UPDATE: It's official, the deal is done.
This deal has been in the works for a while now. The money had been decided but apparently the two sides had agreed to change some of the contract language.
According to Ken Rosenthal, the guaranteed money breaks down like this,
- $6M signing bonus.
- Salaries of $5M, $5M, $6M, $7M, $9M, $10M, $11M.
- $1M in the form of a potential buyout on a club option in the 8th year for $16M.
Rosenthal also sent out the following tweet,
If Castro wins MVP or finishes 1-5 twice, final year and option year each escalate by $2M. Max value including option, escalators: $79M.
Now that is what you call a club-friendly deal. With a "win" currently being valued at $4.5M/year, Castro only needs to perform like an average SS (2 WAR) for the length of this contract for the Cubs to end up getting good value. Castro is already a 3+ WAR shortstop the past two seasons and if he continues to play at his current level or if he improves as many expect him too, the deal could end up being a steal. If he plays at the MVP level as outlined above, then it's still a huge bargain even with the escalators.
The Cubs got good value here. Thanks to Obstructed View for doing this calculation a few days ago. Here is what Castro would get paid if he were a free agent...
Let’s start with a 3-WAR projection in 2013 and increase it by .5 each year for 4 years and then decrease it by .5 the final 2 years. That’s 22.5 WAR.
We’ll star the win value at $5.5 million and increase it by $0.5 million each year.
2013: 3 WAR, $5.5 million/W, $16.5 million $WAR
2014: 3.5 WAR, $6 million/W, $19.5 million $WAR
2015: 4.0 WAR $6.5 million/W, $26 million $WAR
2016: 4.5 WAR, $7 million/W, $31.5 million $WAR
2017: 4.0 WAR, $7.5 million/W, $30 million $WAR
2018: 3.5 WAR, $8 million/W, $26 million $WAR
That’s a total of $149.5 million
Of course, Castro is not a free agent, but even if the Cubs were to go year to year and go through the arbitration process and then pay him for the first two years of free agency, Castro's expected payout would be around $90M (again, according to OV Blog's calculations)
Nobody would have paid Castro that amount because the whole point of signing an early extension is to get him for something less than full value The benefit goes both ways. Castro is guaranteed to make this money even if he gets injured or regresses badly and the Cubs get a discount for committing to Castro for 7 years. That discount turned out to be around 33%. The deal buys out 2, potentially 3 years of Castro's free agency and assures they will have him for his peak performance years. Under this deal, Castro won't be a free agent until he is either 29 or 30 years old.
It's also important to note that while some would have preferred to see Castro perform better before committing these kinds of years and dollars, the truth is that if Castro were to take a big step forward this year, there would be no way that Castro would sign this kind of deal. In effect, Theo was buying low on this deal considering Castro's struggles this season.
Great deal for the Cubs and a nice move by Castro to buy himself some security. Win-win.