This Time Around, Giants Play It Smart on Free Agent Pitching Market
by David Golebiewski on Dec 28, 2008 7:53 AM PST
in Transaction Report
13 comments
Wading into the free agent pitching waters is just about the most treacherous activity that a team can undertake. There are certainly some bargains to be had, but the history of lengthy, exorbitantly-priced contracts for the most coveted arms on the market is mixed at best.
By definition, a free agent has accumulated at least six years of service time at the major league level, meaning that his days of making less than his fair market value are over. Add in the injury and attrition rates for pitchers and the uncertainty of projecting player performance more than a few years out, and you have a recipe for some expensive mistakes.
To get an idea of the return on investment that clubs have been getting from free agent hurlers, let's take a look at the pitchers who received multi-year deals during the 2006/2007 offseason and how their level of performance stacks up to their salary.
To do this, we can calculate a pitcher's Wins Above Replacement (WAR) and then convert that to a salary figure. For the purposes of this article, I'm going to utilize the scale used at FanGraphs: one free agent WAR was valued at $4.1M in 2007 and 4.5M in 2008. Salary information was obtained either from MLB.com or Cot's Baseball Contracts. The player's real salary earned will be called "actual salary" while the player's salary based on their performance will be called "earned salary." For Japanese players, I have decided to pro-rate the posting fees. For instance, Boston paid about $51.11M to acquire the rights to Daisuke Matsuzaka and sign him for six years. I will assign an additional $8.52M per year on top of Matsuzaka's salary (51.11 divided by 6).
2006/2007
Miguel Batista: 3 years, $25 million
2007 actual salary: $5.5M
2007 WAR: 1.69 (4.1M per win) = $6.93M earned
2008 actual salary: $9M
2008 WAR: -0.93 WAR (4.5M per win) = -$4.19M earned
TOTAL: $14.5M actual salary, $2.74M earned salary, -$11.76M
Adam Eaton: 3 years, $24.5 million
2007 actual salary: $6.9M
2007 WAR: -1.01 WAR (4.1M per win) = -$4.14M earned
2008 actual salary: $7.64M
2008 WAR: 0.25 WAR (4.5M per win) = $1.13M earned
TOTAL: $14.54 actual salary, -$3.01M earned, -$17.55M
Kei Igawa: 5 years, $20 million
2007 actual salary: $4M
2007 WAR: -0.65 WAR (4.1M per win) = -$2.67M earned
2008 actual salary: $4M
2008 WAR: 0.1 WAR (4.5M per win) $0.45M earned
PLUS $5.2M post fee X 2 = $10.4M
TOTAL: $8M actual salary (+10.4M post) = $18.4M, -$2.22 earned salary, -$20.62M
Ted Lilly: 4 years, $40 million
2007 actual salary: $5M
2007 WAR: 2.56 WAR (4.1M per win) = $10.5M earned
2008 actual salary: $7M
2008 WAR: 1.98 WAR (4.5M per win) = $8.91M earned
TOTAL: $12M actual salary, $19.41 earned salary, +$7.41M
Jason Marquis: 3 years, $21 million
2007 actual salary: $4.75M
2007 WAR: 0.69 WAR (4.1M per win) = $2.83M earned
2008 actual salary: $6.38M
2008 WAR: 1.47 WAR (4.5M per win) = $6.62M earned
TOTAL: $11.13M actual salary, $9.45M earned, -$1.68M
Daisuke Matsuzaka: 6 years, $52M
2007 actual salary: $6M
2007 WAR: 2.39 WAR (4.1M per win) = $9.8M earned
2008 actual salary: $8M
2008 WAR: 2.54 WAR (4.5M per win) = $11.43M earned
PLUS $8.52M post X 2 = $17.04M
TOTAL: $14M actual salary (+17.04M post) = $31.04M, $21.23M earned, -$9.81M
Gil Meche: 5 years, $55M
2007 actual salary: $7M
2007 WAR: 2.95 WAR (4.1M per win) = $12.1M earned
2008 actual salary: $11M
2008 WAR: 3.86 WAR (4.5M per win) = $17.37M earned
TOTAL: $18M actual salary, $29.47M earned, +11.47M
Jamie Moyer: 2 years, $11.5M
2007 actual salary: $6M
2007 WAR: 0.8 WAR (4.1M per win) = $3.2M earned
2008 actual salary: $5.5M (with innings-based incentives)
2008 WAR: 2.15 WAR (4.5M per win) = $9.68M earned
TOTAL: $11.5M actual salary, $12.88M earned, +1.38M
Vicente Padilla: 3 years, $33.75 million
2007 actual salary: $9M
2007 WAR: 0.32 WAR (4.1M per win) = $1.31M earned
2008 actual salary: $11M
2008 WAR: 0.67 WAR (4.5M per win) = $3.01M earned
TOTAL: $20M actual salary, $4.32M earned, -$15.68M
Jason Schmidt: 3 years, $47 million
2007 actual salary: $12.5M
2007 WAR: 0.06 WAR (4.1M per win) $246K earned
2008 actual salary: $12M
2008 WAR: DNP
