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Extending Our Thoughts on the Soria Extension

On Saturday night the news broke that the Royals had signed Joakim Soria had signed a contract keeping him in Kansas City possibly through 2014. According to Bob Dutton, Soria will earn eight million dollars through 2011, then a series of escalators and options begin to come into play, potentially raising the value of the contract to over $30 million. Last night, Royals Review discussed the contract with site contributors NyRoyal and NHZ over pork chops and cheddar mashed potatoes at the site headquarters (Eastern Region) in Wilmington Delaware.


Royals Review: What are your overall, initial, reactions?

NYRoyal: I'm very happy with this contract extension. The two guys I'd most like for the Royals to extend this year are Soria and Greinke. One is out of the way. It is a good, long contract which eats up some free agency years. And the risk to the Royals is pretty small because of the club options. I think it is a fair deal. It guarantees some good money for Soria and it keeps him on the team long-term. The deal shares both benefits and risk between Soria and the team. If Soria is a good pitcher throughout the contract term, it gives him a little less money than he'd otherwise get. If Soria busts, then he gets much more. In short, it is a fair, smart deal.

NHZ: Well, GMDM just successfully locked up one the best relief pitchers in baseball to a thoroughly reasonable guaranteed deal, and at the same time set what we all hope is a new precedent for the way the Royals will deal with the good young players that come up through the organization. In their recent history, the Royals have had trouble hanging onto this type of player. Carlos Beltran is the best example of this, the one that pops into everyone's heads. Also, when they finally did lock up one of their homegrown was Mike Sweeney. Now Mike Sweeney is an awesome guy, but we are know how that ended up playing out. Also, I think it generally creates some friction between players and the FO when a player has to go all the way thorough to arbitration to decide his contract figure. Moore has completely eliminated any problem he could have potentially had with Soria in that respect.

For my money, it is very encouraging that we've finally seen one of the new guard of the Royals locked long term. It really is one of the measures of a how well run small-to-middle market team. It's one thing to produce a good young player, but it's another step entirely to lock said players up at a reasonable level financially that will give the Royals enough flexibility to have the money to put into other needy areas. With the low guaranteed price tag here of 8.75 million over three years, the Royals have bought out arbitration years without having to worry about being hamstrung by a large contract.

Royals Review: Looking at the contract specifics, does anything jump out to you?

NHZ: Altogether, the contract guarantees three years and leaves the club with three options after that. In terms of how the money is spread out: 2009 - $1 Million
2010 - $3 Million
2011 - $4 Million
Then, if the club option part of the contract is bought out at this point, the Royals owe Soria a 750K buyout.

2012 - The club option for this year would become guaranteed at $6 million if he has 55 appearances in 2011 or 110 in 2010 and 2011 combined. It would become guaranteed at $6.5 million if he pitches 400 innings over the previous two seasons.

2013 - Club option year
2014 - Club option year

Apparently, the value of all three of the club option years depends on whether or not Soria becomes a starter or remains a reliever. If Soria remains a reliever, he can get around 30 mil out of those three option years.

Now, what sticks out in particular here? Well, first that the Royals are going to get great value for Soria through at least 2011. I think any team in baseball would jump at the chance for Soria to be a reliever for them at the price of $4 million. That's the most Soria will make in the guarenteed years, and that's without getting into what Soria could be capable of as a starter.

Second, the club options. I don't know if I've seen a contract that has three club options. I know the 2012 option can automatically kick in, but the Royals really are in control of all three years give that they control how many times Joakim pitches out of the bullpen. The thing is, I'm not sure this is something to be looked at negatively, really. I've heard rumblings about the reserve clause era and that Soria could have got a much better deal, but when you consider that this could end being a contract of over 30 million dollars for someone who has pitched a year and a month and a half of (albeit stellar) major league relief, I think all's pretty much fair here. While the club controls the options, I have enough confidence in Soria's abilities down the line to feel confident in saying that Soria is going to be more than $9 million dollars richer by the time it's time for his next contract.

Third, the language of the contract and the way the 2011 option year was set up clearly allows for the fact that the FO is seriously considering Soria as a potential starting candidate going forward. He may, indeed, turn out to be one of those pitchers who does his best work out of the bullpen. I'm on record, however, as being one of the people who thinks that Soria can make a successful transition to starting pitching. It seems to me that the dollar amount, year-to-year, give the Royals ample opportunity to get their money's worth from Soria while easing him into the rotation sometime in the next three years. By the time 2012 rolls around, we'll know what kind of starter Soria is--I have a hunch he'll be worth 6 million--and it seems likely that the Royals and Soria will both be in a good to do well for themselves going forward.

NYRoyal: The only thing that jumps out at me is the small escalators if he becomes a starting pitcher. If he becomes a good starting pitcher, then his value to the team goes up greatly, but his cost increases by a very small amount. If he becomes a #3 SP or better, this contract goes from a good deal for the Royals to a spectacular deal for the Royals.

