Updated Value of a Win & How It Relates to Andrew McCutchen
This past week, Matt Swartz published a 2 part series of articles at Fangraphs that examined historical WAR value assumptions and what the actual numbers were. It is a fantastic 2-parter, especially the second part that I linked. It’s the kind of article that you really need to read, ponder for a minute or two, and then re-read it again to process the info.
To streamline the article, Swartz feels that the $/WAR has actually been undervalued historically. He shows the WAR values accumulated by free agents and what the $/WAR is for each year, plus the $/WAR if you factor in the cost of the compensatory picks associated with signing those free agents as well.
Swartz’s conclusion that WAR has been undervalued actually gave me pause, because I’ve felt that in recent years it has actually been overvalued. But his numbers and methodology are sound, so I have to change my way of thinking and start to accept these new numbers. Swartz feels that the $/WAR for 2012 is actually $6.3 million if you include draft picks. He allows a 9.4% reduction if you exclude draft pick compensation, which I would like to do as I feel the new CBA is going to severely limit how many free agents get arbitration offers from their old teams (a team has to make a $12.6M qualifying offer), so that gives a number of $5.7M/win.
One of the other interesting nuggets from the Swartz article is his breakdown of how free agents performed from 2007 to 2011 based on the tier of their average annual value: greater than $15M, between $10M and $15M, $5M to $10M, and less than $5M. His research shows that players in the wobbly middle class of $10M to $15M actually performed the least effectively, needing $6.5M/win. The best value? The free agents in the less than $5M category are paid only $3.6M/win.
Hopefully this bodes well for Erik Bedard ($4.5M) and Rod Barajas ($4M). Clint Barmes ($5.25M average value) just misses this bargain bin category. Using the $5.7M/WAR figure for 2012, you can see that all of these players, plus A.J. Burnett at $5M in 2012, only need to provide 1 WAR each to justify their contracts this year.
But how will this new value affect future contract extensions for the Pirates, specifically Andrew McCutchen? Back in December, Tim examined the potential value of an extension for McCutchen. At that time, Tim felt that 6 years/$51M was a fair value for McCutchen using Justin Upton’s contract as a baseline. However, historically we have used $5M/WAR here at Pirates Prospects.
The other issue, and probably the one that the Pirates and McCutchen’s agent are wrestling with, is what is McCutchen’s ultimate ceiling. In 2011, McCutchen tantalizingly produced 5.7 WAR, but you were left feeling that he had another gear not fully being used. If we use 5.7 WAR as the baseline for 2012 (his age-25 season) and the $5.7M/WAR figure, McCutchen’s value would be $32.49M. Considering that he will be paid an estimated $520,000 in 2012, his surplus value would be just under $32M.
Let’s take a look at what McCutchen’s potential next 6 years could look like, with a 5% escalation on WAR per year and upgrading Justin Upton’s existing contract:
|Year||Age||$/WAR||WAR||Value||Est. Salary||Surplus Value|
That totals up to 6 years/$56M and buys out the first 2 years of free agency for the Pirates. You can also see that the Pirates have immense surplus value all throughout the duration of this assumed deal. Even if you add in a $2M signing bonus for McCutchen and bring the deal to $58M, it is still a bargain for what McCutchen would bring to the franchise.
I would still consider a 5 year deal in the low $40M range as a compromise if McCutchen did not want to give up 2 free agency years. At no point would I just buy out his arbitration years, as there is no benefit to the team other than providing cost certainty.