We saw it coming, but we didn’t see that coming. Not that contract. Not like that.

The Royals were linked to Ian Kennedy early in free agency, and often. The frequency increased at the end of last week, and as we’ve learned so often during the Hot Stove, when Rosenthal and Heyman are tweeting about it, things are percolating. So it wasn’t exactly a surprise when the deal was broken on Twitter early Saturday. What was surprising was the length and dollars of the contract.

Five years? Huh? $70 million? What?

There’s a lot of collateral to unpack in this contract. For starters, there’s a reported opt out after two seasons.

The opt out is a new tool clubs have been utilizing on the larger free agent deals. I realize the teams carry most of the risk on the opt out. If a player is good, they will pull the cord and reenter the free agent market much earlier than the team would have liked. If the player underperforms in the first couple of seasons, they will be more likely to bypass the opt out and could potentially saddle a team with a horrendous contract.

While the risk is certainly present in these opt outs, it’s also easy to see how teams like the Royals are approaching them. As stated ad naseum this winter, the core of the Royals will hit the free agent market following the 2017 season. With the window of contention so obviously open the next two seasons, it’s easy to understand the reasoning of giving the opt out for Kennedy at that moment. The hope is, Kennedy will pitch well enough for the Royals during their window that he will exit to give the Royals more flexibility to rebuild. Two things to remember are: His agent is Scott Boras and somehow, someway Boras always manages to find a better deal for his clients. And two, it’s folly to try to predict how a player and the market will react. I mean, Kennedy was saddled with a qualifying offer this year. If there was ever a pitcher who would take the $15.8 million, it would have been Kennedy. There were questions that the Padres would even give it to him, because the threat of him accepting was real. Instead, he has a potential $70 million payday.

This opt out is going to loom large, because the projections are… Unkind. Not so much for the first two years of the contract. It’s the final three that will keep Royals executives up at night.

Kennedy has averaged 1.6 fWAR over the last three seasons. As as starting pitcher the last six years, he’s averaged 2.4 fWAR. He’s compiled two strong years as as starter, a couple that were kind of meh, and two that were not very good at all. When you view his Steamer projection at FanGraphs, a 2.0 fWAR makes a lot of sense.

Using FanGraphs projected value of fWAR at $8 million, it’s easy to see how this deal falls apart after the 2017 season.

KennedyValue

Based on the projections, the above table suggests a fair value for Kennedy would have been around three years and $40 million. But come on… Free agency and fair value are rarely synonymous.

As Matt Jackson wrote at Beyond the Boxscore, it’s easy to see how Kennedy fits into the second tier of free agent starting pitchers. His track record compares favorably with the subset of starters who received five year deals this winter. If I were to guess as to why the Royals went after Kennedy, his durability had to have been a major selling point. Kennedy has made 30 starts in each of the last six seasons and has topped 200 innings three times. Despite possessing one of the top bullpens in the game, the Royals value innings from their starters. Who doesn’t? There’s a comfort in knowing you have one (or preferably more) guy who will take the ball every fifth day. The Royals rotation was littered with question marks. It’s strange to say, but Yordano Ventura is still relatively unproven. He was great for the Royals in the last couple of months of the season, but can he be a steady performer for the entirety of the year? Chris Young has stamina issues. This will be Kris Medlen’s first full season since his second Tommy John. And who knows where Danny Duffy will see the majority of his innings. Before Kennedy’s arrival, Edinson Volquez was the only known quantity in the rotation.

The counter argument is that the Royals are paying a high price for mediocrity. Perhaps, but this is the cost of doing business in baseball in 2016. Compare to Jason Vargas a few seasons ago. Vargas was an underwhelming starter who surprisingly signed for four years. I’m certain the Royals extended in that manner to secure what they hoped would be an innings eater at a controlled cost of around $8 million a year. It didn’t work out that way, but it was a gamble worth taking because now that innings eater is averaging around $14 million a year. The Royals can’t go out and sign multiple starting pitchers in an off season, but they can stagger their contracts to alleviate the pain.

The Royals have also had a fairly positive track record on their pitching acquisitions the last couple of years. Maybe that’s due to their ballpark and defense and pitching coach, but you can’t argue against the successes of Volquez, Young, Vargas, James Shields, Ervin Santana, and even Jeremy Guthrie for a time. There are no All-Stars or Cy Young award winners in this bunch, but as we’ve learned, when you built your team on defense and a rock-solid bullpen, you don’t necessarily need those types of pitchers to be successful. Shorten the game, catch the ball, and profit.

There’s also the issue of the Royals losing their first round draft pick by signing a player who declined a qualifying offer. I’ve seen estimates of that pick at around $10 million, so if you like to count every nickel and dime in a deal, that increases the overall expenditure by the Royals, which makes this a less attractive signing. Kennedy doesn’t pocket that money, of course, but the Royals jettison the opportunity by removing the pick from their draft equation. The Royals haven’t done as well in the draft over the last couple of years, but we have seen there are ways to spin those draft picks into players who can help you win a World Series. The Royals are in a position where they probably thought they had a couple of high draft picks (their normal slot, plus their extra pick for when Gordon left via free agency) and now those picks are gone. I’m sure there were several interesting discussions centered around the draft and Kennedy.

Kennedy is good enough he can be a solid mid rotation starter for the Royals in the next couple of seasons. The hope here will be that he pitches well enough to propel the Royals back into the playoffs while the window remains open before choosing to opt out after the 2017 season. Let the Royals take advantage of what should be a couple of remaining solid years in his arm, then let another team worry about his mid-30’s. That sounds like a good deal to me.