Reds ink Johnny Cueto to four year extension

The deal 4/$27mil and will cover three arbitration and a year of free agency. The contract spans his age 25-28 seasons.

During the current arbitration hearings, Cueto wanted $3.9mil and the team was offering $3mil. So let’s split that and say $3.45mil. Using the 40/60/80 scale, he would figure to earn about $5.5mil in 2012 and then about $10mil in 2013 before entering free agency. So let’s analyze the first three years of the deal. If you average out the four years, Cueto will be paid $6.75mil per season. Over the first three years of the contract, that’s $20.25. Estimating what he would have made through arbitration, Cueto otherwise would have been paid about $19mil. So the Reds, unless Cueto has some phenomenal seasons and really increases his value, are not saving money with this deal through his first three seasons.

However, the savings will come in the fourth year, the free agency year. Johnny Cueto will be a 28 year old starting pitcher on the open market, who would have made around $10mil in his last arbitration deal contract. Assuming he is a good pitcher come three years from now, his price will be high. I think it will be safe to say he will make at least $10mil+. So the Reds will be saving at least four mil alone that season. Considering the first three years are practically a wash, I like this deal for Cincinnati. Sure, they are not saving now and in the near future, but they aren’t overpaying either. So it will be worth it come year four when they do make a big saving on a good pitcher.

Even more so, I like the deal because of the timing. Johnny Cueto was one of my favorite prospects coming out of the minors. But through his first two seasons, he never hit his potential. I blame Dusty Baker for bumping his innings from 83 in 2007 to 174 in 2008. That’s another story though. Still, Cueto was an okay reliever and finally seemed to emerge last season. He lowered his BB and HR rate, as well as his FIP. The result was a career high 2.5 WAR, which IS good for a 24 year old pitcher. As he matures, there is a real possibility Cueto develops into a front line starting pitcher. If that’s the case, $6.75mil a small price to be pay for big performance. You can bet your ass that if Cueto does even better in 2011, then he would have commanded more money than he did this off-season. If Cueto never fully develops, $6.75mil would be his fair market value. However, if he does put it all together, $6.75mil will be a bargain. And remember, they still have him signed for a year of free agency.

So, good for Cincy.

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