This Two Year Contract Extension is an Overpay

Before the 2024 season, the Kansas City Royals signed pitcher Seth Lugo to a 2-year, $30 million contract with a player option for the 2026 season. Lugo went on to have the best year of his career, pitching to a 3.00 ERA (Earned Run Average) in 206.2 innings pitched, placing 2nd in the American League Cy Young voting.

Photo Courtesy of The New York Times

Lugo has been solid this season, posting a 3.46 ERA in 127.1 innings, and on the surface, deserves more than what he's getting. He has the ability to exercise his player option at the end of the season to become a free agent, but the Royals decided to extend him to a 2-year, $46 million contract lasting from 2026 to 2027. I recently made a blog post about why teams shouldn't trade for Lugo if he was put on the trading block, and I'm taking the same stance I had previously. Seth Lugo is currently 35, and his performance will only decrease year to year. His underlying numbers paint a different picture when looking at his surface numbers. He is below average in every Statcast metric possible, the most concerning being his 8.3% walk rate, which has risen from its 5.7% clip last season. A roughly 2.5% change in walk rate isn't much when just looking at it numerically, but in reality, it is a wide gap that made him go from one of the best pitchers in limiting free passes to allowing them at a below-average clip. His strikeout rate of 20.7% is below average, and combined with an allowed hard-hit rate of 45.9%, is pedestrian considering he has a 3.46 ERA on the season. He has a 4.66 FIP (Fielding Independent Pitching) and a .258 BABIP (Batting Average of Balls In Play), which further suggest he's been very lucky this season and is a beneficiary of fortunate batted ball luck.

Seth Lugo's contract extension seems like a desperate play for the Royals, who are always among the bottom of the league when it comes to payroll. He also has a vesting option, which is for $20 million and can be earned if he achieves certain incentives in the two years of the contract.

Projected contract: 2 years, $24.1M

Actual Contract: 2 years, $46M, and $20M vesting option

• https://www.baseball-reference.com/players/l/lugose01.shtml

• https://baseballsavant.mlb.com/savant-player/seth-lugo-607625?stats=statcast-r-pitching-mlb

• https://www.fangraphs.com/players/seth-lugo/12447/stats?position=P