February 4, 2010

Ahead in the Count

Revising Player Contract Valuation, Part 3

by Matt Swartz

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In the first two parts of this series, I explained my new approach to contract valuations and whether MORP should be linear with respect to WARP. Basically, this entailed asking the question of whether Matt Holliday, perhaps a six-win player, could be just as easily replaced by signing two three-win players or three two-win players. The issue is roster space and playing time. The alternative argument to doing MORP linearly is that a team can sign Holliday and concentrate all six of those wins on one spot of the diamond, and then they could improve themselves more by filling their other openings with decent players as well.

In this article, I explain that teams who do sign free agents have enough flexibility and enough openings that this is not a binding constraint-teams can improve themselves with a series of decent players, or going for broke on one spot. First I will show that the teams who signed big-ticket free agents in the 2009-10 offseason had enough openings that they had valid alternatives to improve their team similarly. Then I will briefly go through how competitive teams who did not sign big-ticket free agents improved their teams, and it will become more apparent that most teams do not have a roster full of players who are above replacement level, and this means that this "capacity constraint" of roster spaces in non-binding; in other words, even most very good teams have a number of areas where they could improve on replacement-level talent.

Let's begin by looking at the three big-ticket free agents this offseason and the three teams that they signed with in detail. I will discuss the openings that each of these teams had, and how they could have achieved a similar improvement differently.

Cardinals Sign Matt Holliday for Seven Years, $120 Million

The Cardinals had a giant vacancy in left field, which Holliday had filled before free agency. Holliday may be worth as much as six wins over replacement, as he has WARP3 totals of 7.8, 6.2, and 6.7 the last three years. Although the Cardinals are arguably above replacement level in the rest of their lineup, they had little depth in the rotation behind Chris Carpenter, Adam Wainwright, and Kyle Lohse. They signed Brad Penny, who may provide 1-2 wins above replacement. They seem inclined to stick with the back end of the bullpen comprised of Ryan Franklin, Jason Motte, Kyle McClellan, and Dennys Reyes, but with their track records, none of these four seem likely to put up a FRA far below the 4.50 approximation of replacement level for relievers mentioned in the second part of this series. Between the opening in left field, the two openings in the rotation, and several high-leverage roles in the bullpen, the Cardinals had as many as seven spots at which they could have improved upon replacement-level talent.

They added about 7-8 wins with Holliday and Penny, filling two of their vacancies. They will pay $24.5 million this year for those two players, but much of the latter portion of Holliday's contract is really being paid for now, in the sense that he would not be getting $17 million per year for his age-36 season if he was not offering his age-30 season for the same price as part of a package deal. More specifically, not even Scott Boras would pretend that Matt Holliday is worth $17 million in 2016, but the Cardinals anticipate that they are getting more than $17 million of value in 2010 from Holliday. (This is effectively the baseball labor market's way of building an effective loan from the player who won't use all that money any time soon to the team who could use it to make payroll now.) What this all means is that even though Holliday and Penny are getting paychecks that total $24.5 million this year, the real economic cost of this year is more than that.

The Cardinals had other opportunities to improve their team similar to the options they selected. They could have signed Johnny Damon to play left field for probably about $7 million (or less, if you believe the current rumors), adding about two wins above replacement level instead of Holliday's six. Instead of only signing Brad Penny to their rotation, they could have re-signed Joel Pineiro (at two years, $16 million) as well, thereby possibly adding another two wins instead of using Mitchell Boggs or Blake Hawksworth. They could have signed Jose Valverde for two years and $14 million instead of letting the Tigers do so, and followed up with Billy Wagner at the one-year, $7-million deal that the Braves signed him for; that's a pair of relief pitchers who would be likely to add a couple wins. Although they would have to surrender their first- and second-round picks for Valverde and Wagner, they would have recovered two picks for Holliday and ended up in the same spot. The cost for Valverde, Wagner, Pineiro, and Damon would have been $29 million, more than the $24.5MM they did spend, but not when you consider the hidden cost of guaranteeing Matt Holliday six extra years. The six wins from Holliday could have been achieved by Valverde, Wagner, Pineiro, and Damon at about the same economic cost, implying that the Cardinals did not and should not have paid a premium on a per win basis.

