For no particular reason, I’ve been thinking about large contracts, the $300-million type of contracts. I wrote just over three years ago about how ten-year deals turn out for the teams that hand them out, and the overall takeaway was, if you’re signing 31-year-olds for ten seasons, that’s not a great idea. If you’re signing 27-year-olds, it just might be. That Bryce Harper and Manny Machado have combined to average just under five wins per 650 plate appearances since inking their mega deals makes that even more apparent.
The contract we’re looking at today is a little different — it’s for nine guaranteed years, not ten, and was signed when the player was 29. It’s Gerrit Cole’s 9/324 deal, at the time the richest pitching contract in history, and I’m willing to bet it will stay that for at least one more season. Cole just finished as the Cy Young runner up, in a 5.3 fWAR season that still felt like he left a little on the table.
So, how valuable has he really been, based on both total output and adjusting for his salary?
Well, Cole’s been the best pitcher in the American League since coming to the Yankees, leading the league in fWAR and innings pitched since signing his deal. The only pitchers in all of baseball that have posted a better K-BB% are Corbin Burnes and Jacob deGrom, who have thrown 30 and 94 innings fewer than Cole over the same two-year period respectively. The value of a starting pitcher isn’t just in overall performance, but the ability to juice that performance over the full season, and Cole’s been able to do that.
But there are diminishing returns to a player’s performance, because that performance demands compensation and teams do have budgets — a starting pitcher just isn’t going to suck up a $75 million annual salary. There’s also the nature of long-term contracts, where teams know that the final year or two of a deal isn’t going to provide a ton of value, and that overperformance in the front half is the expectation to balance out the decline.
The Yankees have to set aside $36 million of CBT payroll every single season for Cole’s deal, although that number dropped to $13 mil for the prorated 2020 season. The oft-cited “one win is worth $8-9 million” returns a value of $56.95 million in production, against $49 million in salary allocated, or a 16.22% return over the first two seasons. Next season, Steamer projects Cole for another 5.4 fWAR, which would have him comfortably worth his contract with about a win or so to spare.
FanGraphs’ proprietary value metrics differ somewhat, assigning a value of $53.6 mil, or a 9.3-percent return. Interestingly, their value metric finds Cole slightly more valuable in 2021 and actually less valuable than his salary in 2020 relative to the above catch-all value of a win. That $53.6MM is, unsurprisingly, the most valuable production in the AL.
So I think we can conclude that Cole’s put up about a win and a half more than his contract value so far, with another win or so of extra value due in 2022. That’s certainly a net positive, he’s been worth more than he’s been paid, although I think it’s also fair to say he’s perhaps been slightly less valuable relative to pay than he could be. Certainly, his hamstring injury plays a role here — he was more valuable by fWAR in 17 August innings than he was in 32 September innings. The best pitchers in baseball were able to put up about 1-1.5 wins in September, whereas an injured Cole could only post 0.6 fWAR, the kind of performance that takes your season from “team MVP” to “huh, he was pretty good this year”.
Cole’s guaranteed 7/$252 left on his deal, and I tend to think that’s right around what he would get if he were a free agent this winter. He’s over 30 now, which probably keeps him out of the 9-10 year range, but it wouldn’t surprise me to see both Robbie Ray and Marcus Stroman come away with six guaranteed seasons, and Cole owns a much better track record than Ray and a much higher ceiling than Stroman, so you could argue a free agent version of Gerrit Cole would land eight guaranteed years — ergo, he’s outperforming his current deal.
But, in context of other large starting pitching deals, Cole’s probably lands somewhere in the middle. Max Scherzer may just be the most valuable free agent signing of all time, and he put up a 61.8-percent return by FG value in his first two seasons with the Nationals. Zack Greinke, meanwhile, actually posted negative value in his first pair of campaigns after signing for 6/$205MM with the Diamondbacks.
The value of Cole’s deal is probably going to be decided in the next two seasons, where we can still reasonably expect peak performance, before Father Time inevitably takes his toll. If Cole manages six-win seasons, which he probably would have done this year if he hadn’t gotten hurt, it greatly increases the odds we see this deal as an all-time one. If he produces less than that, it probably gets viewed as someone like CC Sabathia — still really valuable, but with a looming opt-out causing a significant questions in roster management going forward.