A purely speculative analysis on a BJ Upton contract extension

So we learned today that Justin Upton decided to sign a six year, $51 million dollar deal with the Diamondbacks.  For the last couple of years, we as fans have wondered if it was possible to sign BJ Upton to a long term deal, buy out arbitration and his first couple years of free agency, and so on and ultimately drew conclusions that BJ was seeking to hit free agency and sign a big deal.  With his brother signing with the Diamondbacks, the perspective changes a little bit; after all, they are siblings and ultimately if Justin could be bought out, BJ has to have a price as well.  I've decided with absolutely no information whatsoever on any status on negotiation to speculatively analyze where each party might be on a contract that may or may not have absolutely no basis in reality.  Results after the jump.

Justin's contract contains a $1.25 million dollar signing bonus and breaks down like this:

10: 0.5m
11: 4.25m
12: 6.75m
13: 9.75m
14: 14.25m
15: 14.5m

So, a soft signing bonus and what amounts to a pittance in salary the first year very quickly accelerates to very big money in a clearly back-loaded contract, his arb years are 2011-2013, while his free agent years are the next two.

There are a couple of things to note here before we start speculating as to where the Rays and BJ might be eying each other at in terms of a contract:

First, Justin is still only 22 years old. A six year deal doesn't necessarily eat into the prime of his career.  He'll be out of the contract at 28 years old and still have around three years of his physical prime left.  He'll be able to land a fat deal with someone else assuming he stays healthy and continues to improve.

Second, the Diamondbacks as of recent years, have not been in the business of deferring money on contracts.  Back when the Diamondbacks started in 1998, financial deferment was all the rage in baseball, and the DBacks did it a ton, committing what eventually ended up being hundreds of millions of dollars to players like Randy Johnson, Matt Williams, Curt Schilling, Mark Grace, and Luis Gonzalez.  As of before the start of the season last year, they still owed $59 million in deferred money, and most of it goes to players on that 2001 world series roster.  Deferred money and irresponsible spending is what ultimately forced new ownership for the Diamondbacks.  The group that took over in 2004 does not defer contracts.

I'm going to attempt to promote what I'll refer to as a reasonable range,' the maximum that Upton should be asking for, and the minimum the Rays should be offering, in order for these two parties to be properly negotiating a contract.

I'm going to start with where BJ might be because it's going to take a lot longer to explain his perspective then where the Rays might sit.  In contrast to his brother, BJ is no spring chicken.  While only 25, he's still, by virtue of his age, going to be more difficult to buy out his free-agency years then Justin.  He's already into his 1st arbitration year and if he doesn't sign an extension, will hit free agency when he's 28, which is the same as his brother would be now after the contract.

While the standard way of making these estimates would be based around a player's WAR dollar value, in today's economy, WAR is simply overinflated.  BJ's been worth $49.1m over the last three years, and there's no team in major league baseball that would even think about signing just about any player to a contract of this value.  Instead, I'm going to base BJ's demands on a combination of his arbitration value, and the contract his brother just signed.

Upton's arbitration value for this year was $3 million.  If we use the 40/60/80 formula based off of this salary, BJ's free agent value today would be $7.5m/yr with his final 2 arbitration years being worth $4.5m and $6m respectively.  If you include the general-estimate 3% inflation to these values, they turn into roughly $4.65m, $6.37m, and $8.2m respectively.  Without using math, we can safely assume that Upton would not be asking for any more money in his free-agency years then his brother is getting now, unless the Rays decide to try to buy out several years of his free agency.  Upton will be at best as good as his brother, and it's pretty likely based on past performance that he won't be quite as good, so the absolute ceiling it should be expected he's asking for on his first year of free-agency is $14.5 million. 

Going on the $8.2 estimated now value with inflation vs the $14.5 estimated max that his brother earns, and considering that buying out his first 2 free-agency years will be more expensive then his brothers, I feel safe picking a number in the middle of these two for Free Agent Year 1, That would end up being $11.35m, with 10% escalators for each year after the first.  FA year 2 would cost $12.5m, FA year 3 would be $13.75m, and FA4 would be $15.1m.  I would also feel safe assuming that BJ would require current non-inflation-adjusted-arbitration-values + 10% to buy out his remaining arbitration, or 4.95m and 7.25m. If you add up all these years in pure salary, the grand total is $64.9 million, which sounds like a reasonable estimate.  Ultimately, I would feel safe thinking that for a 6 year contract, BJ would be asking for a maximum of $65m, and I would knock off 10% off each year and bundle it all together as part of a signing bonus.  What you end up with is:

Signing Bonus: $6.55m

ARB2 - 4.65m
ARB3 - 6.37m
FA1 - 10.215m
FA2 - 11.25m
FA3 - 12.375m
FA4 - 13.59m

Total salary: $65m over 6 years

Simply put, that's a lotta cash and those are some big numbers at the end.  In contrast, I think it's a lot easier to figure out the Rays initial offer, take CC's contract signed in 2005, chop off the first two years and offer the remaining 4 as his year to year salary, with his signing bonus being the total rate of inflation on that contract since 2005, which is approximately 11%.  You chop off the first two years because CC hadn't reached arbitration yet when they negotiated that contract.

Signing Bonus: $3m
ARB2 - 4m
ARB3 - 5.25m
FA1 - 8m
FA2 - 10m

Total Salary: $30.25m over 4 years

While at first glance there's a huge salary discrepancy here, I personally think that BJ would be more then willing to consider a 4 year deal, and might actually prefer it.  He'd hit free agency at 30 and still have an opportunity to land a big contract, whereas a 6 year deal puts him at 32 years old and on the fringe of the end of his prime.  If you adjust the signing bonus by removing the 10% off the last 2 years from it, and chop off the last 2 years of his suggested proposal, you come up with this:

Signing Bonus: 3.665m
ARB2 - 4.65m
ARB3 - 6.37m
FA1 - 10.215m
FA2 - 11.25m

Total Salary: $36.15m over 4 years

From this perspective, I personally think that these two should be able to work a deal out.  The minimum the Rays should be offering vs the maximum BJ should be asking are reasonably close on a 4 year deal.  Obviously as I stated all along, this is purely speculative.  Upton could be for one reason or another demanding a larger deal, or more years, or the Rays could be offering a smaller deal or forcing more years that Upton may not want.  Another thing to consider that unlike the Diamondbacks, the Rays still make a habit of deferring money on deals.  CC, Pena, Longoria and Burrell at a minimum all have at least some of their total contract deferred without interest.  If the Rays are serious about signing Upton, this is a procedure they likely won't be allowed to do.  But if these two parties are as sane as we think they are, and they want each other, they should be able to figure out a contract before the season's over.