Ryan Howard’s Extension

So, out of nowhere, it’s being reported that the Phillies and Ryan Howard have agreed on a five-year, $125 million contract extension. This appears to be on top of his current deal that pays him $19 million in 2010 and $20 million in 2011. My first thought upon hearing of this deal was that it’s too high, and my numbers seem to confirm my suspicions.

I project Howard to be worth about $97 million over this span, or between $5-6 million less per year than what he will be getting in his contract. My projection assumes that he will be playing on an average team, so he may be worth a bit more to the above-average Phillies than my basic estimate, possibly enough to put his salary in line with his marginal revenue product. The contract could reflect the front office’s confidence the organization is primed for a continued run of success. However, I think it’s unrealistic to assume that the Phillies will be as good as they are now for the next seven years.

But even if Howard will generate the production to justify the contract under the right conditions, I still question if this is the right move. In the context of the free-agent market with many good teams making bids for his services, a contract of this magnitude may make sense. But, a lot can happen before this contract kicks in. I’m all for signing players before they hit free agency, but it should be for a discount. If I’m the Phillies I take my chances that he walks in two years, because I think he’s ended up with a deal that is about as good as he can expect in two years.

4 Responses “Ryan Howard’s Extension”

  1. Brent says:

    I certainly agree with you. When I first saw 125 mil, I was expecting to see 6 or 7 years behind it, not 5. In your projections, do season ticket sales, jersey sales, etc. factor in?

    He may not be “Mannywood” status yet, but someone like him can make a huge difference in ticket sales, which increases parking lot revenue, concessions, memorabilia, etc. I’m sure you’re well aware of this, but was curious if there’s really a way to calculate this?

  2. JC says:

    The projection is not that specific, so there may be some things that are unique to Howard and Philadelphia that I neglect.

  3. dan says:

    I’m in Philly, and this move will be applauded greatly right now. What they all say in 5 years might be different, but for Philly it’s not just the on field production, it’s also sort of a statement that the Phillies are one of the big boys now…

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    […] Ryan Howard's Extension (sabernomics.com) – April 26, 2010So, out of nowhere, it's being reported that the Phillies and Ryan Howard have agreed on a five-year, $125 million contract extension. This appears to be on top of his current deal that pays him $19 m… […]