Kyle Seager signs extension: What about Josh Donaldson?

Kyle Seager has signed a seven-year, $100 million extension with an eighth-year club option for up to $20 million with escalators, according to Jeff Passan of Yahoo! Sports. Seager was about to enter arbitration for the first time with three years, 85 days service time, and was projected to earn $5 million according to Matt Swartz's model for MLB Trade Rumors. The extension buys all three of Seager's arbitration years, four years of free agency, and an additional club option year.

When is an arbitration buyout team-friendly?

Every so often, we wish the Athletics could pull off a "team-friendly" arbitration buyout, the idea being that the player is exchanging some of the uncertainties of year-to-year statistics that can affect arbitration values with the certainty of a big payday. That financial security is likely a big part of why Sean Doolittle signed his five-year, $10.5 million deal that buys out his three arbitration years with options for the next two free agent years.

The deal is only team-friendly, however, if the player's performance matches the contract expectations and the player does not suddenly gain injury-prone status. Brett Anderson, for example, received what was essentially two years of small raises to the league-minimum he otherwise would have received, a two-year arbitration buyout, and two more club option years. The result: Much of 2010 lost to elbow problems, much of 2011 and 2012 lost to Tommy John Surgery, much of 2013 lost to that ankle injury, and much of 2014 lost to that freak index finger injury and then later a bulging disk.

While still a value because of his potential as a pitcher, the Athletics (and later the Rockies) would probably have paid quite a bit less in arbitration settlements from year-to-year than the 5 years/$20.5 million he ultimately was paid. Recall that as a condition for sending Anderson to Colorado for Drew Pomeranz and minor-leaguer Chris Jensen that the A's had to send $2 million cash to the Rockies.

You mentioned something about Josh Donaldson

Josh Donaldson will be entering arbitration for the first time this winter as a Super-2 player, meaning he is among the top 22% in service time of players that have between two and three years of MLB service time and accumulated at least 86 days of service time in 2014. The MLB Trade Rumors model projects he will earn $4.5 million out of a one-year arbitration settlement.

Now we begin the part where I make up some numbers.

To project out further we have to consider what sort of raise Donaldson might get from year-to-year. For instance, Giancarlo Stanton, entering his second arbitration year, was projected to earn a $6.5 million raise from his $6.5 million first-year arbitration salary. Neil Walker, the Pirates second baseman, is project to earn about a $3 million raise from his $5.75 million second-year arbitration salary, with another arbitration year to go. Kyle Seager and Josh Donaldson, if they stay healthy and productive, I would guess receive raises somewhere in the middle of those two.

Let's assume Kyle Seager would have earned, after making $5 million in arbitration, some $4 million raises each year. If the turning-27 third baseman continues to produce the 5+ bWAR seasons he has, we can guess he signs some $25M AAV deal upon reaching free agency ahead of his age 30 season in 2018. But if he turns into an injury-prone player or his performance suddenly slows down, those arbitration raises and his future free agent payday also slow down. Seager would not be the first American League West third baseman to have his performance and health fall off a cliff in his late 20s and early 30s.

"Ironman" Kyle Seager, Seager is rarely hurt, continues to produce as he has, and signs a $25M AAV extension of at least five years. "Injury-prone" Kyle Seager is often hurt, hits for far less power than he has in the past, and is lucky to sign a free agent deal for $10M AAV. "Actual" Kyle Seager shows Seager's deal, including the 2022 team option. The Mariners have bought themselves insurance against the ironman version of Seager while exposing themselves to the risk he could turn into injury-prone Seager.

For Josh Donaldson, let's pick a nice round figure like $6 million as his annual arbitration raise, assuming he continues his 7+-bWAR seasons:

There's a problem with this, however. That two-year age difference has some effect in how to value a player like Donaldson, and Donaldson would not necessarily have three or four free agent years bought out. What happens if we limit the free agent buyout years to two instead of the five with option Seager received?

Here, the A's are spending more than they would have otherwise compared to the "Ironman" deal in the first two years, but less than what Donaldson would earn in a continuing healthy 2017-20. It is of course a bad deal if Donaldson's age or injury slow down his production.

Yet I don't think Donaldson takes this deal, because he would be entering the free agent market deep into his mid-30s aging curve. Perhaps he takes an even shorter deal. One that just buys out his arbitration years:

Let's say they agree. The terms may ultimately backload the deal, which would make him an ideal trade chip for Oakland in 2017 or 2018 as Brett Anderson was at the end of 2013. But do the A's save that much? Not really, and now they're locked into the elevated figure if Donaldson does take a downturn.

So what was your point again?

Kyle Seager is a slightly younger player than Josh Donaldson, and the Mariners have a lot more money to spend, with Seager joining Robinson Cano and Felix Hernandez in the Mariners $100 million contract club. Josh Donaldson is an extremely important third baseman for Oakland, but the club does not want to be trapped in an Eric Chavez situation where tens of millions are tied up long-term in a player who is entering the wrong side of the aging curve.

A shorter deal reduces the risk, but it also reduces the benefits to both player and club. The club saves less because they're not buying out the potentially most expensive arbitration years, and the player has less incentive to sign because he is not going to make that much extra if he does end up missing games or underperforming.

The numbers above are just a guess. What it comes down to really is how each party evaluates the potential range of value of the player's service. What is the likelihood that Donaldson has a year where he cannot heroically overcome the bangs and bruises he incurs? How risk-averse is Donaldson? What does $30 million over the next four years mean to somebody instead of $45 million over the next four years?

Let's talk about it.