Friday, February 03, 2012

Ranking the mega-contracts

Over at the Huffington Post, ScottCampbell takes a crack at naming the 10 worst contracts in baseball right now. It’s a valiant effort – there are a lot of bad contracts out there – though at points it lacks some real analysis. See this quote on Albert Pujols:

“Pujols may go down as the greatest right-handed hitter ever, but that still doesn't mean this contract won't end up looking dreadful halfway through.”

First of all, in order to go down as the greatest right-handed hitter ever, Pujols will still need to be producing at age 35, so that sentence contradicts itselfa little bit. Secondly, Campbell is making the common mistake of rating Pujols contract by the fact that he won’t be worth the money on the back end. Isn’t it possible, though, that he’ll be so good at the front end that it will even out? In 2016, we can try to figure out whether he’ll be worth the remaining amount on his contract, but in 2012, we should be evaluating Pujols' contract based on the whole thing, right?

Anyway, Campbell’s list seems solid on its face. It's not like he ranked Pujols' contract as the worst, he had him 8th. I wanted to dig a bit deeper to see if I agree.

I’m taking the 22 mega-contracts, and comparing the amount a player is likely to produce with the amount he’s likely to be worth over that time. I’m defining "mega-contracts: as those with $20M in Average Annual Value remaining, or contracts worth over $100M total. This leaves off Alfonso Soriano and John Lackey, among others. Very simple, really. Some things to consider.

-Past value, under the current contract, is not considered. Mark Teixiera’s excellent 2009 season isn’t relevant to us, only whether he’ll be worth the $112.5M over the next five years.
-A team’s ability to pay a contract will not be considered. We’re considering whether a player is worth that money in a vacuum. It’s a valuable measure, I think – maybe the Red Sox can afford to pay Carl Crawford what he’s making, but is they’re unlikely to be able to trade him. That limits their flexibility.
-It’s important to remember that remaining length is an important consideration. Sure, Vernon Wells won’t be worth $63M over the next three years – but would you rather have Vernon Wells, plus another $53M to spend between 2015-2017, or Jayson Werth?
-These values will change. Ryan Braun and Troy Tulowitzki have backloaded contract extentions that are very team friendly right now. If we do this analysis again in five years, when they’re making huge money in their thirties, maybe they’ll be untradeable albatrosses. This value is about the present, though.
-I’m not a statistician. My attempts to figure how valuable a player will be and how much money that will be worth, in future years, are pretty broad. That said, predicting Troy Tulowitzki’s 2020 season is pretty much a shot in the dark anyway, no matter how advanced a statistical model you’ll be using.

So, with that in mind, here are the 22 MEGA contracts, ranked from best to worst.

1. Ryan Braun, Milwaukee Brewers. 9 years, $131.5M
Expected WAR, 2012-2020: 46.4. Expected value: $234.69M. Value of contract +$103.19 total, +$11.47M annually.

Braun, going into his age 28 season, has averaged 6.1 WAR over his past three years. He’s locked up for the rest of the decade, running through his age-36 season. Testosterone levels aside, my valuation has Braun worth over $140M in the first five years alone. In free agency, he’d have gotten $200M, easily. Great contract for the Brewers.

2. Troy Tulowitzki, Colorado Rockies. 9 years, $152.25M.
Expected WAR, 2012-2020: 49.0. Expected value: $248.32. Value of contract +$96.07M total, +$10.67M annually.

Tulowitzki is by far the best shortstop in baseball right now. Over the total length of his contract, he’s expected to be worth more than any other player. Since he’s making a couple million more annually than Braun, he’s not quite as underpaid, over the length of his contract, but I think the Rockies will take it. Everyone in Denver gets to continue to be a Tulowitness to a future Hall of Famer.

3. Matt Kemp, Los Angeles Dodgers, 8 years, $160M.
Expected WAR, 2012-2019: 46.5. Expected value: $232.75M. Value of contract +$72.75M total, +$9.09M annually.

