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Kepler's Unusual Contract

The Twins announced long-term deals with Max Kepler and Jorge Polanco yesterday. Both are somewhat unusual players with whom to sign to a long-term deal, and thus required an unusual deal, which is fantastic, because truth is often found at the edges. Let’s look at how these contracts usually are structured, how Kepler’s is different, and what it says about the Twins and Kepler.
MLB Salaries 101
Long-term contracts usually follow the same structure as a player’s natural earning power. For the first three years of a players service time, a player makes whatever the team wants, so long as it’s above the major league minumum. In years four through six, the player gets substantial raises, provided the club opts to retain him. The purpose of these raises is to get him close to what he would expect to make in free agency, which happens when he has six full years of service. An established young player could expect salaries that look something like this:
Attached Image: Screenshot 2019-02-15 at 10.36.01 PM.png

The long-term contract for an established young player usually mimics this, taking a little less in each year along with an option year on free agency. He does this because the money is guaranteed. Otherwise, if the player is hurt or never develops, the team can decide not to retain the player in those lucrative arbitration years. The team might also give a small signing bonus up front. So it might look like this:
Attached Image: Screenshot 2019-02-15 at 10.36.01 PM (1).png

An Unusual Challenge
Kepler provides some unusual challenges to this structure. The first is procedural: Kepler is a Super-2 player, which means he got arbitration to start a year early. So even though he’s only in his third year, he was going to make $3.125M this year.

The bigger issue is that Kepler is not an established young player. He’s made peripheral improvements in his nearly three years in MLB, but his numbers have essentially stayed steady and underwhelming. There’s a lot to like in his profile, and he just turned 26 years old this week, plus he’s relatively new to this baseball thing being from Germany. But the later years of a typical contract provide a significant challenge to the Twins.

This year and next year were easy to work out. Even if Kepler doesn’t develop further this year, the Twins would almost surely offer him arbitration for next year, meaning he would get about $6M. His numbers are worth that, and he would be entering his 27-year-old season, which is still on the upswing of a baseball player’s career.

But if he didn’t break through, there is a decent chance the Twins would not offer arbitration for the 2021 season. If they did, Kepler’s salary would be raised to $8-9M, he would be turning 28, and he would be a middling hitting corner outfielder, albeit with good defense. He might improve and be worth that money, but maybe not. And if he stays the course again, there is no way they offer him arbitration in his sixth year.

That pessimistic career arc shows the challenge the Twins faced in working out a long-term deal. If Kepler doesn't develop, a typical long-term deal would really hurt them in the later years. A fiscally conservative (or if you prefer, “cheap”) team can’t guarantee $10M and $12M paydays to someone who might be a below average outfielder. The available spend every offseason is usually $20M - $60M for a team. Losing $10-12M of that hurts.

On the other hand, losing $6M is probably acceptable, especially for a guy who at worst is a solid strong-side-of-the-platoon hitter with good defense. Which is why it’s now time add Kepler’s contract to the chart:
Attached Image: Screenshot 2019-02-15 at 10.36.01 PM (2).png

A Balanced Deal
The Twins lock in a player that is arguably already worth $6-7M to a slew of $6-7M/year contracts. To do so, they pay him an extra $3M this year (remember, he was already going to make $3.25M), guarantee next year (which they almost surely would have done anyway), and then get two years of similar pay without having to worry if he takes a big leap forward. The only really risky year is Kepler’s 7th year, when they pay him $8.5M, so they’re betting on minor breakthrough sometime before he turns 30 years old.

The Twins reward? If Kepler does take that giant leap, he’s a bargain, not just for this year and next (which he already was) but for FOUR more years. I’m a Max fan, admittedly, but even objectively that’s a good risk on a 26-year-old with really good plate discipline and power who has a career .730 OPS, even if he’s a career .233 hitter.

And for Kepler? He’s guaranteed $35M, even if he never takes the next big step. That's nice. Plus, there’s some upside for him too, if he can look out that far ahead. He’ll be able to hit free agency as a 31-year-old, which is a plenty marketable age. If he’s hitting and if salaries bump up a bit, he could be in line for a deal worth twice as much.

The Twins and Kepler have found a middle ground that balances the risk and reward each needed, despite Kepler not being the prototypical extension candidate. What’s more, it appears the Twins were able to do the same with Jorge Polanco, and tomorrow we’ll examine his contract a little more closely, to see what it tells us about the Twins tendencies.

