Nationals Arm Race

Cliff Lee. Photo: Al Bello/Getty Images

As Cliff Lee continues to dazzle in the post season (his most recent effort being his 8inning, 2hit 13k gem against the most potent offense in Baseball, your NY Yankees), rumors of his purported price tag in the Free Agency market continue to reach spiraling heights.  The most common numbers thrown out start at 5yrs, $25M per.  One author at Forbes thinks he may approach $200M for 6 years combining salary and endorsements.

If you are trying to compare talent to contract value, then you have to start with the highest paid pitchers at current.  CC Sabathia is at $23M/year, Johan Santana is at $22.9M/year on average, and Roy Halladay took a slight discount to sign with Philadelphia (and be able to live in his offseason Odessa home 2 extra months of the year and drive to Spring Training) and is making $20M/year on his new deal.  Clearly, Cliff Lee has shown that he belongs at least at the $20M/year scale.  But how much higher makes sense financially for the signing team?

Forgetting for the moment that payroll means very little to a team like the New York Yankees (unfortunately his likely destination), lets talk about the value of the Free Agent contract and whether a team that gives out a $25M/year contract can ever really get their money’s worth.  Baseball is filled with horror stories of huge FA contracts that went bust.  Names like Zito, Dreifort, Pavano, Neagle, and Hampton fill general managers and fan’s heads with dispair.

How bad were these contracts?  I put together a spreadsheet with every significant starting pitcher FA contract that I could find, then cross referenced it by the Pitcher’s Won/Loss record during the duration of the contract.  See below: the table is sorted in reverse order of $/win.  In addition to the major FA contracts, I also arbitrarily added every “Ace” starter in the league, resulting in names like Lee, Jimenez, Price and Buchholz being in this list despite not being major FA pitchers (yet).  Their inclusion illustrates one of my major conclusions below.

Comment on Won/Loss records; yes I know that individual pitcher wins are not a great indicator of a starter’s worth.  However, they do reasonably indicate over the course of a longer term period the value of that pitcher to a team.  Perhaps a better argument is free agent dollars per quality start (despite the quality start measuring basically a mediocre start of 3ER or less in 6ip or more by a pitcher, it does generally correlate well to team wins andveven to a “real” quality start of 2ER or less in 6IP or more).  At some point I’ll re-run the analysis and count up QS per FA dollar to see how it compares.

Note for the purposes of this argument:

• The Contract total value is averaged over the life of the contract, even if the payments are different during different years.
• The W/L record is for the pitcher over the life of the contract, not necessarily for the original signing team.
• If the contract is current (i.e., runs from 2009-2012) then I’ve only counted the completed regular seasons.
• There are no off-season records taken into play.
• I entered in both Japanese Pitchers (Igawa and Matsuzaka) with massive posting numbers twice; one factoring the posting fee and the other not.  Without the fee Dice-K looks halfway decent but with it he’s overpriced (something all Boston fans probably already knew about their highly paid #5 pitcher).

Conclusions.

– If  you can get 1 win per $1M expended, you are doing about average it seems.  Anything above $1.25M and you are looking at a questionable contract.

– It is difficult to look at any contract below $1M/victory and say that the team made a bad deal.

– The absurdly low $/victory values for David Price and Clay Buchholz demonstrate as clearly as possible the value of the pre-arbitration superstar.  Tampa Bay (who did a similarly shrewd deal with Evan Longoria, buying out the arbitration years and tying the player to the club past the 6-year pre-FA window) now gets Cy Young-quality starts from Price for the next two years at 1/20th his market value.  Buchholz is even more evident; at a pre-arbitration salary of $443,000 for 2010, he went 17-7 and gave the Red Sox #1 starter capabilities.  On the open market he’s worth at least $15M/year at that level of productivity.

– The worst FA contract ever given to a starting pitcher wasn’t one of the aforementioned infamous culprets; it belongs to one Kei Igawa.  The Yankees paid the posting fee of $26M just to negotiate with him, then signed him to a 5 year, $20M contract.  For that outlay of $46M guaranteed, the Yankees have gotten a record of 2-4 over parts of two seasons, and he hasn’t appeared in a MLB game since June of 2008.  Luckily the Yankees can afford it; this kind of FA mistake would cripple a mid-to-small market team for years.

– Jason Schmidt‘s 3yr, $47M deal with the LA Dodgers is the largest $$ bust in terms of a pure FA play, not counting the vagarities of the Japanese posting system.  Schmidt had ironically just finished an incredibly efficient deal with San Francisco, where he went 71-36 over 5 seasons on a $40M contract (resulting in a very good $/win number of $563,380).  Six games into his Dodger career he went onto the DL list with shoulder injuries that eventually cost him the rest of 2007 and all of 2008.  He tried to regroup in 09, failed to make the team out of spring, made a few starts and was back on the DL.  All told, 3 wins in 10 starts for $47M.