Kemp, like Tulowitzki, is just heading into his age-27 season. While he hasn’t been quite as consistent as the first two on this list, his 10.0 WAR in 2011 shows what his upside is. His average expected WAR is actually higher than both Braun and Tulowitzki. He’s getting paid quite a bit more than those two, though, so he’s not quite the “steal.” Still, a good bet to be a very team-friendly contract.

4. Adrian Gonzalez, Boston Red Sox, 7 years, $152M.
Expected WAR, 2012-2018: 37.5. Expected value: $186.23M. Value of contract +$34.32M total, +$4.89M annually.

It’s a pretty big dropoff from Kemp to Gonzalez, who is three years older and is paid $1.7M more annually. The Red Sox won’t be complaining, as Gonzalez’s high level of production will continue. Even at the back end of the deal, Gonzalez should still be worth $20M+ per year. With all the criticism of the Red Sox spending spree last winter, locking up Gonzalez to a relatively team friendly contract extension through his prime, rather than letting him hit the open market, was a great move.

5. Miguel Cabrera, Detroit Tigers, 4 years, $86M.
Expected WAR, 2012-2015: 23.0. Expected value: $111.59. Value of contract +$25.59M total, +$6.40M annually.

The main difference between Gonzalez’s contract and Cabrera’s is that the my matrix has Gonzalez continuing to produce above his average contract value beyond 2015. Think about it – at first look, you’d probably rather have Cabrera plus the 3 years and $66M to spend after the 2015 season. However, my matrix has Gonzalez being worth about $71M in those three years. Cabrera, if he’s still producing at something close to his current level, will command more than a 3 year, $66M contract - even going into his age-33 season. So, while Cabrera looks to be a slightly better value annually over the length of his contract, the Red Sox having Gonzalez locked up in future productive years makes his deal more valuable to him.

6. Justin Verlander, Detroit Tigers. 3 years, $60M
Expected WAR, 2012-2014: 17.6. Expected value: $84.19M. Value of contract +$24.19M total, +$8.06M annually.

Verlander could blow this projection away, or get hurt. Barring injury, Verlander will either get a massive extension, or sign the biggest ever contract ever for a pitcher after the 2014 season.

7. Roy Halladay, Philadelphia Phillies. 2 years, $40M.
Expected WAR, 2012-2013: 11.9. Expected value: $56.41M. Value of contract +$16.41M total, +$8.2M annually.

Halladay also has a possible $20M vesting option for 2014, which he will probably also be worth. As a 35-year old pitcher, the possible that he’ll run out of gas is there. As the best pitcher alive, the possibility is that it won’t.

8. Tim Lincecum, San Francisco Giants. 2 years, $40M.
Expected WAR, 2012-2013: 9.5. Expected value: $45.28M. Value of contract +$5.28M total, +$2.64M annually.

A couple weeks ago, when Lincecum signed his extension, I saw the numbers and thought to myself “that seems about right.” Lincecum is not the pitcher of his 2008-2009 peak, but he’s still very, very good. This deal seems sensible for both player and team.

9. C.C. Sabathia, New York Yankees. 5 years, $122M.
Expected WAR, 2012-2016: 22.8. Expected value: $111.13M. Value of contract -$10.88M total, -$2.18M annually.

Sabathia has the biggest contract of any pitcher in baseball, and the highest annual value of any pitcher in the American League. He’s also been remarkably consistent, and usually good. So while he might be slightly overpaid, if you asked Brian Cashman or any Yankees fan “You’re paying Sabathia $24.4M over the next five years – will you be upset if he’s actually worth only about $22.2 annually?” they’ll probably giggle. Of all the big, long-term contracts in baseball, this one is probably the most spot on. Team and player will both probably be happy with the results.

10. Joe Mauer, Minnesota Twins. 7 years, $161M
Expected WAR, 2012-2018: 29.5. Expected value: $146.57M. Value of contract -$14.43M total, -$2.06M annually.