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66 Comments

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drivlikejehu
Feb 16 2019 01:12 PM

I don't think there's any reason to suggest the front office sees the contract as anything other than a fair deal, which is exactly what it looks like to me. Agents negotiate contracts for a living and Kepler's agent got him a lot of guaranteed money relative to what he has shown to date.

 

Before making this deal, the Twins corner outfield situation was: Kepler under control through 2022, Rosario under control through 2021, with one elite corner outfield prospect who could be ready in 2020 or even earlier, one very good corner outfield prospect who could be ready in 2021 or even earlier, and several other prospects who could be in the picture over the next several years (Rooker, Baddoo, Lewis if SS doesn't work out, etc.). 

 

There's really nothing about that picture that made extending Kepler a high priority. Even if the Twins want Kepler around as CF insurance, he was under control through 2022 anyway, and beyond that he might not really be suited to center. They have some young outfield prospects who may emerge by then as well. To me this is basically a straightforward reflection of the fact that the front office is optimistic Kepler will be a productive hitter going forward.

    • Jerr, LA VIkes Fan and Original Whizzinator like this
My only trepidation is that to me, it seemed that his spot is maybe the most easily replaced (would Cave be a definite step down?) and more importantly one of the easiest spots to upgrade if your team tops out. This FO will not upgrade above contracts it already possesses.

 

It was of course Seth who brought up FG, in the first reply. While well-intentioned, and casts the new contract in a favorable light, I think it is a serious misuse of the notion of dollars-per-WAR. And not for the reasons already brought up.

 

That's why I said "If you believe in it" (or something to that intent)... Honestly, all I meant for it to say was that even if he stays at what he was in 2018 (which was like 2.8 fWAR), then $7 million is a great deal. And, has been mentioned, if he does take any sort of step forward, it's even more of a steal. 

    • Carole Keller, Jerr, gagu and 2 others like this
What's the over / under on how long he'll remain a Twins. My guess is the '21 trade deadline.

That's assuming Bux doesn't completely flame out and they need to move Kepler to CF.
    • Original Whizzinator likes this

 

What's the over / under on how long he'll remain a Twins. My guess is the '21 trade deadline.

That's assuming Bux doesn't completely flame out and they need to move Kepler to CF.

 

If Kepler improves his batting average to say even 260 I think the Twins will be hard pressed to move him.His defense is close to elite for a right fielder. He has enough power to stay there and K and walk percentage are decent and could get better.He just needs to bring that average up and suddenly he is a great player.

 

Cave's K rate is not great and while his defense would play in right I'm not sure his arm does.Cave's BABIP was also high last year while Keplers was low.Cave is probably the closest replacement for Kepler but personally I think right now Kepler is better and if Kepler improves a little I think he is definitely the better all around player in right field.

 

Wade could probably play good defense in right and he has always had a good OBP but he lacks the power that you typically want your right fielder to have.You could take the trade off but again if Kepler improves his BA a little he looks like the better player.

 

Kiriloff can play right and his bat would would play there but he would be at his very best an average fielder in Right.Personally I think Kiriloff is better fit in left field or first base as he doesn't have great speed for the outfield.He can certainly play outfield but his defense there will likely never be near elite.

 

If Kepler improves his BA,keeps his K rate down and Walk rate up, keeps slugging 20 to 25 home runs per year then he is going to be tough to replace.If he improves I predict he will be a Twin through the life of his contract.I don't see anyone in the system with the number of tools he has and the ceiling he has for that position.

 

If he stays who he is then, Yes I agree with you the Twins have lots of options.Those options all have there flaws but if he can't hit that will be a problem.

    • LA VIkes Fan and Original Whizzinator like this

If you believe in him... You believe in him. This contract isn't cripplin by any stretch of the imagination. 

 

If it goes bust... Oh Well... That's life. The contract isn't crippling.

 

Now...The Super Two status...That's a little tough to swallow... .We wasted 16 days of service time in April 2016, The OF was falling apart, the team was falling apart and he got 12 AB's during this time on the bench in April. Those 16 days of bench time would have had him pretty close to the super two cutoff. 

 

I'd build a statue for Terry Ryan in his honor... but there are times like these where I would walk up to the statue and yell at it. 

 

 

    • Jerr, adorduan and gagu like this

I would walk up to the statue and yell at it. 

You've aged a lot in recent weeks.

 

297.png

    • Jerr, diehardtwinsfan, Riverbrian and 3 others like this

That's why I said "If you believe in it" (or something to that intent)... Honestly, all I meant for it to say was that even if he stays at what he was in 2018 (which was like 2.8 fWAR), then $7 million is a great deal. And, has been mentioned, if he does take any sort of step forward, it's even more of a steal. 

