How Madison Bumgarner's 2012 Contract Explains the Eloy Jimenez and Alex Bregman Deals

Eloy Jimenez is the latest player to sign away his arbitration and initial free agent years. That trend started with Madison Bumgarner, and his deal changed the course of baseball history.

Describe the 2019 baseball offseason in one word. Stagnant, you might say. Boring. Collusion. Protracted. Boras. 

While these are good answers, recent events have shown value is the operative word in professional baseball. Value is king. Nowadays, there are few executives who spend exorbitantly while scoffing at cost-benefit analysis and probabilistic models. Teams are not only focused on paying players what they are worth, they are taking advantage of the CBA and young players to get surplus value—the kind you simply can’t get by trusting arbitration or free market economics. The pre-arbitration extension is now standard practice. That’s why Alex Bregman signed a 6-year, $100 million extension with the Astros late Tuesday night and why White Sox prospect Eloy Jimenez signed six years and $43 million guaranteed, the largest signed by a player who has never seen the majors. Similar deals for Aaron Nola, Luis Severino and Whit Merrifield tell the same story: teams are more willing than ever to hand out deals early in a player's career, and that's all because of potential value. 

Jimenez's deal represents the latest benchmark in a trend of value maximization. If Jimenez becomes a superstar or even a league average player, the surplus value for the White Sox will be enormous. If Bregman stays at his current level, the Astros will be able to reap the same benefits. And with the low salaries for younger players, service time manipulation and six years of team control, the players have no leverage to fight against that unless they are a superstar like Mike Trout. 

This trend is the reason the offseason slowed to a crawl. Without fail, every post about the slow offseason would feature random guys (and it’s almost always a guy) trumpeting the virtues of the free market and telling players to get in line.

They are wrong: baseball is, and has never been, a free market. If every single big leaguer were available for open bidding, then that would be an open market, one which would pay them even more than they already earn. From the MLB Draft to rookie service time to international spending, baseball is a heavily controlled cartel with brokered rules. And as anyone who has watched Narcos knows, cartels are generally inefficient and corrupt. Money is not built to trickle down in a cartel, and baseball is no different. This free agency period is, to put it simply, the cost of doing business.

This brings us to Madison Bumgarner, the ultimate template for the franchise-changing value contract that all these front offices seek. In April 2012, ex-Giants GM Brian Sabean made the best investment of his career. By locking up Madison Bumgarner to a five-year, $35 million contract with two club option years, the Giants did something unprecedented. No team had ever given that much guaranteed money to a player with one-plus years of service time. At the time, it was mostly considered a win-win for both sides. Bumgarner’s $35 million guaranteed seemed reasonable and the Giants were happy to lock up his prime years, especially with the two club options.

“Bumgarner had been on track for a first year arbitration salary of $4MM or more,” Ben Nicholson-Smith wrote at the time, in his trade analysis at MLB Trade Rumors. “The deal also insures against the possibility that Bumgarner breaks out into an ace.”

Seven years later, the winner and loser are clear. Bumgarner became an ace and provided arguably the greatest postseason performance in history to lead the Giants to the 2014 World Series title. But while Game 7 of the 2014 World Series was legendary, Bumgarner’s team-friendly contract had a much greater impact. Assuming Bumgarner would’ve been a free agent at the end of 2016, a year where the best starting pitcher on the market was Rich Hill, it’s fair to argue that Bumgarner could’ve gotten at least $28 million per year (based off of Max Scherzer’s $30 million deal from 2015). Given that Zack Greinke got $34 million per year, that’s a conservative estimate. With estimated arbitration numbers, some quick math reveals the Giants saved about $62 million on that deal alone, not including whatever post-arbitration extension would have been necessary to keep him in the Bay Area.

We know why players are taking guaranteed money. The payday and stability are too tempting to pass up, and the lack of a solid structure for young players in the CBA means that giving up money is rational. But for teams that make the right extensions, the potential is limitless. The Giants changed their fortunes forever by signing Bumgarner. The Posey, Brandon Crawford and Brandon Belt extensions were all made in the wake of this deal, not to mention the two World Series victories. The Bumgarner deal completely changed the trajectory of the Giants, brought in millions in revenue, and ensured the Giants were a good on-field product.

This type of deal is what teams are looking for now. The Indians assumed millions of potential value by extending Corey Kluber and Carlos Carrasco early in their careers. Now it’s easier to understand why Trevor Bauer has no intention of letting that happen to him. The Rays tried extending Chris Archer and Matt Moore in years past, but did ink utilityman Brandon Lowe, who signed a four-year, $24 million contract on Wednesday. The Phillies pioneered this extremely aggressive insurance with a similar deal for Scott Kingery last offseason, before he’d even appeared in the majors.

Paying market price, in this era, does not get you anywhere. Late Tigers owner Mike Ilitch is gone, and his team is saddled with massive financial commitments to Jordan Zimmermann and Miguel Cabrera. Every general manager is now that guy in your fantasy draft who talks about getting the best picks based on Average Draft Position and projected value. Dodgers assistant GM and now Giants President Farhan Zaidi, a noted fantasy football savant, might literally be that guy in your fantasy league. Value-obsession makes even more sense because this is not fantasy, it’s all real, and these front office guys want to keep their jobs as much as the players.

As Kershaw said in the famous fantasy football piece: “For me, anyway, I guess there’s some truth to this sabermetric stuff they’re talking about….I take no solace in any of this.”

Hunting for value works. The Bumgarner contract is exactly what the Yankees and Phillies were looking for when they signed Luis Severino and Aaron Nola to extensions. After adding as much surplus value as possible, then teams will bid to pay market price. In January of 2018, John Edwards produced a chart ranking teams by their efficiency at generating dollars per WAR for free agent contracts between 2006 and 2017. The least efficient teams are the usual suspects: Mets, Diamondbacks, White Sox, Angels and Rockies. Meanwhile, the Dodgers, Giants, Yankees and Cubs were all below the MLB average. And if it worked so well for Bumgarner, why not position players and relievers? Hence you get similar types of deals for Jose LeClerc in Texas (four years and $14 million) and Whit Merrifield in Kansas City (four years and $16 million). Now, the Astros have made the biggest move of all by locking down their cornerstone player through arbitration and a chunk of free agency. And you can’t really fault them for it.

Front offices, while guilty for not shelling out money to try and win, are also handcuffed by this new era of contracts. If they give long deals like those signed by Cabrera, Albert Pujols and Chris Davis, the entire front office will likely be fired down the road. Expensive contracts with decade-long commitments are bad ideas unless that player helps a team win a title or the player is named Mike Trout. There’s little chance that Manny Machado will be producing enough to make $30 million in a decade. Instead of the big signing, it’s much easier to mimic Jerry Dipoto and avoid any reckoning by constantly trading and rebuilding rather than spending on expensive free agents. Why take risks in a system completely incentivized against risk? Thus, teams just don’t bother to make competitive offers to Harper and Machado, creating a dreadful offseason that ends with fans interpreting cryptic Instagram posts.

As long as this CBA exists, teams are just not going to spend more money on aging veterans. Instead, owners like the Pirates’ Bob Nutting will say that the payroll “isn’t controllable”, players will tweet angrily, and teams will continue their arms race to find the best team money isn’t supposed to buy. Without radical structural change in the minor leagues and for rookie salaries, the search for these extensions and the next low-cost young player will never end. However, in these last few years before the labor meltdown in 2021, it may become more efficient for teams to follow the Brewers model and offer some deals to free agents. If teams are willing to go against the grain and pay market price to win now, paying good baseball players what they are owed might be the next inefficiency.