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Should the Yankees lock up their young talent?

Now that a rebuild has gifted the Yankees with a clean slate, their financial options have expanded. They could extend their young studs.

MLB: Toronto Blue Jays at New York Yankees Brad Penner-USA TODAY Sports

Kicked off by this year’s wild trade deadline, Brian Cashman and the Yankees have begun to purge the payroll of the expensive remnants from the past five years. Whether this movement is accomplished by trades or the natural endings of contracts, the team will have a lighter load over the next couple seasons.

Although there will still be some costly, and regrettable, deals remaining on the books (like Jacoby Ellsbury), this group will be firmly in the minority. For the first time in recent memory, the Yankees will field a team practically devoid of binding long-term deals. Of the 25 players currently on the roster, only eight are already done with arbitration, while twelve have yet to even reach arbitration. This may not be remarkable when compared to the rest of the league, but for the Yankees it’s a marked shift.

This is a unique opportunity for New York, one that allows the front office to finally build a team with the future in mind. With payroll flexibility and a team largely under control for years to come, the Yankees now have the organizational depth to build from within and the wiggle room to dip into the free agent market.

It will be interesting to see how the Yankees assemble this team, given the bevy of potential options. The team could choose to follow the precedent of other large-market clubs that have recently rebuilt, such as the Cubs and Red Sox. Then again, they could combine the strategy of smaller-market teams, like the Royals and Rays, while flexing their financial muscles to build an intriguing team.

The more traditional route, which Chicago and Boston have followed, is to supplement young stars with big-ticket free agents. There’s still time for players like Kris Bryant, Addison Russell, Javier Baez, Xander Bogaerts, and Mookie Betts to be locked up via an extension, but it looks more likely that they’ll pass through at least the cheap part of arbitration before extensions begin to be inked. Both clubs have instead used the money from potential extensions to sign big names, such as Jon Lester, Jason Heyward, David Price, Pablo Sandoval, and Hanley Ramirez.

On the flip side are the Royals and Rays, who lack the money to retain their best players after arbitration or sign top free agents. Instead, they’ve extended young studs as prospects or pre-arbitration players, including Yordano Ventura, Salvador Perez, Mike Moustakas, Chris Archer, and Evan Longoria.

In a vacuum, the latter strategy seems far more desirable. Teams aren’t stuck relying on taking expensive deals in the free agent market that could go horribly awry, instead depending on cheap and controllable talent for years to come.

Unfortunately, that isn’t always the case. Although there are plenty of success stories in the Archers and Perezes of the world, many also forget about players like Jon Singleton and Allen Craig. Yet, despite the dark side to this strategy, these extensions are rarely catastrophic.

The reason is the relatively low risk as a result of low salaries spread out over many years. For a player signed at, say, $3 million over four years to be considered an “overpay,” they would need to be worth less than half a win each season. This is because the cost of a win is considered to be about $7 million (fluctuating both higher and lower depending on the season), and the four-year, $3 million deal for a .5 WAR player has the cost of a win coming in at $6 million. Although it isn’t a desirable outcome, the extension isn’t even considered an overpay. Obviously, overpays can come much more easily when the dollar totals are higher, but the majority of these extensions are cheaper, so the busts are few and far between.

As evidence, I looked at every contract for four or more years of a player with three or fewer years of service time (one year of arbitration or less) from 2007 to 2012, as this is the type of extension that has come into question above. Of the 61 instances, just ten contracts were considered overpays, and the average cost for a win overall was just $4.8M.

Were there some extensions that did not fall under the overpay category that teams wish they could undo? Certainly, but there weren’t many examples. The Yankees don’t even have to look far for a success story. The four-year, $28 million extension with options that Robinson Cano signed with the Yankees in February 2008 turned out to be their smartest investment of this young century.

With that in mind, the “lock up a young stud” plan seems like a very good idea, as long as the Yankees exercise caution. The biggest obstacle would likely be convincing players to sign the contract. Still, it’s a bit surprising to see just how often the deal Tampa Bay patented for the modern era really does work out, and perhaps bigger market teams like the Yankees, Red Sox, and Cubs could take advantage of it more often. If they did, it would allow for more security and room on the payroll - possibly to spend on free agents to play alongside the cost-controlled players.