Mets Sign Jason Bay for Four Years and $66 Million

The Mets had a lot of work cut out for them this offseason after falling from playoff contention and losing 92 games in 2009. They had a number of replacement-level players in key spots, and had to pick a few areas to upgrade. Left field was clearly an area where they lacked a valid alternative, and therefore added Jason Bay for four years at $66 million. At catcher, the Mets have signed a couple of backup options, but no one above replacement level; they're still effectively looking for a starting catcher. They have Daniel Murphy available to start at first base if they would like him to, but they have been looking at first-base options throughout the offseason. In their rotation, the Mets have Johan Santana on top, followed by Mike Pelfrey, John Maine, and Oliver Perez. All four of these players are above replacement level, but the Mets have been looking for a solid fifth starter due to inadequate options above replacement level. In their bullpen, the Mets have two strong options in Francisco Rodriguez, Pedro Feliciano, and decent guys like Sean Green could be valuable options in middle innings, but the Mets certainly could have added a couple other high-leverage options.

In fact, on top of than Bay, the Mets did add some options in the pen with Kelvim Escobar and Ryota Igarashi. However, they have not yet upgraded at catcher, first base, second base, and starting pitcher, and may not do so despite an abundance of rumors about improvements in each of those areas. Instead of signing Bay and getting about four wins from his production, the Mets could have spread that around by adding Gregg Zaun, Adam LaRoche, and Johnny Damon to fill their lineup more evenly, adding about one win at catcher, another 1-2 wins at first base, and another two wins with Damon. The cost of Zaun was $2.15 million, LaRoche got $5.5 million, and Damon could probably be had for about $7 million (or less). The cost of these three players would be $14.65 million instead of $16.5 million per season, and the Mets would have avoided committing to Bay for 2011-13. The Mets would have added at least as many wins as Bay adds, would not have cost them a draft pick like Bay did, and would have still given them the option of improving in the rotation and second base if they were inclined to do so later.

Red Sox Sign John Lackey for Five Years, $82.5 Million

Prescribing a better off-season plan for the Red Sox is a tough thing to do, because they got such incredible bargains on a strong roster, building their defense up while also adding some run prevention on the mound with their signing Lackey. However, I have tried my best to come up with a decent plan that would be as good.

The Red Sox had openings on the left side of their infield, although their third-base opening was not clear until later in the offseason, as Mike Lowell turned out to be injured. They also needed an outfielder to complement Jacoby Ellsbury and J.D. Drew, replacing the departing Jason Bay. The Red Sox decided to shift Ellsbury to left field, but still could have left him in center field had they found a better deal. The Red Sox had a strong bullpen, and a pretty strong rotation, but felt like adding another starter was their best bet. The Red Sox had four main areas where they felt an upgrade was most important: shortstop, third base, outfield, and starting pitcher. They filled these with Marco Scutaro, Adrian Beltre, Mike Cameron, and John Lackey. These players probably add three, three, two, and four wins, respectively, for a total of twelve wins added above leaving their team as it stood in November.

As the Red Sox were one of the rare teams to fill all of their openings, there is not an obvious solution that adds twelve wins, but they could have Randy Wolf and Chone Figgins instead of Lackey and Beltre, presumably adding about the same number of wins (and still consistent with their defensive plan) and paying $29.75 million over three years for Wolf, and $36 million over four years for Figgins. The cost in 2010 would have been about $17.75 million this year, which is approximately what they are spending on Lackey alone, and surrendering one draft pick either way. Of course, Wolf's and Figgins' deals are not exactly short ones, so this is may or may not have been enough to match their production even if it was about $10 million cheaper.

Looking at the three biggest deals of the off-season, we see that teams did not really need to pay a premium, and two of the three teams that signed them have several remaining openings this late in the off-season. Now, rather than go through all 27 teams including some teams without playoff aspirations at all, I will show how a few competitive teams upgraded a little at many positions rather than going the route of the Cardinals and Mets (and somewhat the Red Sox as well) of upgrading a lot at few positions.

