Today I was looking over the early free agent signings, trying to get an idea of how much free agents were getting paid per win this off-season. In the past, free agents usually received $4-5 M per win, with the $5 M total coming in recent years. The idea floating around is that free agent prices will be going up this off-season with the new National TV revenue kicking in. My theory before looking at the free agents who have signed was that they would be getting more than $5 M per win. After looking over all of the numbers, I was surprised to see that players are still getting close to $5 M per win. It just comes with a catch for each player, which I detail below. If you want to skip over the part where I show my work, and get right to the summary, that’s below.
Tim Lincecum (2 years, $35 M)
Lincecum didn’t hit the open market, but the Giants gave him a two-year, $35 M deal. In the last two years, he’s been worth a total of 2.5 WAR combined. I’m sure the Giants were thinking he’d bounce back to his pre-2012 numbers. In 2011 he had a 3.6 WAR, which was his lowest total from 2008-2011. If he returns to that 3.6 WAR level, then the $17.5 M annual salary would equal about $5 M per win. That looks like a big “if” from the outside, but it seems like the Giants were willing to take the gamble.
Jason Vargas (4 years, $32 M)
He just got a four-year deal at $8 M per year. Last year Vargas put up a 1.5 WAR, which is worth $7.5 M at $5 M per win. From 2010-2012 he averaged a 1.9 WAR per season. At $5 M per win, that would be worth up to $9.5 M per year. I don’t think Vargas is over-paid in the short-term. Whether he can maintain this level 3-4 years from now is another question.
Carlos Ruiz (3 years, $26 M)
He had a down year last year, but he wasn’t that bad. He had a 1.4 WAR, which is about $7.5 M per season at $5 M per win. Ruiz got $8.5 M per year, plus a $500 K buyout in 2017. If he remains in the 1.5 WAR area, then the Phillies would be paying a little more than $5 M per win. If he bounces back to his pre-2013 levels, they could be getting a huge bargain. I don’t think he’ll bounce back in the way that Russell Martin bounced back, but I could see him worth the money they’re giving him.
Tim Hudson (2 years, $23 M)
He received $11.5 M per year, coming off a season that was shortened by an ankle injury. He still put up a 1.7 WAR in the shortened season. In 2012 he had a 2.1 WAR, which is worth $10.5 M per year at $5 M. I think you could make an argument that Hudson is getting more than $5 M per win, but not more than $6 M. I think the Giants are also hoping that he stays healthy. If he does, then he’s still good enough that he could be worth his salary at $5-6 M per win.
Marlon Byrd (2 years, $16 M)
I don’t think anyone expects Byrd to repeat his 2013 season, where he posted a 4.1 WAR. The question is, how far will he fall from that number? He’s getting $8 M per year, so he’s being paid like a 1.5 WAR player at around $5 M per year. That’s close to his average over the last three years, so it seems reasonable that he received $8 M per year. There’s just the age risk, and the question of how far he will decline from his career year in 2013.
David Murphy (2 years, $12 M)
He had a down year at the plate last year, and was worth 0.4 wins above replacement. In 2012 he had a career year, with a 3.9 WAR. Prior to that he was a 1.3 WAR player per year from 2008-2011. If he just returns to those levels, then he will be worth the $6 M per year he’s getting with the Indians. There are the usual question marks about his hitting outside of Texas, although he hit pretty well on the road in most years, so he’s not a product of Arlington.
Josh Johnson (1 year, $8 M)
Johnson had a 0.5 WAR last year in a down year. He’s a bounce back candidate, and his value entirely depends on how much he bounces back. At $8 M (plus an additional $1.25 M if he makes 26 starts), he’d have to be a 1.5-2.0 WAR player to justify his salary. If he does bounce back to his pre-2013 numbers, that should be no problem.
Chris Young (1 year, $7.25 M)
He signed today with the Mets, following a down year where he posted an 0.5 WAR. In 2012 he had a 2.5 WAR, and he was a four win player in 2010-11. I don’t think he’ll return to being a four win player, but he just needs to be a 1.5 WAR player to justify his salary. He’s also 30 years old, so I wouldn’t assume he will repeat his 2013 season.
High Risk, High Reward Free Agents
The catch with all of the free agents who have signed is that all of them have question marks. A lot of them are being paid for their former production, with hopes that they will return to those levels. For some, they’re just coming off a down year, or a year with injuries, or both. For Lincecum, the production he would need is two years removed. Then there’s Vargas, who is getting $8 M, which is an amount you’d expect for a pitcher like Vargas in free agency.
I’ve seen the $7 M per win number floating around several places. That number would be correct if you’re using the 2013 season to determine value. However, I don’t think any of the above players were signed for their 2013 season (with the exception of Byrd, and in that case I don’t think anyone thinks the 2013 season is legit). The teams who signed the above players are paying those players for what they did before the 2013 season, with the hopes that those players bounce back to their production. The common trend is that there’s risk involved with each of the early signings, since no player is guaranteed to bounce back to a former level of performance. That said, it’s easy to see how players are still worth $5 M per win if you base the contracts on what they did before the 2013 season, rather than just looking at their most recent year.
If you think about it, the idea that teams would suddenly pay more than $5 M per win because of the new TV revenue is ridiculous. Each team is getting $20-25 M at most, and that number has been refuted with the claim that not every team receives $20 M. Let’s just keep it simple and say that it’s $20 M extra. Let’s also assume every team will be putting all of that money into payroll (they won’t). Then let’s estimate that each team on average has 12 guys who are paid based on their value — basically everyone who is not a league minimum player. I went with 12 because it’s half the roster, giving the final spot to the league minimum side.
It wouldn’t be smart for teams to suddenly start paying $7 M per win — $2 M more than the previous totals — when they’re only getting $20 M. First of all, teams might not be getting the full $20 M. They also might opt to use that money elsewhere, other than MLB payroll. But most importantly, if they start paying $2 M extra, then they eventually have to pay that to everyone. If that means $2 M extra to 12 different players, then you’re talking about an amount that is more than the $20 M each team is reportedly receiving.
I do think there will be a rise in free agent costs, but I think the rise will be gradual. An extra $20 M per team isn’t going to lead to a massive increase in prices, since those increases carry over to all future spending and would amount to more than the extra $20 M teams are receiving. I think the increase that could be seen is a half million. That makes more sense when you consider that teams will be using part of the $20 M elsewhere, while also considering that the increase in $/WAR impacts more than just a few players on each roster.