I'd love to see a survey about shopping for results in the middle of the market; my off the cuff recollection is that such contracts are usually pretty poor bets to work out, but that may well be the freshness of the Sale extension and Story contract (168 and 140 million) being fresh in my mind.
I'd always preferred a go big or go home approach but I know full well those contracts are no guarantee either. David Price's contract is usually considered bad even though he went 46-24 in Boston with a 118 ERA+ and played a huge part in a World Series and two more playoff appearances. Hell, $217 million might look good just knowing you'd get a starter to throw 230 IP again like Price did in 2016.
I think the largest risk for FA contracts is really the Sale type of outcome in a general sense. Meaning, a situation where you have a significant % of the budget tied up for multiple future years, and a huge question mark as to the player's ability to take the field and/or their effectiveness when they get there. Because they're also one of the 26/40 at some point.
Consider the last few years.
As an example of the general concept - a 75%-career-numbers Sale would have been an asset and the trickle-down/push-back effect on the pitching staff could have made them competitive at the '22 or '23 trading deadline. But meanwhile (assuming you can't trade a player like that) you have to hold a slot open for him and give him a chance to win his job back. When that gets compounded by random injuries. . .
Contrast that to long-term guys who have a clear full-season injury you can plan around. Or even a clear half-season injury before the season begins. E.g., Sale was expected back (and came back) from TJS in mid-to-late 2021. So you go out and get a 1 year starter with some pen experience (Richards).
Story is particularly bad luck in that he's suffered serious injuries after the season began or the FA window had closed: broken hand on pitch in July 2022, elbow toward end of offseason 2022-3, shoulder injury 10 games into 2024.
You can plan for that with moderate AAA backup, but when guys like Chang also go down. . .