– Some of the infamous deals do appear close to the top of this list; Neagle’s $51M for a 19-23 record.  Dreifort’s $55M deal resulting in a grand total of 9 wins and only 26 starts.  Ironically, the highest single season salary was Roger Clemen‘s $28M deal with New York in 2007.  For that money the Yankees got a middling 6-6 record.

– Are there any major FA deals that ARE paying off?  Well, you have to dig deep.  CC Sabathia has won 40 games for the Yankees in the first two years of his $23M/year deal, which is easily the best 9-figure deal.  However, it is early; we need to check back in years 6 and 7 of this deal.  Mussina went 92-53 for the Yankees after he signed his $88M deal in 2001.  Verlander won 18 games this year for his $16M annual salary and looks like a good bet to continue that trend.

– The BEST long term FA deal ever signed has to be Pedro Martinez‘s 6year $92M deal.  He went 117-37 between 1998-2004, won 3 Cy Youngs, had 2 Cy Young runners-up, and in the year 2000 posted an ERA+ of 291, which accounts for the best modern-day single-season pitching performance in the history of the game.

Bringing this back to Cliff Lee; the conclusion is thus; he may earn a $25M/year deal but the odds of his continuing to win 20-22 games/year for the duration of the contract and thus inflating the $/win value will eventually prove that contract to be an albatross (even more so if he misses significant time to injury at some point).

Now that the regular season is over, lets take a look at the opening day payrolls and how the teams finished up:

What we see here is some direct relationship between payroll and performance at the very top and bottom of this table: the Yankees certainly bought their way into the playoffs while the Pirates certainly played their way to the worst record in the league with the lowest payroll in baseball.  But how do you explain the other 28 teams in between?

First lets talk about the high end of the spectrum.  The Red Sox slumped at the end of the season to the 10th best record but were only a game worse than the AL West winning Rangers.  Several high payroll teams (Cubs, Mets, Tigers) continue to show why long term contracts for aging veterans are not the way to win in modern baseball.  Well, unless you’re the Yankees and you buy enough of them to cover for mistakes (see Vazquez, Javier).  The two LA teams are both in the upper ends of the payroll spectrum but faltered this year for different reasons (the Angels with injuries and key FA losses and the Dodgers with ownership ridiculousness).

At the other end of the spectrum, the Padres and Rangers are in the beginning stages of where Tampa and (to a lesser Extent Florida) are now; teams that gutted themselves, developed their teams through superior drafting and player development (even with the Lee trade most scouting pros believe the Rangers still have the best or 2nd best farm system) and kept payroll low.  If you have superior drafting capabilities and develop players, soon you’ll have a good young team, cost contained, that outproduce multi-million dollar free agents.  Also, Kudos to the Atlanta Braves for smartly spending money and continuing to produce quality major leaguers.  A team that spends $84M on payroll certainly can’t complain about being poor, but to produce a playoff success with a young team and with more players in the wings (Mike Minor comes to mind)

A good number of teams fall more or less in line with their payroll productivity.  St. Louis underperformed this year but finished with the 12th best league record and the 12th highest payroll.  Milwaukee, Arizona, Washington, Cleveland, Colorado and Philadelphia all basically finished in line with their payroll output.

However, when a team with the second lowest payroll (Padres) misses out on the playoffs on the last day of the season, arguments for a salary structure in the major leagues basically goes out the window.  Why would you penalize a team for excelling at player development and shrewdness in the amateur market by going to an NFL-esque salary structure?  If the Rays can consistently outperform a higher payroll team like Toronto with more expensive personnel, shouldn’t the message be to teams to get better management and a better plan?  The real lesson learned is that no matter what your payroll, incompetence in the front office will turn a $100M payroll into a poor team (see the NY Mets for the past few years).  Each of the GMS of the teams with the 5 biggest “negative” deltas between payroll and record (San Diego, Texas, Tampa, Cincinnati and Oakland) are on the short lists of anyone’s GM of the year candidates.  Meanwhile, the Executives of the 5 “positive” delta teams (the Mets, Cubs, Mariners, Orioles and Tigers) are being questioned or (in Minaya‘s case) already out the door.

The Yankees continue to spend a ridiculous amount of payroll (at $200M+, that is nearly 7 times what Pittsburgh spent last year) and look to add to that amount with rumored FA chases of Cliff Lee and Carl Crawford.  This cannot be healthy for the competitive spirit of the other teams playing in the AL East.  But if there doesn’t prove to be a direct correlation between payroll and results, how can anyone realistically ask for a salary cap?

