Did Logan Webb give the SF Giants a hometown discount with his extension?

Perhaps, the only good news of the weekend came on Friday morning when it was announced that the SF Giants signed Logan Webb to a five-year, $90 million extension. It is a deal that gives both Webb and the Giants cost certainty over the next five seasons, but did the 26-year-old give San Francisco a hometown discount?

Did Logan Webb give the SF Giants a hometown discount with his extension?

The short answer is no but why does it feel like a discount? It probably boils down to how extensions that buy out remaining arbitration seasons typically work. Webb's deal has an average annual value of $18 million per season beginning in 2024, but that is not what he is set to earn each year. The Giants listed the specifics of the deal as soon as it was announced:

When a player signs a deal that buys out his remaining arbitration seasons, arbitration is, in some sense, still in effect. Webb's deal is a perfect example of that. You might already know that arbitration is a process by which players earn raises based on performance and service time.

Sometimes, players and teams need a third-party arbiter to hammer out the final details. It is a gradual process, but the process puts a hard ceiling as to how much players can typically earn. Webb is earning $4.6 million in 2023 in his first turn through arbitration.

That is a huge bargain for a pitcher who has been one of the best over the past couple of seasons. If he were to go through arbitration over the next couple of seasons, he likely would have earned in the neighborhood $8 million and $12 million in 2024 and 2025, respectively. His extension captures those amounts exactly.

With his extension, the arbitration framework is still in place and it is a standard practice. However, the right-handed hurler gets cost certainty over the next five seasons, so even if his performances dips, he is guaranteed to reel in a substantial sum.

Going back to Webb's average annual value of $18 million, that feels like a steal for a pitcher of his caliber. By the third and fourth years of his new contract, the five-year veteran is slated to earn $23 million and then $24 million in the fifth seasons.

The deal recognizes that Webb's market value, or actual value, is likely in the neighborhood of $23 million currently based on recent performance. However, he does not reach that amount until the third year of the deal. This just goes back to the concept that these types of extensions do not go straight to market value in the first season.

While Webb's deal feels like he gave the Giants a hometown discount, the righty likely was not going to earn anything more than what he signed for over the next five seasons. With that being said, the case could be made that Webb loses a potential opportunity cost had he not signed the extension.

The veteran starter would have been able to enter free agency after his age-28 season in 2025. Youth would have been on his side and he might have been able to command a contract in excess of five seasons. Teams do not like to go beyond five years with pitchers often, but an exception could be made if a pitcher is under 30-years-old like Webb.

Instead, Webb signed an extension that keeps him in a Giants uniform through his age-31 season. The righty will still be able to land a second large payday if he continues to pitch like he has since the start of 2021.

The good news is that Webb will remain with San Francisco for a long, long time. The Giants' roster has a continuity problem, but hopefully, that begins to change if some of their top prospects develop into impactful players.