Royals Review: Are you surprised that it was Soria that got the first "lock-up" contract of the Dayton Moore Era?

NYRoyal: I'm a little surprised, because I would have thought that it would be Greinke or Gordon. But now that I think about it, I shouldn't be surprised, because I think this is the easiest deal. As he only has reliever innings under his belt, he's going to be the least expensive of the young guys to lock up long-term. A reliever's salary is going to be the most speculative of all players, therefore they should be most likely to jump at guaranteed money in a long-term deal. So I think Moore had a player and agent who were motivated to do this kind of deal. Greinke, Gordon and Butler are going to be more difficult. Neither Gordon nor Butler have proven themselves, so they might not think this is the best time for them to sign a long-term deal. Greinke, on the other hand, has established himself fairly well and has only 2 arbitration years left. His long-term contract would be pretty big. But I think Moore should be working on it. And I bet he is.

NHZ: No. Not even slightly. I'm not saying I predicted this, but I am looking at the Royals roster right now and the fact of the matter is that Soria made the most sense to be signed first. Joakim Soria, AT WORST, an excellent relief pitcher going forward, and one with the stuff where there's no reason to expect him to fade into oblivion as with some other pitchers. Relief pitchers are generally fluky, but everything the numbers and those scouty types say about Soria indicate that there's no reason he can't be successful in some capacity throughout the length of this contract.

Who else made sense to lock-up, coming into this year? David DeJesus was already locked up when he signed his five year deal during Allard Baird's tenure. Mark Teahen was a huge question mark, one that now seems to be emerging as a disappointing player. Alex Gordon was and is talented, but his rookie season slugging line (.411) didn't really lend itself to the Royals FO wanting to lock him up instantly. Greinke was another huge question mark, one that now seems to be establishing himself as one of baseball's better pitchers. It would make some sense to buy out Buck's last arb years, but that would only be a two year deal at this point anyway, and no one thinks Buck's going to turn into a star. We all love Brian Bannister, but there were multiple doubts about him--and there still are--when it comes to exactly what kind of starter he really is.

Altogether, I think Soria was the one young player coming into this season that had both the arb years to buy out, a great rookie year, and no question marks except for the reliever/starter thing. The way he built on his success this first month and a half, Dayton Moore was able to conclude that Soria was worth locking in to be part of the Royals next competitive teams. I think now his focus will be on locking up Gordon--who has shown this year that he is starting to mature as a player--and Greinke--who is awesome and very key to the Royals future contention chances--but I also think that Soria was the logical choice to lock up first. I think that in addition to keeping Joakim in the fold for a good long time, this move also signals to the current Royals young players that Moore is committed to working out fair deals that will keep them in Kansas City, and that the thrift years are over.

Royals Review: Off the top of my head, it seems lie most contracts like this are being awarded to position players (Braun, Tulo, HanRam). The only recent pitching comparable I can think of is Fausto's contract with Cleveland, and he's a starting pitcher. So...

NYRoyal: Pitchers are the riskiest baseball players. Their performance varies from year to year more than position players. This is doubly true of relief pitchers. And pitchers get injured more frequently than position players. So there's real risk for a team locking down any pitcher long-term. But that doesn't mean it should never be done. That risk should be taken into account when putting together the contract. For Soria's contract, the risk was clearly taken into account and the Royals have lots of outs and aren't giving up a whole lot of guaranteed money. It's a pretty safe deal for both Soria and the Royals.

Despite the inherent risk in signing a pitcher to a long-term contract, I remain adamant that the Royals next lock-down should be Greinke. While I see Soria as a probable good closer/good SP, I see Greinke as a likely #1-#2 SP. That's damned valuable and if we can get him now when he will take less money for security, then do it. I posted this in another thread, but it bears repeating here (with revisions):

Giving him guaranteed money would save the Royals money, although they'd be taking on risk. But he doesn't have an injury history and he's got very good mechanics. Of course he has the mental/emotional/psychological issues, but he's had them under control through therapy and meds. I don't think that is too much of a concern now. After a bit of consideration, I think I'd offer him:

4 years, $32M (plus 3 options years which could make it 7 years, $73M)

2009 $4.5M
2010 $6.5M
2011 $10M
2012 $11M
2013 $12M club option
2014 $14M club option
2015 $15M club option
I may be way off base. This may be too high or too low, but it sounds about right to me.

NHZ: So I think it generally has to do with the correct perception that young pitchers are more of a risky commodity than young hitters. Fausto Carmona looked like a stud last year, got overworked in September and October, and hasn't found the plate this year. That's just one example of the many modern examples of the hazards of managing young pitchers through the injury nexus. There's a good deal of--sometimes contradictory--research out there, brought up recently by NYRoyal and 2X2L, that gives us a better idea of what to help young pitchers contribute while keeping them healthy. The fact of the matter is that despite advances in this field and in the medical field--TJ surgery is quite routine now--pitchers are still more risky to project going forward than hitters. There are exceptions to that rule, but I believe that's why some clubs have put more of an emphasis on locking up young position players while being content to work out the one-year, arb-avoiding deals with their pitchers.