So, the entire principle behind NOT signing Adam Dunn during the summer was the 2 draft picks we would acquire (the signing team’s 1st pick and a supplimental) after he declines our arbitration offer.

Check out this link at mlbtraderumors.com.  If this site is correct, and the analysis is accurate, then Dunn has fallen just below the threshold and is now a Type B Free Agent.

From a Nats standpoint, this is an unmitigated Disaster.  Now not only is there more incentive for other teams to sign him,there’s even LESS incentive for him to take a deal from us.  And, we’ll get merely a supplimental 1st pick.

Unless the entire 2010 season was just a charade and we plan on signing him anyway.  Per Boswell there’s a 3-year deal on the table now.  But if you’re Dunn, you HAVE  to see what is out there right now, right?

Assuming that he does not consider AL teams, as he has stated he wants to continue to play the field, here’s a quick rundown on NL teams and their 1st basemen situation:

NY: Ike Davis; up and coming prospect
PHI: Ryan Howard: long term contract
Fla: Gaby Sanchez (doesn’t matter, they’re not FA buyers)
Atl: Derrick Lee, who is a FA.  Troy Glaus also a FA but was awful this year. Could be a buyer.

Stl: Pujols
mil: Prince Fielder
Cincy: Joey Votto
Chi; it was Derrick Lee til they traded him.  Possible FA buyers.
Hou; it was Lance Berkman til they traded him.  But are they FA buyers?  I don’t think so.
Pitt: Garrett Jones (doesn’t matter, they’re not FA buyers)

LA: James Loney: cost contained and home grown.  plus no FA $$ spent until ownership divorce settled.
SD: Adrian Gonzalez
SF; Aubrey Huff: a FA and SF desperately needs hitters.
Col: Todd Helton; not the greatest hitter anymore but signed through 2013.
Ariz: Adam LaRoche who is a FA but I sense Ariz is rebuilding and not FA buyers

So, if he goes anywhere I think it could be either Atlanta, Chicago or San Francisco.  Chicago already has some serious payroll issues and an underperforming team.  SF may not have the payroll flexibility to buy Dunn despite really needing him.  Atlanta only has $60M committed next year and has a bunch of arbitration cases … but they’ve spent over $100m on payroll as recently as 2 years ago and may expand it out again.

Adding in AL teams, looking at 1B solutions (I can’t see him signing up for a team that will ONLY DH him, so we have to look at teams where he splits time between 1B and DH).

Bos: Youklis/Victor Martinez
NYY: Teixeira
Tampa: Carlos Pena, a FA who will be allowed to walk.  However, Tampa won’t buy Dunn
Tor: Lyle Overbay, a FA who is 34.  Can’t see Toronto buying an aging FA w/ new GM in town.
Balt: Ty Wiggington: another aging mediocre FA.  But are Orioles buyers?

Det: Cabrera
CWS: Paul Konerko, a FA coming off a fantastic season; i see him resigning here.
Minn: Justin Morneau
KC: Billy Butler
Cle: Matt LaPorta, the future of this team right now and bounty from the CC Sabathia trade.

LAA: Kendrys Morales;
Oak; Daric Barton: up and coming hitter, only 24.
Sea: Russell Branyon/Casey Kotchman but they have Justin Smoak coming up (bounty for Cliff Lee).
Texas: Jorge Cantu/Chris Davis; rotating door post Smoak trade, but Mitch Moreland is prospect of the future.

So, from what I can tell there’s only really 4 AL teams that even have FA spots at 1B.  Chicago (resigning Konerko), Tampa (not FA players), Toronto (are they FA buyers?) and Baltimore (why would Dunn go to a WORSE team than Washington?)

I still see him focusing on the NL.  Based on this … Dunn seems like he may have options in the NL, which means our chances of having him accept a 3 year deal with us less likely.  Not good news for us in 2011.

In a short series (if you went to a 3-man rotation in the playoffs, as lots of teams do), who scares you the most?

Candidates:

• Philadelphia: Halladay, Hamels and Oswalt
• Boston: Lester, Beckett, Buchholz.  tough.  If they were all performing that is.  Beckett seems off this year.
• NY Yankees: Sabathia, Burnett and Hughes; this was supposed to be Vazquez but once again the best rotation that money can buy, didn’t.
• St Louis: Carpenter, Wainwright and Garcia.  Wow.
• San Francisco: Lincecum, Cain and Zito/Sanchez/Bumgarner; again, that’s tough.
• Tampa Bay: Price, Garza, Shields (with Sonnanstine/Hellickson thrown in there).  Scary tough, which is why they’re beating out the Red Sox right now.

