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Thoughts on the Hyun-Jin Ryu signing

Not only the contract itself, but the bigger picture

The Toronto Blue Jays host a media availability with new signed free agent left handed pitcher Hyun-Jin Ryu Steve Russell/Toronto Star via Getty Images

Now that the dust has settled on the Hyun-Jin Ryu signing and I’ve had a chance to digest and think things through, I thought I’d put some detailed thoughts together on the signing. My natural disposition is to be risk averse, and going to the fourth year that was the clincher to get him here is certainly a stretch in terms of value, but overall I’m cautiously optimistic.

To be frank, given that, I was a little taken aback by the level of euphoria when the news broke. Perhaps I maintained more faith than most that the Blue Jays both had the capacity and willingness to spend money to land targets that made sense to their competitive window when the opportunity presented itself. And with the Jays still firmly in build mode as opposed to contend mode, I saw major free agent additions as a matter of opportunism rather than necessity — and the market was unfortunately much stronger than the last couple when quality player languished.

Indeed, the biggest positive about this signing for me is not anything to do with Ryu specifically, rather it’s what is confirms about the bigger strategic picture and resource allocation. This signing moves the Jays above $100-million in opening day payroll (including the dead Tulo money). I still think there should be room to add payroll/spend money in 2020 to opportunistically make the team better (like eating some near term dollars to acquire an intriguing young player); I don’t think we should be satisfied with the current level of spending/investment.

But at the very least, the team is not going to run like a total small market operation with a bottom-10 or bottom-5 major league payroll during the building phase of a contention cycle moving out of the trough. I didn’t think that was the case, and while I was preaching patience for most of the offseason until this signing, I’ll admit to getting increasingly anxious. But those pitchforks can now be safely stashed away.

That being said, the magnitude of the guarantee does give me plenty of trepidation. It starts with a high level concern that again doesn’t have to do with Ryu specifically: big free agent pitching contracts tends to not turn out very well. It’s too early to say much about the deals of the last couple winters — though the Alex Cobb and Nathan Eovaldi deals look awful; Yu Darvish, Jake Arrieta and Yusei Kukuchi don’t look great; with only the Patrick Corbin deal off to a good start.

In the 10 offseasons preceding that (2007-08 to 2016-17), there were 32 “big” free agent contracts given out to starting pitchers, where “big” is defined as at least three guaranteed years, with a total guarantee of at least about 10 times the league average salary at the time, or roughly about $50-million in today’s dollars:

Those contract totaled just over $3-billion in value, generating about 285 WAR (which is an average of fWAR and BWAR), almost $11-million per win not adjusted for significant salary inflation. Not all those contracts are done (and a few were opted out of), so it’s just over $2.5-billion in cash paid out, which makes it more like $9-million per win. That’s probably overly favourable since the back end of contracts tend to fare worse, the truth is probably somewhere in between.

But those are averages, there’s obviously plenty of variation, so I rated each contract value wise. It’s worth noting that the total fWAR was about 305 WAR compared to 264 bWAR since fWAR tends to treat declining pitchers who post reasonable peripherals but get shelled more favourably. so where there was a split I tended toward the bWAR.

Of the 32, I get 12 as total disasters for the team (38%), with another seven being poor outcomes (22%). On the flip side, nine worked well, with three more being home runs (it’s worth noting two of those were opted out of, limiting the upside for the signing team). So we can see the skew to the downside; basically, a major free agent pitching contract is about as likely to be a disaster as to work out well.

Which is why generally it’s current contenders who give out these contracts, where marginal wins have a lot of value. That’s why I was somewhat skeptical it made sense for the Blue Jays to make a big splash this winter to stretch to land a pitcher, but that’s not to say it’s strategically incoherent either. Next year’s free agent class isn’t that strong, this should help bridge the gap to contending (which is not nothing), and let’s not discount the imperative or simply putting a quality product on the field and avoiding more of the past few seasons.

So that’s the broader picture of the nature of the gamble, but it doesn’t say anything about this specific gamble. Few pitchers have been as good as Ryu over the last decade when healthy — those last two words being the operative clause. Ryu has only pitched 740 innings over the last seven years, and turns 33 the day before he presumably takes the mound on opening. Add in a transition to the more offensive environment of the AL East, and there’s a lot of risk.

That’s mitigated by the fact that for 2020 and 2021, there’s very little opportunity cost to the salary. That’s not a justification to burn cash, but they don’t have much in the way of commitments or projected salary, so paying up for Ryu shouldn’t stop them from doing other things. All it cost to acquire a frontline type pitcher was money, no prospects or draft picks.

It’s dicier for 2022 and 2023, which is where they might regret having $20-million on the books for Ryu. If, per the above, one figures there’s a 60% of the deal not working out to some extent, even in a “poor” type scenario most of the value is frontloaded and you’re not getting much in the last two years. The younger core will be in their prime, and if (hopefully) they’re the nucleus of a contender then between them earning real money and spending to build around them, potential dead money could prevent helpful additions.

There’s also the nature of the gamble. After adding a couple of “lower ceiling” back end types, Ryu is certainly an upside play his demonstrated ability to prevent runs. With some reason, the front office has been criticized for eschewing upside in favour of “raising the floor”. Ryu’s profile layers in nicely in a complementary manner with what’s already in the organization.

If the going rate in free agency is something like $9-million per win, then something like nine wins is required for this deal to “break even” by conventional analysis. Given the circumstances above, I think it’s fair to say there’s a lower bar here. Which is why my quick take was something like 40% poor outcome/40% some degree of okay/20% well despite that being better than the average FA starter deal and the Jays stretching.

It will depends on the timing of production (a great season in 2020 and then little afterwards would be less then optimal), and the nature of it (the Jays would probably prefer 400 very good or great innings than 600 league average innings), but if they get 9 WAR over the next four years from Ryu I’d say it worked out well. If he pitches 500-600 innings well above average, it could be a steal.

Conversely though, if he ends up less than five WAR, either from low innings or poor results in more innings, it’s going to have been a poor investment regardless. Mapping innings against run prevention, I think the possible outcomes looks something like this:

Ryu contract outcomes

I’ve mapped adjusted era to an actual era, based on last year’s run scoring environment for a Blue Jay starting pitcher, where about 4.60 ERA was average and 5.80 (for a starter) was the approximate true replacement level. As we’ve seen in recent years, that can shift quite a bit so used the adjusted marks is the better true marker.

Finally, are the implications for the young starting pitchers. Not this move in isolation, but in conjunction with acquiring established major league starters in Chase Anderson and Tanner Roark. That leaves Trent Thornton and Ryan Borucki theoretically battling for the last rotation spot, though realistically the odds are against everyone being healthy. And Nate Pearson looms at some point after April.

In any event, all of this presumably pushes 2019 debutants Anthony Kay, T.J. Zeuch and Jacob Waguespack to Buffalo’s rotation until they either hammer down the door or spots open up. Patrick Murphy also fits in that group, and 2020 is his last option year. And then beyond that is a group including Sean Reid-Foley, Yennsy Diaz, and Hector Perez and theoretically Julian Marryweather.

I don’t have a problem with forcing younger players and prospects to force their way up rather than being forced into service by default as was often the case last year. But at the same level there’s something of a logjam, with a lot of 40-man pitchers with no major league experience and option years being burnt and dwindling. At some point in the next 12 months, something got to give and some decisions are going t have to be made. To some extent, adding three established (instead of one or two) MLB starters complicates this in what’s still likely a building year.