

  13. pedro3131

    March 29, 2013 12:19 PM

    Pencil. Point taken, was just responding to your own question about “Deals that went right” with the guy who first popped into my head. I agree with what both of you guys are saying, but I think it’s important to recognize that we don’t live in a world where salary corresponds to actual value. It’s driven by market forces and even if you’re going to overpay, there isn’t really an alternative unless you want to develop talent and then let it leave town a la the Royals and Pirates. GM’s obviously need to balance these market forces with not destroying their teams long term prospects and I think most of us here have a base agreement on whether or not Amaro has done that, but it’s not such a black and white as “pay him this or let him walk and develop your own talent”

  14. Phillie697

    March 29, 2013 12:23 PM

    @pedro,

    Perhaps, but there is a difference to signing Cole Hamels to 6yr/$144M and signing Jared Weaver to 5yr/$85M. It’s not always about growing talent; sometimes it’s really just about being smarter with your money.

  15. Pencilfish

    March 29, 2013 12:27 PM

    Phillie697,

    As I said, I don’t disagree with your viewpoint, but it’s not grounded in the reality of the business side of baseball.

    If the reports are true, Detroit just gave Verlander the largest contract EVER for a pitcher. The lesson I draw from that is your argument about allocating dollars wisely has been ignored by Detroit too. As I said, Detroit can not only field an expensive competitive team but also turn a profit. So can the Phillies, Angels, Rangers, Yankees, Red Sox, Dodgers, etc. Therefore, how relevant is your argument, despite all its merits?

    The biggest danger is if expensive teams become uncompetitive and begin losing fans and money. That’s what happened to the Mets. But for every Mets team, there’s also a Pirates team, with 20+ consecutive losing seasons while committed to building a team from within with a limited budget. Given these two worst-case scenarios, it seems most teams would rather become like the Mets rather than the Pirates, which is opposite of what you prefer.

  16. Phillie697

    March 29, 2013 12:56 PM

    @Pencilfish,

    Sorry, I cannot buy your argument because your argument implies that there is something else other than winning consistently that will make the most money for a baseball team. The Rays notwithstanding, in a non-stupid market not filled with senile old people who already have their team affiliation set bazillion years ago, in a normal market, you make money by winning consistently, period. Hell, the Phillies of the late 90s/early 00s vs. now is a PRIME example.

  17. Phillie697

    March 29, 2013 01:00 PM

    And to argue that I would prefer the Pirates is ludicrous. I can tell you right now that a team of 25 Ben Zobrist type players will cost the Phillies less AND win more games than our current team, AND we’ll make more money off of that team. THAT’s the nirvana each team should be striving for, not the Pirates OR the Mets.

  18. Pencilfish

    March 29, 2013 02:11 PM

    Phillies697,

    Here are the top-10 teams by attendance in 2010, 2011 and 2012, along with their payroll ranking
    in parenthesis:

    2010: Yankees(1), Phillies(2), Dodgers(12), Cards(9), Angels(4), Twins(13), Cubs(15), Red Sox(3), Giants(8), Rockies(22)

    2011: Phillies(2), Yankees(1), Giants(8), Twins(9), Angels(4), Cards(11), Brewers(17), Red Sox(3), Cubs(6), Texas(13)

    2012: Phillies(2), Yankees(1), Rangers(6), Giants(8), Dodgers(12), Cards(9), Angels(4), Red Sox(3), Tigers(5) and Cubs(15)

    6 (2010),7 (2011) and 8 (2012) of the top spenders were among the teams with highest attendance, so there’s a good (but not complete) correlation between spending and attendance, where some of the profit is made. Of the top-10 teams by attendance, 6 (2010), 5 (2011) and 6 (2012) did not make the playoffs, so attendance is not as strongly correlated with a playoff (ie, winning) team. The Cubs, Red Sox and Phillies in particular stand out in 2012.

    The Rays are a great example of what happens when smart spending works. The Rays are also an example of what happens when it goes wrong. Prior to 2008, they finished last in the AL East 9 times in their 10-yr existence.

    I don’t disagree with your arguments (sorry for repeating it for the 4th time, but you seem to be speed-reading). The only problem is that most GM’s ignore your arguments about fiscal prudence, so it isn’t very relevant (repeating it for the 2nd time) in most FO’s, save maybe for the Pirates, Rays, A’s, etc.

  19. LTG

    March 29, 2013 05:23 PM

    I’m going to go out on a limb and say that the above evidence establishes no correlation of any kind. The complex and multiple variables involved in attendance are not controlled for.

    Isn’t it a deceptive abstraction to talk about FOs and their goals as uniform even within a single FO? True MLB is a business, but every member of an FO has his own opinions about how to balance the business side of MLB with the game. It seems to me irresponsible to draw conclusions about facts on the ground in MLB FOs on the basis of the vague fact that MLB is a business.

    Anyway, are you guys just talking past each other here? 697 is arguing that every FO ought to do x. Pencilfish is arguing that most FOs do not-x. The first is normative; the second descriptive. There’s no contradiction, so no disagreement. I guess Pencilfish might be saying that the normative claim ignores the goals that most FOs have as a matter of fact and the norms should align with these particular facts. But then I take it that 697 would say that those FOs ought to revise their goals.