I suspect you're going to be equally wowed by every contract extension of a not-yet-FA-eligible young player you read about, by any team, then.

 

The reason $7M for a good season will be a great deal is that the contract blends also all the risk of not-great outcomes into the price. You're looking at the upside but not the downside.

 

Which... is fine for our team to do. They, being the ones who sign a few dozen player contracts every year, are better placed to absorb the risk, than the player who has only one life to live and values the certainty. Kepler's now set for life - the tradeoff being that he could have bet on himself and possibly gotten more, but just as possibly ended up with almost nothing if the worst were to happen. So, good deal for both sides - just like life insurance is a good deal for those at certain times in their lives - the individual has the risk smoothed out, the big company comes out ahead on average.

 

But way short of "incredible," the term you chose, for the team.

    • TheLeviathan, Dman, Platoon and 1 other like this

 

I suspect you're going to be equally wowed by every contract extension of a not-yet-FA-eligible young player you read about, by any team, then.

 

The reason $7M for a good season will be a great deal is that the contract blends also all the risk of not-great outcomes into the price. You're looking at the upside but not the downside.

 

Which... is fine for our team to do. They, being the ones who sign a few dozen player contracts every year, are better placed to absorb the risk, than the player who has only one life to live and values the certainty. Kepler's now set for life - the tradeoff being that he could have bet on himself and possibly gotten more, but just as possibly ended up with almost nothing if the worst were to happen. So, good deal for both sides - just like life insurance is a good deal for those at certain times in their lives - the individual has the risk smoothed out, the big company comes out ahead on average.

 

But way short of "incredible," the term you chose, for the team.

 

I mean, the downside is that he doesn't every play again... And yes, this type of signing for these types of dollars involve some risk on both sides... they all do. The Twins have plenty of money available this year. They've found a way to level it out so that he never makes the real huge money in any one year. 

 

OK, maybe I'll change "incredible" to "really good" or something more appropriate. And, I will likely applaud most of these types of deals. 

    • Carole Keller, ashbury, Jerr and 2 others like this
To me Kepler did several sensible things here. First and foremost he set himself up for life, he took the money and ran. Secondly, he seemed to view that times, they are achanging. Free agent bidding is not as robust as it had been, and there really is no way a new CBA can guarantee that. It could change the contract structuring, but the days of paying for what you used to do are over. Thirdly, he could have "bet on himself". He may have won that bet, or one of his ACL's might have lost it for him. And last(ly). There is something to be said for a 'bird in the hand is better than two in that fondly remember center field batters eye!
    • Carole Keller, Jerr, Kevin and 5 others like this

Player salaries resemble to me the way homes were priced in the mid-2000s. The way the stock market was as we moved toward Y2K. The writing has been on the wall for a while. These contracts just don't work and corrections happen.

FanGraphs has a valuation model that needs to be adjusted because in no way does it reflect REALITY when it comes to what players get on the open market as free agents.

This begs the question.....
How much longer did player salaries need to increase at ridiculous rates? Average player salaries increased by over 100% from 2001 to 2015. Was this supposed to continue until the end of time?

grew 100% over 15 years relative to the total MLB revenue stream. We know the size of one slice of the pie, but not the size of the whole pie. We can’t possibly understand the constraints without more information
    • Carole Keller likes this

To me Kepler did several sensible things here. First and foremost he set himself up for life, he took the money and ran. Secondly, he seemed to view that times, they are achanging. Free agent bidding is not as robust as it had been, and there really is no way a new CBA can guarantee that. It could change the contract structuring, but the days of paying for what you used to do are over. Thirdly, he could have "bet on himself". He may have won that bet, or one of his ACL's might have lost it for him. And last(ly). There is something to be said for a 'bird in the hand is better than two in that fondly remember center field batters eye!

Kepler is one ACL-tear away from Jason Kubel. Fine role player, but took him 10 years to earn 31 mil

I hadn’t thought about the upcoming CBA on why a player would want a guarantee locked up. Good point!
    • Carole Keller, gagu and Original Whizzinator like this

In four years Kepler will be 30 and he might not be the same defensive player he is now. At some point during htis contract he's going to have to have enough offense to offset the fact he is getting older.