Phillies: If the Phillies had just kept their roster as it was in the beginning of the offseason, they would have definitely had room for John Lackey in the rotation. Their rotation was set to be filled by Cliff Lee, Cole Hamels, Joe Blanton, J.A. Happ, and either Jamie Moyer or Kyle Kendrick. It is tough to see Moyer or Kendrick ending up posting better than a 5.50 FRA, so the Phillies could have upgraded with John Lackey which would have added about four wins. Instead, the Phillies opted to improve their rotation by 1-1.5 wins by swapping out Cliff Lee and bringing in Roy Halladay, while keeping the back four intact. They also added Placido Polanco at third base. This added another couple wins over any notional replacement-level option. The Phillies also added Danys Baez and Jose Contreras to fill out the pen, probably adding about a win over what they had. Thus, the Phillies spread their four- or five-win improvement across Polanco, Halladay minus Lee, Baez, and Contreras rather than inking John Lackey. Even after all the upgrades, the Phillies still have room for another small upgrade in the rotation if they want to. Both the big-ticket free agent approach and the Phillies' small series of upgrades approach are valid, but the Phillies opted to avoid having many replacement level players in key roles.

Brewers: The Brewers exemplified the 'lots of small upgrades' model this offseason, upgrading slightly at catcher (Zaun), center field (adding Carlos Gomez to the mix), in the pen (re-signing Trevor Hoffman and adding LaTroy Hawkins), and in the rotation (bringing in Randy Wolf and Doug Davis). Between these six players, the Brewers probably added seven wins, more than any single free agent on the market would have added. Despite the lack of new four-year deals or eight-figure salaries (just barely), the Brewers still didn't exhaust all of their openings, as they have room to improve in the bullpen if they want to later on.

Angels: The Angels certainly could have added Holliday with all the money they spent this offseason, and they certainly could have slotted him into their outfield nicely. However, the Angels added Bobby Abreu, Hideki Matsui, Joel Pineiro, and Fernando Rodney instead, generating at least six wins of production at a cost of about $28.5 million this season, but with no obligations past 2011. As mentioned above, there is a lot of implicit cost that comes with signing Matt Holliday to a seven-year deal, and the Angels may have come out about evenly.

Mariners: Jack Zduriencik has had a busy offseason, upgrading his team enormously. The Mariners managed to upgrade across the board in small increments. Not a superstar by any means at first base, Casey Kotchman still represents a likely improvement over filling the position internally. Zduriencik re-signed Jack Wilson to play shortstop as well, who was somewhere between 14 and 27 runs above average depending on which defensive metric you employ. The M's also added Milton Bradley via trade, re-signed Ken Griffey Jr., traded Brandon Morrow for Brandon League, and traded a trio of prospects for Cliff Lee. These moves probably added about fifteen wins beyond what they would have won had they returned in 2010 only with players still under contract at the end of 2009. However, with the exception of the King Felix extension (which does not affect 2010), they did not give away any deal more than four years, and the only eight-figure salary they added led to a subtraction of another eight-figure salary in the process (Bradley for Silva). Certainly, the Mariners spent some money this off-season, but they did not add a big-ticket free agent to do so.

Summary

Above, we see three teams that upgraded by signing free agents to five-year deals (or more) and four teams that upgraded by making a series of smaller moves. Even the teams that added a lot of non-elite players still have some room to improve their pitching, which further illustrates the point that teams really do have a large number of openings going into an offseason that could be filled with a mixture of a superstar with replacement-level players, or by a series of players that are average of slightly above. The above discussion of seven teams in win-now modes illustrates the point that teams can really go either direction. There are enough openings on most teams to allow that. Although the argument that teams only have so many roster spots could justify a premium on superstars in some contexts, there just isn't a binding capacity constraint on the vast majority of major-league rosters. Therefore, it is my belief that MORP should be a linear function of WARP, as teams can upgrade a little at several positions or a lot at one position and still have room to spare.

Matt Swartz is an author of Baseball Prospectus. 
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