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Paying Aaron Judge – Revisited

There has been significant discussion in our comments section the last week regarding a contract extension for Aaron Judge. Back in December, our own Matthew Cohen wrote about what a potential Aaron Judge extension might look like. I highly recommend regarding Cohen’s assessment, and at the time it was written, I agreed with most of what he wrote. However, much has changed in the last 3 months regarding baseball’s economic picture, and I think that it is worth revisiting a potential Judge extension now that the Yankees have given out more extensions in 2019 than they had in the last decade.

Background

For the purposes of this exercise, I think Cohen’s estimates for Judge’s projected salaries under MLB’s current economic structure in 2019-2022 are accurate. For reference, Cohen projected Judge to make the following salaries in those years:

2019: $684,530

2020: $9.23 Million

2021: $15.51 Million

2022: $25.25 Million

The current system will allow the Yankees to maintain complete control over Judge through his age-30 season. Judge has proven in his two full seasons that he is one of the most productive bats in the league, while playing above-average defense in RF, enough to put his floor as a player at 5 WAR by any flavor (Baseball-Reference, Fangraphs, Baseball Prospectus) of WAR. In his best years, Judge is likely to exceed 7 WAR, making him a steal even at the $25+ million salary Cohen projects in 2022. The concern, of course, is that it is impossible to predict an aging curve for Judge due to his size. There has not been a player of Judge’s caliber and size to play in the Majors into his 30’s. The non-baseball factor to consider is that Judge appears to be a classic Yankee personality, and will remain highly valuable to the Yankees from a marketing perspective for years to come. All factors considered, it absolutely makes sense for the Yankees to engage in extension talks with Judge.

The Problem

This off-season threw a wrench into any calculators we have been using to determine salaries for players in the Free Agent Market. It was a long, cold market for most Free Agents, some of whom remain team-less. Much of this is due to the fact that most teams are treating the various Luxury Tax Thresholds as hard caps. The Yankees have exceeded the first two thresholds, which makes sense since the only penalties are monetary. However, should the Yankees exceed the threshold by more than $40 million, in addition to a tax increase, the Yankees will have their highest draft slot in the Rule 4 Amateur Draft pushed back 10 spots. These are hefty penalties, and the Yankees have clearly viewed that specific penalty as an impediment to additional spending this off-season (see: Bryce Harper and Manny Machado).

The players have voiced significant displeasure with the current system, and it is clear that the next set of Collective Bargaining negotiations will not be business-as-usual. I think it is entirely possible that baseball economics as we know them could change significantly when the next CBA expires prior to the 2022 season…Judge’s final current guaranteed season in pinstripes.

A Path Forward

We have already seen one example of a player taking a seemingly below-value extension out of fear of the current Free Agent market and the uncertainty regarding future economic realities: Aaron Hicks. The Hicks 7 year/$70 million extension does not provide a roadmap for Judge’s deal, but it does highlight the fact that we need to set our sights lower when evaluating potential extensions for players. Additionally, the Hicks extension has one feature that is of the utmost importance: it does not significantly change his luxury tax hit for the 2019 season. Hicks’s extension only causes his luxury tax hit to jump by approximately $4 million from $6 million to $10 million. That fits within the Yankees’ financial plans for this season.

If we take the $684,530 that Cohen projects Judge to make in 2019, it would be impossible to extend Judge this year without significantly increasing his luxury tax hit. For that reason, I think that it is very unlikely that the Yankees will extend Judge this year. However, no matter what salary projection you use, Judge will earn a significant raise next year when he is eligible for salary arbitration for the first time. Judge’s luxury tax hit will be rising significantly next year, and that combined with uncertainty regarding baseball’s future economic structure and an unstable Free Agent market could encourage the Yanks and Judge to make a deal.

While 10 years is a nice, round number, I don’t think that really fits in Judge’s case.. Judge will go into the 2020 season in his age-28 season. A 10-year deal would pay Judge through age 38. While Bryce Harper just scored a contract that will pay him to play baseball through his age-39 season, the aforementioned uncertainty regarding Judge’s aging curve may prove to be an obstacle to getting the Yankees to pay for 8 free agent years. However, the Yankees could provide a salary that few teams have been willing to offer over a slightly shorter contract. I think that the sweet spot for a Judge extension is 8 years, $240 million. The Yankees give Judge a massive raise in his arbitration-eligible years in exchange for a slightly shorter contract. Judge is unique, particularly as compared to this off-season’s big free agents, due to the uncertainty regarding his aging curve and his inherent value to the Yankees, and I think a unique contract extension would make sense. I think Judge is likely to significantly out-produce his contract at least through age 32, barring significant injury. His plate discipline and raw power should allow him to be at least an above-average bat beyond that. Additionally, the luxury tax threshold will rise somewhat in the final years of the CBA, so the Yankees can continue to find ways to field a good team without receiving the strictest penalties under the rules. An 8 year, $240 million extension makes sense for both Judge and the Yankees.

Conclusion

Aaron Judge is a generational, unique talent. Baseball’s economics are flawed and in flux, and no one can say how a player Judge’s size will age. All of these factors make pinning down numbers for an Aaron Judge extension difficult. However, while I do not think an extension makes sense for the Yankees this year, I think a Judge extension next year makes a lot of sense for both sides.

[credit to Keith Allison for the thumbnail photo]

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