TOTAL: $24.5M actual salary, $246K earned, -$24.254M
Jeff Suppan: 4 years, $42 million
2007 actual salary: $6M
2007 WAR: 1.96 WAR (4.1M per win) = $8.04M earned
2008 actual salary: $8M
2008 WAR: -0.3 WAR (4.5M per win) = -$1.35M earned
TOTAL: $14M actual salary, $6.69M earned, -$7.31M
Woody Williams: 2 years, $12.5 million
2007 actual salary: $6M
2007 WAR: -0.61 WAR (4.1M per win) = -$2.62M
2008 actual salary: $6.5M
2008 WAR: DNP
TOTAL: $12.5M actual salary, -$2.62M earned, -$15.12M
Barry Zito: 7 years, $126 million
2007 actual salary: $10M
2007 WAR: 1.05 WAR (4.1M per win) = $4.31M earned
2008 actual salary: $14.5M
2008 WAR: 1.26 WAR (4.5M per win) = $5.67M earned
TOTAL: $24.5M actual salary, $9.98M earned, -$14.52M
2006/2007 FA TOTALS: $226.1M spent thus far, $108.57M earned, - $117.53M
Average return on investment: 48% of fair market value (collectively, teams got less than half of their expected return on free agent starting pitchers signed to multi-year contracts during the 2006/2007 offseason: $108.57M earned/ $226.1M actually paid out)
The 2006/2007 offseason may have been a particularly poor crop ( it will only get worse once the back-loaded portion of some of these pacts kick in), and far fewer multi-year deals were handed out last offseason. Perhaps teams started to get the picture that dishing out huge dollar amounts to the Jeff Suppans and Vicente Padillas of the world is a pretty bad idea; those sorts of players constitute marginal upgrades relative to the additional cash that must be spent.
Plenty of teams got burned during the '06-'07 offseason, when money was handed out like water. But no team was scorched as badly as the San Francisco Giants, who dished out unfathomable amounts of cash to Barry Zito, despite his modest peripherals. While GM Brian Sabean and the Giants will have to live with the consequences of that colossal contract for the next five seasons, it does at least appear as though San Francisco's front office has learned its lesson.
Consider San Francisco's recent signing of Randy Johnson. Johnson is 45 years of age, but he remains one of the more effective starters in the National League. Though he no longer pumps mid-90's gas, The Big Unit still managed to punch out 8.46 batters per nine innings in 2008, with just 2.15 BB/9. His 3.76 Fielding Independent ERA (FIP) ranked 16th among National League starters.
In 2009, the Marcel projection system forecasts Johnson to toss 170 innings with a 4.11 FIP. That projection was made before Johnson, a flyball pitcher, shifted from Arizona's Chase Field to AT&T Park. Let's knock his FIP down to an even four. In 170 innings, Johnson would surrender about 75.6 runs (4 FIP/9 X170 IP). A replacement-level starter, with a FIP of 5.50, would surrender about 91.2 runs in 150 innings. We'll cap the replacement-level starter's innings at 150 on the assumption that such an ineffective pitcher would not be kept on the mound beyond that point. The additional 20-inning gap will be filled by a replacement-level reliever, with a 4.75 FIP. The replacement-level reliever would give up about 10.6 runs. So, combined, we have..
Randy Johnson: 75.6 runs allowed in 170 IP
Replacement-Level Starter: 91.2 runs allowed in 150 IP
RL reliever: 10.6 runs allowed in 20 IP
Overall, the replacement level starter and reliever would surrender 101.8 runs. Subtracting that number from Johnson's 75.6 runs allowed, we find that Johnson projects to be about 26.2 runs above replacement level. Using the concept that 10 runs equals a win, Johnson is valued at 2.62 Wins Above Replacement (WAR). You'll recall that one WAR was valued at about $4.5 million last offseason. There had been a rate of inflation from one season to the next of about 10% over the past few years, but that trend does not seem to be continuing thus far. Let's say there's a little more than 5% inflation from last offseason's WAR figure, making our new going rate for one WAR about $4.8M.
That would make Johnson's contribution worth about $12.6 million. The Giants managed to snag The Big Unit for 1 year at just $8 million, meaning the surplus value of the deal (the amount that Johnson's level of performance exceeds his actual salary) projects to be about $4.6 million.