    Finally, meeting 697′s maximization goal can permit overpaying for talent, given the market at the time and a reasonable prediction for how it will develop. For instance, the Cliff Lee deal might soon look reasonable to a team in need of pitching after the influx of TV money further explodes the free agent market.

  20. Jesse

    March 29, 2013 06:37 PM

    Pencil,
    I see your point but you can’t really call that correlation. That’s like saying there’s a correlation between days Ryan Howard goes long in BP and days in which I eat a sandwich.

    I think you’ll find higher correlation in both attendance and payroll with market size than each other.

  21. Pencilfish

    March 30, 2013 01:51 PM

    LTG, Jesse,

    I say it for the 5th time: there is no disagreement (mostly). I’m just saying GM’s will continue to offer risky contracts for a shot at winning. As I understand, Phillie697 is saying they should change their approach. I agree, but it will not happen, period. Want more proof? Did you hear about Buster Posey’s new contract (9yr/167M)? It will take him to age 35. What are the chances Posey will make this contract worth it, given his position?

    As for correlation between attendance and payroll, I concede it is not as simple as I made it sound, but I think it is implicitly assumed that payroll usually begets winning, which then boosts attendance, although that’s not always true (ie, Marlins and Angels in 2012). I don’t know if market size correlates to payroll. What about the Mets, Cubs, Houston and Washington (until recently)?

    My point about the business aspect of MLB targets people who decry these outlandish contracts, as if money was theirs (it isn’t) and as if it ruins a franchise (it doesn’t…usually). These outlandish contracts are offered because the team (FO, owners, etc) thinks it will help them win AND make a profit. Isn’t that obvious??

  22. Jesse

    March 30, 2013 03:11 PM

    Houston is an exception, and Washington was new to town, but the Mets and Cubs have had some of the league’s highest payrolls in many of the past years. I guess the Mets only just recently fell out of the top 10, but they used to be up there behind only the Red Sox and Yanks, even when they were stupendously mediocre.
    There’s a lot of factors into why ownership groups that can afford to buy big market teams are the ones that can afford big payrolls, often regardless of attendance or performance, and it’s not limited to baseball.

    Also I think very choices made by a FO can be thought of as helping the team win and turning a profit. They’re usually one or the other as a motivation and most FOs would go through periods of serious trends for one or the other. E.g. The Howard extension. No way that would be profitable (people would buy that many more tickets than otherwise? doubtful. Jerseys? not even close), but it was intended to help them win. It was just wrong on that part, and that’s why it’s so decried. It harms the teams ability to win directly and indirectly because it’s less money they have to spend to help the team win. “Isn’t that obvious??”

  23. Pencilfish

    March 30, 2013 06:49 PM

    Jesse,

    Whether Howard’s contract is profitable or not is irrelevant. What is relevant is if the team is profitable. Recently, Forbes rated the Phillies the 4th most valuable team in MLB (893M), a rise of 24% over 2012.
    How have Howard, Papelbon, Hamels’, etc contracts harmed the team valuation? A perennial loser like the Cubs are even more valuable than the Phillies, so even valuation is not correlated with winning.

    Put yourself in the shoes of the Phillies owners. Being the savvy businessmen they are (otherwise, they wouldn’t be what they are), why would they approve RAJ’s offer to Howard?! Let me know if you can come with a reasonable answer. These are the same guys who bought the team for 30M that is now worth almost 30x more, so don’t tell me they don’t know what they are doing…

  24. Jesse

    March 31, 2013 03:43 AM

    Clearly we are talking about very different things, and, assumedly, right past each other. Why should I try to disprove the argument that Howard’s extension was profitable for the team… It’s not like you said “These outlandish contracts are offered because the team (FO, owners, etc) thinks it will help them win AND make a profit”

  25. Pencilfish

    March 31, 2013 11:27 AM

    Not really. I didn’t disagree Howard’s contract was outlandish, but I think you under-appreciate the business decision to make that offer to Howard. If you want to argue about the baseball merits, then you have a more compelling case, but then you would have to extend the argument to other outlandish contracts, too. In that regard, the Phillies do not even own the most outrageous ones.

  26. Phillie697

    April 01, 2013 02:48 PM

    @Pencilfish,

    I actually don’t advocate GMs change their approach. I’m saying BECAUSE their approach is what it is, there is efficiency to be had for a smart GM to exploit their, for a lack of better word, inefficiency.

    And yes, LTG is right, I do, and in fact stated so explicitly, allow for overspending in my approach. While average cost of a win is about $5M give or take, but if the ONLY way I can get a 6-win player is to pay him like a 6-win player for 5-6 years, even tho I know he isn’t gonna stay that way for 5-6 years, then I will measure that cost against the efficiency I gain from maximizing my wins/roster slot. And of course, always mindful of my budget. That calculation is made easier if I just signed a bunch of 3-win players at $8M/yr, since I have more to “overspend.”

    This is what smart GMs should do. It’s not a straight WAR to dollars calculation; it’s just being smart.

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