Oswalt signs for big money

The mid-market Houston Astros tried to guarantee themselves at least one win per five games vs. the Reds over the next five years yesterday by signing Roy Oswalt to a huge 5-year, $73 million contract extension that will take him through his age 34 season. Pretty good birthday present, eh?

Wow. First, a 5-year contract is a mighty impressive...and rather risky thing to give a pitcher. There's no question that Oswalt has been a superb, vastly underrated (outside of the NL Central) pitcher for a lot of years now for the Astronomicals. And he's been as durable as anyone. But pitchers have a way of encountering major injuries and/or rapidly losing effectiveness, and 5 years is a huge commitment. Furthermore, the money is amazing. Joe Sheehan has an excellent article about this in Baseball Prospectus today. Here's an excerpt:

The numbers are staggering: an average annual value of $14.6 million per year, heights not reached by any pitcher in a deal longer than two years since the 2002 Collective Bargaining Agreement increased revenue sharing and investment taxes on payrolls. Those mechanisms have served to make contracts signed before that CBA went into effect--such as megadeals for Kevin Brown, Mike Hampton and Mike Mussina anachronisms. Those three pitchers signed contracts paying more than $14 million per season in the 1998 and 2000 offseasons. In the four offseasons under the new CBA, free-agent pitchers maxed out at about $13 million per annum, with Pedro Martinez setting the pace. The top free-agent pitchers in each year signed deals within a small range of $12 million-$13 million per season.
...snip...snip...
Oswalt's deal dramatically raises the bar for top starting pitchers, setting the price for a top starter on the open market at $15 million per year. Given that the Astros had Oswalt's rights for 2007 for what would likely have been around $13 million (Oswalt is making $11 million in the second year of a two-year, $16.9-million deal) , you can look at this as a four-year, $60-million contract for 2008-2011.

As is the case any time salaries take a big surge forward, this is bad news for a small market team like the Reds. I'm not certain about this, but I believe that Harang may be eligible for free agency after next season, as he's currently in his 5th major league season. Even if he's ours through 2008 (like Arroyo), Harang and pitchers like Lohse will have the opportunity to go through arbitration, which awards salary based on comparable players. This signing could potentially increase the amount of cash the reds have to pay to their pitchers as early as this offseason.

Furthermore, money permitting, the Reds would undoubtedly love to sign a quality free agent starting pitcher this offseason. This signing will absolutely cause an adjustment of perhaps $1-2 million in the going rate for high-end starting pitchers, and this will percolate as you move down the ranks of quality free agents. It will be interesting to see what the offseason brings.

In other news...

The Reds have recently signed Jason Johnson and traded for Tim Bausher. I haven't looked at Bausher much yet, but I think the Johnson could do a great job in the #5 hole for the Reds. Potentially a very valuable pick-up. More on him soon.

Also, I'm blissfully ignoring what's happening with the Reds until I do my August recap, which will hopefully be up in the first few days of September (lots of relatives coming into town this weekend, though, so it might be a few days later than I'd like).