Going into 2014, the clock was ticking for the Cincinnati Reds. The team's strongest asset, its starting rotation, had a clear and present expiration date, with Johnny Cueto, Mat Latos, and Homer Bailey, the team's first through third starters, all set to hit free agency in either 2015 or 2016. Given the market for free agent pitching, if the Reds were going to extend their window with the current arms on their roster, they were going to have to start working on it now, instead of waiting until the eve of departure to start talking terms. So they did.
The Reds announced the signing of Homer Bailey to a six-year, $105 million deal this week, a contract that will keep Bailey in Cincinnati through the end of the 2019 season with a mutual option for the 2020 season. It's difficult to see now circumstances under which that option is exercised by the club, considering it would pay Bailey $25 million for a single season of pitching -- during which Bailey will be 35 years old. But that's the thing with the market for starting pitching these days: Every new offseason makes the contracts handed out the year before seem reasonable in comparison. The Minnesota Twins just added about $80 million in new commitments to a rotation full of journeymen and back-of-the-rotation arms, and the New York Yankees agreed to pay a pitcher who has never thrown an inning of professional ball in North America $155 million in guaranteed money. Who's to say that in 2020, $25 million won't be a bargain for the kind of pitcher Homer Bailey turns out to be?
Of course, that depends as much on Bailey as it does the market. At the end of last season, the Reds' third starter had thrown 853 career MLB innings of 4.25 ERA baseball. That's a less than stellar performance on the macro level for a 27-year-old pitcher receiving a nine-figure investment in any era, let alone one that's seen offense dwindle almost every year over the course of his career -- especially when one accounts for the fact that Bailey plays in the National League, with pitcher hitting and no DH rule. He's good at striking out hitters, but not great (19.4 career K%); he doesn't walk too many batters, but he's not noticeably less walk prone than his peers (7.6 career BB%); and he keeps the ball in the yard about as well as your average major league pitcher can be expected to, giving up a long ball once every nine innings. All three of those stats are within half a percentage point or less of the league average across baseball last season.
But while there is definite value in a pitcher who can reliably pitch to those peripherals across 200 innings a year, that's not the Homer Bailey the Reds think they'll be getting over the next couple seasons. Bailey's career to date comprises two distinct phases: The period from 2007 to 2011 when Bailey threw 436 IP of 4.89 ERA baseball, never managing more than 132 innings in any given year and struggling to keep his walks down (he had a 3.5 BB/9 in those years), and then the past two seasons, in which Bailey has almost matched his raw innings output -- 417 IP -- with only a 3.58 ERA.
It's not particularly difficult to see how Bailey turned things around. His command finally came together, and with it, so did his ability to stop handing out free passes (2.3 BB/9 in 2012-2013). Combine that with a clean bill of health since his turnaround, and the Reds feel comfortable betting that moving forward Bailey's numbers will be more in-line with his last two seasons than with his overall career numbers. That's a gamble, of course; Bailey could regress for any number of reasons, either immediately or after a year or two. But if the floor on the deal is a slightly-better than league average starter and the ceiling is a clearly better than league average starter, young enough to still have a half-decade or more of strong life left in his arm, then there's far worse risks to take than giving him a $17.5 million a year AAV deal through his mid-thirties -- especially considering how well good, reliable arms are getting paid out on the open market.
Which brings the discussion past Bailey and to the remaining two arms in the Reds' rotation: Cueto and Latos. From a results standpoint, both have been superior arms to Bailey, even during the past two seasons when Bailey put everything together. Since 2011, Cueto's thrown 433.2 IP of 2.61 ERA ball, while Latos has thrown 614.1 IP of 3.37 ERA ball. While Cueto has the superior stuff and ability of the three men, he also has problems staying healthy, only pitching 60.2 innings last season; Latos, on the other hand, is a workhorse, throwing over 180 innings in all but his first season as a starter and throwing over 200 the previous two. Which one is "better" in the context of a long-term contract depends a lot on whether you prefer upside or dependability, and how concerned you are about Cueto's health.
But every decision has consequences and opportunity costs. With Bailey's new contract accounted for, the Reds' salary commitments for 2014 are once again over $100 million, but looking forward their obligations are already set at over $65 million in 2016 for only four players (Joey Votto, Bailey, Brandon Phillips and Jay Bruce) and two buyouts (Jonathan Broxton and Skip Schumaker). From 2018 on, the team will be tying up almost $50 million a year in both Bailey and Votto until their contracts expire. Unless they get a major new source of revenue (possible, given that the team's TV contract is up for renewal in 2016) ,or drastically increase their budget from the $100 million range to the $150 million range -- and this is only the second season the Reds have had being a member of the $100 million club to begin with -- their payroll can't sustain another large contract for a high-end pitcher while still providing for the rest of the team. That would mean that the Reds likely wouldn't be choosing between Latos and Cueto; they'd be letting them both walk.
After all, both Latos and Cueto know how valuable the services they provide can be in a market free-for-all. When the two players hit free agency in 2016 (assuming Cueto's team option for 2015 is exercised), they'll both still be in their late twenties and far more in line for the Zack Greinke treatment than the Ervin Santana or Ubaldo Jimenez deals, even with draft pick compensation attached. If the Reds are able to extend Cueto at all, it will likely be by appealing to his durability -- offering him stability and guaranteed money in case his history of shoulder strains derails his career even further. But the very reason that Cueto would be willing to accept such an extension (he has had four such injuries since 2011) is why the Reds would be hesitant to commit that much money to him. Latos is the far better candidate for another six-year, $100+ million contract, but the Reds would have to make the offer so good -- around or exceeding the Masahiro Tanaka deal would be a good place to start -- that Latos wouldn't be able to say no.
Say the Reds offer that money or slightly better next offseason and Latos accepts. The Reds are now looking at three players making $65-75 million, leaving maybe $25-30 million total to spend on the entire rest of the team, with guys like Aroldis Chapman, Todd Frazier, Zack Cozart, and Devin Mesoraco entering their expensive arbitration years. That's a lot of ways to split a relatively meager pool of cash, unless payroll goes up by a considerable amount again.
The other option, of course, is to plan on extending neither from the start -- instead, prioritize finding the next Mat Latos and Johnny Cueto. Bailey is a good safety net; by the time Latos and Cueto leave, he'll not only still be a front of the rotation starter but will have the veteran experience and presence that the Reds liked in Bronson Arroyo. The Reds trust in their ability to identify good young starting pitching, a trust that's mostly been rewarded considering how Cueto, Bailey, Mike Leake and Tony Cingrani's careers have gone so far, and also in their ability to turn other assets into that kind of pitching, which is how the team got a hold of Mat Latos -- by trading a pair of prospects that so far have done little for the San Diego Padres.
In the end I think that's what the Reds will end up doing: Letting both Latos and Cueto leave when their time comes and focusing on getting cost-controlled replacements for them. I think Bailey is about at the top of the tier of starting pitchers in their late twenties who are willing to consider extensions that buy out free agent years without the team throwing in things like opt-out clauses or ratcheting compensation up into the $22-24 million AAV range. And I think that given his track record, it's not asking so much to trust Walt Jocketty and his front office to replace the pitchers they lose to free agency -- so long as the team remembers that it needs guys to hit the ball, too.