The Yankees recently gave their young ace Luis Severino a four-year contract extension, which may turn out to be a genius move.
Last Friday, the Yankees and Luis Severino agreed to a multi-year contract extension. The deal is worth $40 million across four years, with a fifth-year club option that could push the total to $52.25 million.
The extension covers Severino’s four remaining arbitration-eligible years, and possibly one free agent year. Here is his salary breakdown:
2019: $4 mil plus $2 mil signing bonus
2020: $10 mil
2021: $10.25 mil
2022: $11 mil
2023: $15 mil club option with $2.75 mil buyout
The Yankees and Sevy were close to heading to an arbitration hearing on Friday before agreeing to the extension. Brian Cashman and Co. were looking to offer him a contract of $4.4 million for this season, while Sevy was looking for $5.25 million.
It might seem like a minuscule amount to argue over, especially for the Yankees, but it’s significant considering the long-term effects it could have on his arbitration raises over the years.
All three starting pitchers who went into arbitration hearings so far have won their cases. Those three are Gerrit Cole: $13.5 mil over $11.425 mil; Trevor Bauer: $13 mil over $11 mil; and Alex Wood: $9.65 mil over $8.7 mil.
Cole and Bauer each received approximately an 80% raise over their arbitration-eligible years. So, applying that to Sevy, we can look at what his contracts would have looked like based on if he won or lost his hearing.
So, if Severino had won his hearing and got $5.25 mil this season, he could have earned roughly:
2019: $5.25 mil
2020: $9.5 mil
2021: $17.0 mil
2022: $30.6 mil
Total: $62.3 mil
If Sevy had lost his hearing and got $4 mil this season, he could have earned approximately:
2019: $4.4 mil
2020: $7.9 mil
2021: $14.3 mil
2022: $25.7 mil
Total: $52.2 mil
Based on my calculation, the Yankees actually got a steal with this extension. Even if Sevy had lost his hearing, he would have earned roughly $52.2 million over the next four years. If he had won, he would have earned roughly $62.3 million over the next four years. Instead, he will earn $40 million over the next four years, with the possibility of a fifth year totaling $52.25 million.
Aaron Nola of the Philadelphia Phillies is in the same position as Severio and just received a four year, $45 million deal, with a fifth-year club option that could push the total to $56.75 million.
The Yankees got a really good bargain, assuming Severino is able to return to form in 2019. So, why would he seemingly take such a discounted deal?
Well, for one, it’s guaranteed money and security. Sevy is now guaranteed to get $40 million, which wouldn’t be possible if he got injured. No matter what, he gets that money.
And the other reason is a little more strategic on his part. In December 2021, the current Collective Bargaining Agreement will come to an end. The way free agency has played out this offseason, it’s very possible we see a strike and a work stoppage. Sevy’s new contract extension is front-loaded. He will receive $24.25 mil of the $40 mil guarantee before the current CBA ends. This ensures that even if there is a strike, Sevy will get the majority of his money.
All in all, it’s a steal for the Yankees and security for Luis Severino. I’d call this a win-win for both sides and I’d call it a win for the fans as well, as the Yankees have now locked up their ace for the next half-decade.