For my money, it has to be Philly slightly followed by St. Louis.  How is that team gonna get beat this off season?  Of course, they have to MAKE the playoffs for it to matter.  Ironic that the 3 best rotations in the AL are all in the east.  Chicago’s is decent but more veteran laden.  Texas’ starts with Lee and ends with a guy who was playing in Japan this time last year (Colby Lewis).  I don’t think Minnesota’s guys are scaring anyone.  How scary is it that Toronto has two guys with one-hitters this year (Marcum, Morrow) but is buried in FOURTH place in the AL east.  That’s a tough division.

Sports writers and baseball analysts have been beating the drum for years for some sort of payroll system modifications in baseball.   Especially in recent years with the dominance of the Yankees and Red Sox, who have been 1-2 in total salary for a while and have both made the playoffs more often than not in the past decade.  Last year was especially bad, when most of the playoff spots went to big market, big teams.  Great for playoff rankings, bad for most of the teams in the league.   The Yankees spent nearly SEVEN times as much in payroll entering 2010 than Pittsburgh; how can that be equitable?

Well, don’t look now but if the season ended today, as pointed out in this USAToday Article, only two of baseball’s top 10 salaried teams would qualify.  Most of baseball’s current 8 playoff teams are from middle-of-the-road payrolls.  There are two notable outliers: Texas comfortably currently sits atop the AL West with the 27th largest payroll and San Diego, with the 2nd LOWEST payroll in the majors, leads the NL west.  (See this google xls I put together briefly to show teams by record rank, playoff position and salary at the beginning of the season).

Each time a team like Tampa, San Diego or Texas competes well with the big boys, it makes it harder to implement some sort of reform.  Especially since you can look at each of the top tier payroll teams that are NOT in playoff contention right now and excuse their season.

• #2. Boston: still have the 5thbest record and would be leading most any other division.  Lots of injuries, transition year away from expensive older vets like Ortiz and Lowell, $10M in dead money.  Theo keeps talking about a transition year; he’s biding his time before he can re-do the team in the image of the 04 and 07 teams.
• #3: Cubs: over paid for Soriano, Zambrano underperforming, Fukodome bad signing.  Just not well constructed team.  Hendry on the GM hot seat.
• #4: Philadelphia: great team, killed by injuries and inconsistent pitching.  You wonder how badly the Lee trade bungling will hurt them in years to come.  I still think they’ll overtake Atlanta, especially now that Chipper is done for the season.
• #5: Mets: how does Minaya still have a job?  They seem to spend money because they have it, not because they acquire good players.  Oliver Perez, Jason Bay god awful signings, and just Santana and Beltran cost more than the San Diego Payroll annually.
• #6: Tigers: you have to hand it to the Tigers owner, who purposely over spent b/c his town was so badly hurt in the economic crash.  But he has some very expensive players tied up (Cabrera, Verlander, Guillen) for a number of years and their role players aren’t good enough.  Dark Days ahead for Detroit.

So, the #1 payroll team has the best record and the #30 payroll team has the worst record.   But the teams in between aren’t acting like we expect.  Is this Moneyball re-incarnated?  Well no.  Billy Beane’s teams success in Oakland was less about his OBP-centric stats drafting and more about the three starting pitchers (Zito,  Hudson, Mulder) his teams were graced with (as pointed out in this excellent Buzz Bissinger article).  What it does point out is that good GMs (even the wealthy ones in NY and Boston) are starting to value the draft pick and the young player and are becoming better and better at drafting them.  San Diego and Texas both kept payroll low, traded away vets, accumulated draft picks.  Texas easily has the best farm system in the majors and now has a powerhouse team for very little money.  This is exactly the same blueprint practiced for years by Florida and Tampa, though Texas has shown they are not afraid to buy talent at the deadline (something the panhandle state teams never do and thus one of the reasons why neither team really has any appreciable fan following).

So, what should base ball do?

1. Should there be a salary cap?  Well, yes I think so.  I think the Yankees have a totally unfair player advantage over the rest of the league and it shouldn’t be possible to have 4 times the payroll of a team within  your own division.  But i have no idea how to implement it.

2. Should there be a salary floor?  Well, no.  Because teams like Texas, Florida, San Diego, Tampa and (in years past) Oakland have consistently shown that you can build great cheap teams by depending on player development, drafting and having an entire team of pre-arbitration or arbitration-eligible guys.  You can’t force a team to spend money just to achieve an arbitrary salary floor.  Plus you have to allow teams to blow things up and start over (essentially what Toronto is doing now) and try to build for the long run.