Major league clubs (excluding the Yankees, who are basically on their own revenue curve) seem to have changed the way in which multi-year contracts are handed out to starters. A higher degree of caution is being used after the '06-'07 spending spree that left many with a financial hangover- according to MLB.com's free-agent tracker, only two starters who were true free agents were given multi-year contracts last winter (Hiroki Kuroda and Carlos Silva).
The Giants are certainly an example of this trend. After handing over Fort Knox to Zito, they made a much less expensive, lower-risk signing in Johnson. Granted, there are some inherent risks with a guy in his mid-40's with knee and back issues, but much of that risk is negated by the fact that he's only under contract for one season. San Francisco figures to get one of the better starters in the league for less than he's worth in 2009, with none of the gambling associated with a long-term commitment.
A Journalism student at Duquesne University, David Golebiewski is a contributing writer for Driveline Mechanics, Fan Graphs and Inside Edge Scouting Services. Contact David via email at golebie1029@duq.edu or judidave87@msn.com
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I still think your inflated 2009 value for each WAR is high.
That said, I love your analysis of the 06-07 contracts. It’s funny how good a deal Gil Meche was when that was probably one of the most derided deals at its time.
Space.
It's a problem we face.
So we never go anywhere.
We just stay in one place.
by hazel on Dec 28, 2008 9:09 AM PST reply actions 0 recs
It could be a bit high
but we might need to see a few more signings before that can really be determined. Even if we assume absolutely no inflation, Johnson is still worth $11.8 million for 2009. So the point of him being a bargain with few strings attached still stands.
Thanks for your input!
by David Golebiewski on Dec 28, 2008 9:32 AM PST reply actions 0 recs
including posting fee
I don’t think including the posting fee is “fair” on evaluating the Japanese “Free Agents” they weren’t truly free agents and the posting fee is merely cost of doing business, it doesn’t go to the player.
That said their salary is deflated because of the exclusive negotiating rights, however, I think their salary is deflated less than the posting fee.
Either way, evaluating these players is fundamentally different from the other FA of the 2006-7 class.
by Christopher Taylor on Dec 28, 2008 5:04 PM PST reply actions 0 recs
He's calculating return on investment.
That money was spent on the player even if it didn’t go to him personally.
Space.
It's a problem we face.
So we never go anywhere.
We just stay in one place.
by hazel on Dec 31, 2008 6:14 AM PST up reply actions 0 recs
Jason Schmidt!
HAHA Dodgers
I Don't Tolerate Intolerance!
Jeremy Affeldt Ready To Make His Father Proud
by Giant among Angels on Dec 28, 2008 7:12 PM PST reply actions 0 recs
:( Zito
I Don't Tolerate Intolerance!
Jeremy Affeldt Ready To Make His Father Proud
by Giant among Angels on Dec 28, 2008 9:33 PM PST up reply actions 0 recs
Never before have I seen such excellent back to back comments.
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by Kyle Boddy on Dec 29, 2008 9:17 AM PST up reply actions 0 recs
Daisuke Matsuzaka: 2008 WAR: 2.54 WAR
Gil Meche: 2008 WAR: 3.86 WAR
i wish life actually worked like this; i’d have made a lot more money this year.
by results disoriented on Dec 28, 2008 9:39 PM PST reply actions 0 recs
$13MM is no bargain
Randy Johnson can earn an additional $5 million in performance bonuses next season.
by Cainer on Dec 29, 2008 12:32 PM PST reply actions 0 recs
2.5M award bonuses / 2.5 performance bonuses
What those specific terms are? No one knows yet. Personally I am hoping he does well enough to earn those bonuses.
I Don't Tolerate Intolerance!
Jeremy Affeldt Ready To Make His Father Proud
by Giant among Angels on Dec 29, 2008 4:36 PM PST up reply actions 0 recs
Also, if he gets hurt for part of the year he could still pitch very well,
and not make it to the thresholds for those bonuses.
Space.
It's a problem we face.
So we never go anywhere.
We just stay in one place.
by hazel on Dec 31, 2008 6:16 AM PST up reply actions 0 recs
48%
So signing a high-priced free agent pitcher is roughly a coin flip.
by StickRat on Dec 31, 2008 3:43 PM PST reply actions 0 recs
not quite
What that 48% means is that collectively, teams have received 48 percent of the production that they have paid for to this point. As a whole, these pitchers have given performances that equate to a salary that is less than half of what they have actually been paid.
Take Jeff Suppan, for instance. He has been paid $14 million combined over the past two seasons, but his level of production was only worth $6.69 million. Dividing his production level ($6.69M) by his actual pay ($14M) shows that the Brewers have received roughly 47.8% of the production that they paid for.
by David Golebiewski on Dec 31, 2008 4:20 PM PST up reply actions 0 recs
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