Astros locking up the core?

The Houston Astros reportedly reached agreement with Lance McCullers, Jr. yesterday on a five year, $85 million extension that would keep the young curveball specialist in Houston through 2026. Additionally, Jon Heyman of MLB Network tweeted that the Astros had offered shortstop Carlos Correa a six year, $120 million contract extension as he prepares to enter free agency at the end of the 2021 season.

The deal for McCullers starts to fill a pressing need, as three of the Astros’ top four pitchers would have entered free agency following this season. However, Correa represents the bigger star, and the bigger payout, and the Astros will face additional pressure to lock up the young shortstop after losing George Springer in this offseason. With that in mind, let’s examine the deal for McCullers and how it reflects what the market may hold for Correa.

When considering these contracts, we should look at both the theoretical value (where the market should value a player, given their projected performance) and the current market itself (which may or may not reflect those values, given the inherent bidding and negotiations involved). FanGraphs has created a theoretical model over the years to analyze what teams have paid in free agency, and we can also look at comparable players to see what kind of contracts they received.

First, let’s look at McCullers. While the contact isn’t exactly linear (it includes a 2021 signing bonus and the salaries are slightly back-loaded), we can essentially treat the contract as $17 million annually. So what can the Astros expect to get for their $17 million? As your broker will tell you, “past performance is no guarantee of future success.” But if you look at the track record for McCullers, you see surprising consistency:

When factoring in the 60-game season in 2020, you’re looking at a consistent, 2.5-3 win pitcher. Looking back at the FanGraphs model above, we can then use one of their three methods:

1. Simple value: the market paid $4.81M per win this offseason. According to that model, McCullers could expect a salary of $12M to $14.5M per season. From that perspective, the Astros overpaid.
2. Discrete wins: this assumes that teams would pay incrementally more as the player’s value goes higher, simply because they get more value from a single roster spot. Under that method ($3.7M for the first win, $4.7M for the second win, $4.8M for the third win), McCullers could expect between $10.8M and $13.4M per season. From that perspective, the Astros definitely overpaid.
3. Removing one-year contracts: As the article points out, if you remove one-year deals, then the market paid out $6.84M per win. Going back to the estimate of 2.5-3 wins, you get an expected salary of $17.1M to $20.5M. So perhaps the Astros actually got a discount?

However, teams don’t pay for past performance; they project a player’s value over that contract, and hope to get a discount on that value. That’s where the gamble for the Astros with McCullers comes in. FanGraphs projects McCullers at 1.9-2.1 wins per season over the next three years, which would put him at only about $11M per year. Most pitchers don’t typically improve after age 30, so why would the Astros pay such a premium? Well, FanGraphs doesn’t have a monopoly on projections. Baseball Prospectus has their projections from prior to 2020 available, and McCullers projects to the following WAR:

So if McCullers averaged 3 wins per season, he could prove a bargain – under that third scenario, the team is saving over $3M per year. And of course the Astros would have their own in-house projection, and the agents for McCullers might as well, so you would expect the sides to end up somewhere in the middle. All in all, this looks like a fair deal for a pitcher who clearly wanted to stay with the team that drafted him. And it looks like the Astros are willing to pay between $5.5M and $7M per projected win. That gives us a framework for a Correa deal.

Above I referred to the market forces, and in that way, we can look at comparable deals. Fortunately we have a very handy deal for reference: the Red Sox extended shortstop Xander Bogaerts prior to 2020, his last season before free agency, agreeing on a six year, $120M contract (plus a player vesting option for another $20M season following.) There’s no coincidence here – the Astros clearly modeled their reported offer after this deal, and with good reason. Check out Correa’s career stats, compared to Bogaerts prior to signing his extension:

Correa looks like the overall better player, but Bogaerts has definitely shown a greater ability to stay on the field. The Astros probably figured that this was a sensible starting point for negotiations, but they also probably didn’t expect Correa to accept. So as they negotiate, one big issue facing the Astros will be to figure out what player they’re buying with this contract. Correa has posted the following win values in his career:

The two systems clearly value Correa’s defense differently, and the eye test tells me to favor bWAR’s greater value. In either case, we can see almost two different players – the phenom from 2015-2017, and the veteran who battled injuries in 2018-2020. If the Astros expect the Correa of those first three seasons to return, then they should break the bank to keep him. Looking at 2017-2019 (to omit the shortened year of 2020), here’s a list of the players who have exceeded 18 WAR (as Correa did 2015-2017) and their current salary:

As you can see, payers in this stratosphere either earn $30M per year, or will earn it shortly. And that makes sense – if we demonstrated that the Astros were willing to pay $5.5M per win, then a player averaging 6 wins per year would get $33M per year. And if Correa had produce at that level over the past three seasons, I’m guessing we would absolutely be hearing contracts in that range for him. Unfortunately for Carlos and the Astros, he just hasn’t been that player the last three years. Even giving him a prorated, full 162-game season for 2020, he’s averaged 3.5 wins under the more generous baseball-reference formula. At that rate, he’s looking at anywhere between $19.5M and $24.5M per season from the team, which gives the two parties a large gap to bridge.

The other issue at play is Correa’s age. He enters free agency in his age-27 season, meaning a 6-year deal would put him back into free agency at age 33 – certainly a time where he could get a good deal, but past his prime. Typically a player and agent will seek to maximize the guaranteed money over a number of years, but this could give Correa incentive to seek a shorter deal.

The other issue at play is the market yet to unfold. Francisco Lindor, Javier Baez, Trevor Story, Corey Seager, Marcus Semien, and Correa all stand to enter free agency after this season. Reasonable minds can quibble on the order, but these six are all top-10 MLB shortstops by any measure. This sets up a high-stakes poker game among the players and teams – one player and team will combine to set the bar for the other contracts, but who will blink first? Correa has been the most vocal about wanting to remain with his team, and Story and Semien appear all but certain to sign elsewhere. While Mets ownership could seek to continue their spending by locking Lindor up to an extension, it looks like the Astros and Correa likely will set the standard for these other contracts.

Ultimately, I expect Correa and the Astros to reach an agreement before season’s end, with a deal that will average between $26M and $28M per year with a player opt-out after three or four seasons. Such a deal would mark a large bet by the team that Correa can return to his superstar form, but with the rest of their core position players locked in for the next few years, that seems a bet worth making.