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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:
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:
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:
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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