In terms of how this relates to Soria, I don't think you'll find many young pitchers in baseball that are being managed as well. I think the Royals have eliminated a good deal of the risk here, and that Soria himself being so dominant gets rid of some more. Soria isn't a pitcher, in my opinion, that anyone has to worry about regresssing. Well, maybe he won't post a 1.04 ERA, but that ridiculous K-rate is real. With him coming out of the bullpen, a forward thinking FO, and a good manager in the dugout, I think Soria's not very risky at all.

Royals Review: What is your sense of where the industry is going and what do you make of this lock-up-deal resurgence? Is it possible that we're starting to reach a point at which the lock-up contract is actually being too zealously employed? Played out logically, at some point the market would have to shift the other way, and the smart thing would then become just paying the bare minimum for however long, then letting the guy walk, right? If Evan Longoria is getting locked up so early, it seems like the next move for super prospects is to essentially start demanding these deals right away. Right after the draft. Combined with the industry-wide (and from my perspective bizarre) fear of arbitration, and the shambles that the high-bonuses have made of the draft, where do you see things heading?

NYRoyal: The trade market of the last couple of years has shown that most teams view the most valuable commodity in baseball to be young, cheap, talented players. Teams are less willing than they used to be to trade away their top prospects. It is no surprise to me that this trend is now showing itself in signing these players to long-term contracts. I think these are smart moves which usually have involved only moderate risk to the teams involved. This is, of course, something that could be overused. There will be some Berroa's out there. It all comes down to how well an organization evaluates talent. But that is the same as signing veterans in the free agent market. The key difference is that the amount of money and, therefore, the degree of risk is smaller in signing these young players. And, quite frankly, the potential reward is higher. I'm not too worried about prospects demanding these kinds of deals, because prospects have no bargaining power. They have little ability to demand anything. Long-term deals will usually not happen until a player has proven himself for at least a year in the majors. There is no incentive for teams to sign a player earlier than that. While the price tag might be a bit smaller, the risk would be much greater. Too many top prospects have fallen on their face in the majors. But if they've had some major league success and you like the skill set, then by all means sign him up. I really think Longoria-type deals are going to remain to be the exception to the rule.

I could see Boras attempting to get this kind of contract for first round draftees, but I don't think it is likely that teams will go along with it. The risk-benefit analysis just doesn't work for the major league team. Every draftee is an unknown. A relatively high percentage of even top 10 overall draftees fail. So teams are going to be willing to give some kind of major league contract to top draftees, but I really don't think it will be anything like the long-term deals we've seen young major leaguers sign of late. The signing deadline will help with this as well.

And I really don't think these long-term deals are about fear of arbitration. I think it is about buying out some free agency years. It's about teams trying to break out of the keep-the-young-star-for-five-years-and-then-flip-him-for-prospects paradigm (See Santana, Damon and Beltran). Teams are figuring out that it is in their interest to identify young stars and lock them down for a period beyond six years. I think they found an inefficiency in the market and they are taking advantage of it.

NHZ: I stop short of saying that lock-up deal is being used too much, but it is worth noting that front offices open the door for more risk down the line when they lock up a young player to one of these deals. If you're just renewing the contract of a young player, followed by working out one year arb-avoiding deals, you can deal with any injury or decline in skills as you see fit. That's why front offices need to be careful that they lock up guys with sustainable skills, placing an emphasis on low risk players. This ties in with the previous question, as Will noted that a lot of these lock-up contracts have been given out to position players.

Now, once the organization has made the evaluation of a young player enough to say "this is a guy we want to lock down," I don't think any fear of arbitration comes into play. Moneyball was all about exploiting market inefficiencies in the baseball industry, no matter what some straw man-toting sportswriter might tell you, and I think the rise of these lock-up contracts has been general managers and front offices in general realizing that when you have a very good, low risk position player, there's no reason not to eliminate the x-factor of how much money he'll demand in arbitration. In addition, there's the fact that the FO probably has more leverage when drawing up these contracts in a player's pre-arb years, and thus there seems to be greater potential to keep a franchise cornerstone around for below market prices for, in some cases, more than six years. That's HUGE for a team other than, say, the Yankees, Red Sox, Mets, or Cubs, teams that have been able paper over any FO mistake by buying the best FAs out there.

In terms of draftees...well, maybe down the road this type of contract becoming popular will give them more leverage to hammer out a contract quickly, but I don't see it as a significant dynamic right now. Teams are already willing to hand out large signing bonuses, and I think the emphasis for top draft picks will continue to be on the amount of money they can get out of being signed.