A Decent (Contract) Proposal: The Pirates and Gerrit Cole

The May 10th announcement that Stephen Strasburg had signed a seven-year, $175 million deal with the Washington Nationals was about as surprising as news gets in the world of major league baseball. The 27-year old righty, the number one overall pick in the 2009 amateur draft, was due to be a free agent at the end of the season. Strasburg was going to be the jewel in an otherwise dreadful crop of scheduled-to-be free agent pitchers. Zack Greinke's six-year, $206 million deal and David Price's seven-year, $217 million deal, both signed this past offseason, were expected to be baselines for his agent Scott Boras, the agent known as being the most aggressive in having his clients pursue free agency, in any negotiation. Instead, when Nationals owner Ted Lerner reached out to Boras about a long-term deal and Strasburg expressed interest, a deal got done.

Strasburg's career has had its ups and downs. He debuted June 8, 2010 against the Pirates striking out 14 and walking none in a 5-2 Nationals win. But he only made 12 starts that year, tearing his UCL and undergoing Tommy John surgery in September. A year later he made five September starts and then was famously shutdown the following September during a dominating 2012 season (197K, 48BB, 15 HR, 2.83 FIP in 159.1IP) when he reached the Nationals self-imposed innings limit, not pitching in the postseason as the Nats were eliminated by the St. Louis Cardinals. Strasburg pitched a career-high 215 innings in 2014, but various ailments limited him to 127.1 innings last year. This season Strasburg has been fantastic and is on pace to put up the best numbers of his career.

Like Strasburg, Gerrit Cole was a number one overall pick, selected by the Pirates in 2011. Like Strasburg, Cole is represented by Boras. Like Strasburg, Cole has experienced big success, he finished fourth in NL Cy Young voting last year, but has also had difficulty staying healthy. So does the Strasburg signing now make the unthinkable idea of a Cole extension possible?

I think it does.

We can go through a list of players who might be viewed as comparable to Cole and try to triangulate a first-year arbitration award in 2017. If you look at the numbers of Alex Cobb, Jose Fernandez, Garrett Richards and Jake Arrieta among others I think $5 million seems a reasonable guess today for Cole's projected arbitration salary this coming offseason. (The idea here is to present a general framework rather than get bogged down on the specific numbers for each season.)

Using that as a starting point and assuming Cole is able to sustain front-of-the-rotation type performance (and why would the Pirates do the deal if they didn't believe that), $9-11 million and $14-16 million would seem to be reasonable projections for 2018-19. The estimates may slightly skew to the high-side for Cole even though we are continuing to see a rapidly-increasing pay scale for starting pitching, but they seem reasonable.

Simply using $5M, $10M, $15M for the next three seasons means Gerrit Cole would make $30M from 2017-2019 if he is able to maintain his level of performance.

From this point it's more art than science. The Strasburg deal has certain levels of complexity that the Pirates are not likely to propose. Under the terms of his deal with the Nats Strasburg gets paid $18.333M in each of the next two seasons, what would have been his first two years of free agency, and then $38.333M in 2019, after which there is a player opt-out. The deal is uniquely structured over the final four years as well if Strasburg elects to stay in DC giving him the opportunity to realize the full $175 million.

I am proposing a far-simpler deal for Cole and the Pirates. A five-year, $70 million deal. It would pay Cole $20 million for each of his two free agency seasons, 2020 and 2021, in addition to the $30 million outlined above.

Why the Pirates Do the Deal

• Cost certainty. Much like the deals they have done with McCutchen, Marte, Harrison and Polanco this gives the Pirates cost certainty through Cole's arbitration years while buying out his first two years of free agency.

• Below-market free agency seasons. $20M is well below-market for today's front-line starters and will be even more so four years from now. If Cole pitches like he did in 2015, in 2019 and 2020, $20M will be a steal. 

• Revenues are continuing to skyrocket. The vast majority of MLB's new national television dollars will be paid out over the next five years and the Pirates local television deal will come up for renewal. They can afford this deal.

Why Cole Does the Deal

• $70 million is a lot of money. Guaranteed. Cole was given an $8M signing bonus when he signed a minor league deal with the team five years ago after being drafted number one overall. (Boras and Cole turned down an $8.5M major league deal running through 2016 at the time because they projected the deal they signed to be worth an additional $1.4M. Turns out it will be closer to an additional $2M.) But $70M is generational-changing wealth.

• Pitchers get hurt. The old line about there being two kinds of pitchers, those that have been injured and those who will be injured seems more true today than ever before. Coming back from Tommy John seems almost routine today, but even that isn't guaranteed. Cole hasn't suffered a serious injury, but he has been on the disabled list in two of his three full major league seasons.

• He would still hit free agency at the relatively young age of 31. Greinke just got $206M guaranteed in free agency coming into his age-32 season. Cole will still get a monster contract if he performs.

Why the Pirates Don't Do the Deal

• The team operates on a very tight, self-imposed budget. Cole would stand to make well over 10% of total payroll in 2019 when he's making a mere $15M. The Bucs have already committed $11.5M to Francisco Cervelli, $10.3M to Starling Marte and $6.1M to Gregory Polanco in '19 so that means they would have over $40M tied up in four players.

• Pitchers get hurt (see above). A career-ending injury to a player on this type of deal could derail the Pirates' financial plans for years.

• They have a full pipeline of good young pitchers. Jameson Taillon, Tyler Glasnow, Chad Kuhl and Steven Brault all made their debuts in the last two months. They are affordable and controllable and there appear to be more talented young starters behind them.

Why Cole Doesn't Do the Deal

• While $70M is a helluva lot of money Cole will be seriously underpaid in 2020 and '21 if he is a front-of-the-rotation starter.

• While pitchers do get hurt, Strasburg is just the latest example of a pitcher to hit the mother lode after Tommy John surgery.

• This will have no bearing on a deal getting done one way or the other.

Conclusion:

• I've presented this deal to a bunch of people in the industry. The response has been mixed, which is exactly what I expected. There isn't a consensus that the deal is overly favorable for either side. Those generally are the type of deals that have a chance to get done. With Cole coming back from injury and still three-plus years away from free agency, now might be the perfect time for both sides.