I think WAR aging curves suggest age 30 output may not be all that different than age 25 production overall. You're right, the shape of the production may change, but even without any kind of a breakout, Kepler could still be a 2-3 WAR player at 30 like he was at 25. And that's as far as this contract is guaranteed -- $8.5 mil at age 30, plus a $10 mil option or $1 mil buyout on his age 31 season. This contract pretty much ends before the steeper effects of aging should be expected.
    • gagu likes this
I see now that I was mixing up the Kepler deal with the Polanco one upthread, though -- we only have 1 option year on Kepler, but 2 on Polanco. That tempers my enthusiasm for this deal a bit. I wouldn't call it a steal or anything at this point, but I still think I'd rather see us sign this deal than not sign it, all else being equal. (I'd rather see us add more significant external MLB talent, of course, but this deal doesn't preclude that.)
    • Carole Keller and gagu like this

 

No thank you.Why look bother analyzing.

 

And when you say things like this:

Fangraphs has never advocated Dozier to receive anything approaching $46 mil for a single year of his services

What are you really saying about this methodology I need to look at more closely?To what end?

If it doesn't serve too deal terms applicable to reality I cannot bother with it.

Moreover, how can you use the Michael Brantley example over and over again to give it validity when you say what is in bold above?

 

I will try to answer all your questions but you have ignored all of mine thus far

 

Have a good day.Maybe we can pick this up next week.I have things do as I have an extended weekend and places to go

 

Sorry everyone for hijacking the thread, but I'd like to jump back to this. I wasn't trying to ignore any questions, but perhaps I wasn't being clear in my responses. I'll try here.

 

"What are you really saying about this methodology I need to look at more closely?To what end?"

 

First of all, it's important to remember these Fangraphs dollar figures are just a column on their player stat tables expressing past WAR values in dollar terms. They're not saying these are contracts, or should be contracts, or you could assemble a whole team with contracts like these, etc. Looking back at any random player and season, it's just another way of saying Dozier's 2016 performance was valuable. Other ways to say it might involve his 42 HR that year as a second baseman, or his 132 wRC+, etc. But the nice thing about WAR (and by extension, WAR in dollar terms) is that it attempts to quantify these value estimates relative to league, park, and position. We know 42 HR from a 2B in 2016 is more valuable than 42 HR from a 1B in Coors Field in 2000 -- but it's also nice to estimate how much, especially when the comparisons aren't so stark.

 

As I said, that's all looking backward. But there is a more careful, limited use of it looking forward, if instead of past WAR you look at future projected WAR. If you see how much teams are paying in free agency (and trades) for projected future WAR, you get a dollars per WAR figure you can use as a baseline for roughly estimating FA contracts, trade returns, and such.

 

Like in the case of Michael Brantley. He was a FA this winter. He had 3.5 WAR last year, but at his age and health history, we won't project him to repeat that. Fangraphs has him projected at 2.4 WAR for 2019. We observe that teams recently have paid $8 mil per projected WAR in free agency and trade. So, we could estimate a potential salary of $19 mil for him on a one-year contract for 2019, or less than that on a multiyear deal where the projected WAR would gradually decline with age. And indeed, he actually signed for 2/32 -- not far off. Now there are a ton of other factors -- most obviously a team may have different projections for a player. Maybe that $ per WAR figure is going down around the league, maybe there is a lot of competition on the market at that position, maybe a team is willing to pay for upside above projected WAR, or for a steady performance floor, etc. Clearly not every team would have equal interest in signing him at that figure. But it's an easy way to get an *estimate* without having to duplicate the extensive work of an MLB front office! It's very useful, for a fan who wants to estimate what a FA might get, or quickly analyze whether a FA contract is fair (or favors the team or player).

 

I agree that in this thread, it's not really appropriate for judging Kepler's extension right now, because he's not a free agent or even particularly close to free agency. He was an asset already under control for sub-market prices -- something the Fangraphs figure is clearly not trying to incorporate. But that's an issue with the application of the information, not the information from Fangraphs itself. (Although it could be relevant for Kepler soon -- a team looking at Kepler as a potential trade target would be looking at the value he provides, above his salary, compared to alternatives on the open market.)

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LylesCrocodiles
Feb 19 2019 01:35 AM
I will start with the obvious. Early in their careers Polanco has been a better hitter than Kepler. And at a more valuable position defensively. We can all envision better future results for Kepler because he has the tools to be a quality ML right fielder. But I would be shocked if Kepler ends up being more valuable than Polanco the next 5 years. And to pay Kepler $10M more? To me the Polanco deal makes a lot of sense. Kepler? Let’s see if he can really be a .275/.350/.450 guy (he’s a career .730 career ops) before we get real excited about him being a Twin for the next 7 years

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