And here is the problem with statistical analysis. My computer doesn’t know that Joe Mauer might be broken. In fairness, Joe Mauer probably wouldn’t know if my computer might be broken. Anyhow, this could easily be a franchise crippling disaster of a contract. Here’s hoping he gets healthy and resumes his Hall of Fame-level production, even if he needs to move to 3B or RF in order to do it.

11. Albert Pujols, Los Angeles Angels. 10 years, $240M
Expected WAR, 2012-2021: 43.3. Expected value: $217M. Value of contract -$22.83M total, -$2.28M annually.

Would you pay Albert Pujols $2M more than he’s worth annually, over the next 10 years, in order to have him on your team for the next 5? Think of it this way – my model has him worth about $150M over the next five years. He’s one of the greatest players ever, and he’s still near his prime. Sometimes, in order to get the best player in baseball, you need to promise to pay him for when he’ll no longer be the best player in baseball. The Angels were willing to take that risk, to say “to hell with 2020, we want to be a championship level team for the next five years,” and are paying the greatest player alive accordingly.

12. Cliff Lee, Philadelphia Phillies. 4 years, $109M.
Expected WAR, 2012-2015: 16.2. Expected value: $85.06M. Value of contract -$22.94M total, -$5.99M annually.

Cliff Lee is great, but his postseason performances have somewhat inflated his stock. He’s averaged 5.4 WAR over the last three seasons, and he’s going into his age-33 season. And he’s making a LOT of money – over $27.5M annually. Lee’s good enough that this isn’t a bad contract, but it’s not exactly a steal for the Phillies

Ok, now onto the 10 worst of the mega-contracts!

13. Johan Santana, New York Mets. 2 years, $55M.
Expected WAR, 2012-2013: 4.6. Expected value: $21.76M. Value of contract -$33.23M total, -$16.62M annually.

Ladies and gentlemen, your New York Mets! Santana was better than you remember from 2008 through 2010, and will be unfairly remembered for how much the Mets overpaid for him. Pitching is at a premium, so Santana is likely to be worth something -- just not anything near what the Mets are paying him. Santana will be 33 on opening day, and would need an extremely unlikely career revival to have much of a Hall of Fame case. Still, he should get credit for a fantastic peak. From 2002 through 2010, his lowest ERA+ was 129. His career 142 ERA+ is 11th all time, ahead of Halladay and Lincecum.

14. Jose Reyes, Miami Marlins. 6 years, $106M.
Expected WAR, 2012-2017: 13.9. Expected value: $68.12M. Value of contract -$37.88M total, -$6.31M annually.

So Reyes, on and off of the disabled list the last three years, is suddenly going to be healthy in his 30’s? I know he’s a dynamic, exciting player, but that’s a lot of money to spend. Reyes has one of the highest variations of anyone on this list. He could be worth his contract with ease, and he could be a 100 game-a-year player. He’s not a great risk at that money, though.

15. Mark Teixeira, New York Yankees. 5 years, $112.5M.
Expected WAR, 2012-2017: 14.8. Expected value: $71.78M. Value of contract -$40.73M total, -$8.15M annually.

Joe Posnanski termed it Tex-pensive – a ridiculous contract for a very good player. What’s funny, though, is that being overpaid will bring most players an unfair amount of criticism – think Barry Zito, Jason Giambi or Darren Dreifort. After all, it wasn’t their choice to be overpaid by foolish bosses. Teixeira, on the other hand, seems to be given credit BECAUSE he is the overpaid Yankees first basemen. "Of course he’s awesome, he got a $180M contract!" The fact that he started well in New York, with a big year in a World Series season, certainly helped his reputation. Sure, the Yankees can afford it, but they’re overpaying a good player, and it inhibits their chances of getting a better one. He’s a $14-18M player, but getting paid over $22M. When Joey Votto becomes a free agent, remember that the Yankees instead are overpaying a first basemen who, in 2011, wasn't as good as Casey Kotchman.

16. Barry Zito, San Francisco Giants. 2 years, $46M
Expected WAR, 2012-2013: 0.7. Expected value: $3.21M. Value of contract -$42.79M total, -$21.4M annually.

It’s almost over. Per year, he’s the most overpaid player in baseball. He just has the advantage that he’s only getting overpaid over the next two years. By percentage of remaining contract expected to be earned, Zito rankes dead last on this list, at less than 7%. Oof.

17. Prince Fielder, Detroit Tigers. 9 years, $214M
Expected WAR, 2012-2020: 33.5. Expected value: $168.9M. Value of contract -$45.10M total, -$5.01M annually.

Like Teixeira, Fielder is a very good player getting paid like a franchise-changing one. He’s younger than Pujols and Gonzalez, yes, but he’s just not as good. I don’t know how his body will age, and the computer doesn’t seem to want to speculate on it. What it does tell us is that a 7 year, $145M contract would’ve been totally reasonable. Overpaying Fielder, on its own, isn’t so bad. Overpaying him at the expense of being able to resign Miguel Cabrera or Justin Verlander could be. We’ll see how this plays out.

18. Vernon Wells, Los Angeles Angels. 3 years, $63M.
Expected WAR, 2012-2013: 2.0. Expected value: $9.5M. Value of contract -$53.5M total, -$17.83M annually.

Like Zito, the only thing keeping this from being lower on the list is that it will end sort of soon. This contract is a disaster, and taking it on probably got Tony Reagins fired. 

19. Carl Crawford, Boston Red Sox. 6 years, $128M.
 Expected WAR, 2012-2017: 14.9. Expected value: $72.95M. Value of contract -$55.06M total, -$9.18M annually.

You could easily argue that this contract is much better than Wells’s. Sure, Crawford is more overpaid, but looks likely to give some production for his overpayment – Crawford looks to earn about 56% of his contract, Wells only about 15% of his. Still, in sheer amount, Crawford looks to be more overpaid over the next six years than Wells will be over the next three.

20. Jayson Werth, Washington Nationals. 6 years, $116M.
Expected WAR, 2012-2017: 10.6. Expected value: $51.04M. Value of contract -$64.97M total, -$10.83M annually.

Whenever Nick Cafardo tells us that the Red Sox should’ve signed Werth rather than Crawford, and you shake your head, this is why. Fortunately, Werth’s contract will come off the books before Bryce Harper becomes a free agent.

21. Ryan Howard, Philadelphia Phillies. 5 years, $125M.
Expected WAR, 2012-2016: 10.0. Expected value: $51.04M. Value of contract -$48.09M total, -$15.38M annually.

Howard has averaged 3.0 WAR between his  from ages 29-31. What will a player like that be worth from 32-36? This doesn’t even recognize Howard’s knee injury. This will, of course, make any Phillies fan who reads this want to punch me in the face, because I’m obviously a jerk who doesn’t care about intangibles. Oh well. The difference between Howard’s value, even healthy, and Carlos Pena’s, is almost negligible.

22, and the worst contract in baseball. Alex Rodriguez, New York Yankees. 6 years, $143.
Expected WAR, 2012-2017: 3.3. Expected value: $14.78M. Value of contract -$128.23M total, -$21.37M annually.

You would think that, as a Red Sox fan, writing that would make me giddy. It does. Rodriguez stats are so low because he’s getting paid through his age 41 season, where he’s projected to be a good bit below replacement level. If he’s, say, released after the 2015 season, he’ll actually hurt the Yankees less. You’ll see a lot of commentators talking about how Rodriguez is “in the best shape of his life” and is primed for a comeback season. When you see that, remember that his last great season was 2007, which is the same year that Barry Bonds had his last great season. Rodriguez will probably be worth more than 3.3 wins for the rest of his contract – my formula is probably too hard on him. He’s also not going to be worth the 27 wins he’d need to be to earn his contract.Of course, THIS is what people like Campbell worry about when they see Pujols' contract. He should fear not. Pujols has played a less demanding defensive position than Rodriguez did, and, for elite hitters in their 30's, Rodriguez's drop-off is more sudden that other all-time greats like Mays, Aaron and Williams. A-Rod simply isn't a fair comparison for Pujols.

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