How I Value Players

I have been getting many requests to explain my player valuation system. I have added the following to the FAQ page.

How do you estimate the value of baseball players?

The method I use is complex and involves many steps. What follows is a brief explanation. I provide a detailed explanation in my book. Since its publication I have made a few minor modifications that I will detail in an upcoming book, but the basic structure is similar.

I estimate the impact of winning (via run-differential) on revenues (using Forbes’s The Business of Baseball report, various years). Then, I estimate the impact of player performance on run production (hitters) and run prevention (pitchers). These estimates are adjusted for home-park influences. I also add an adjustment for defense. In some cases I assume the fielder is average for his position, in other cases I use the Plus/Minus system to adjust for defensive quality. I then convert the run-contribution estimates to dollars using the estimates of the impact of winning on revenues. Because the impact of winning on revenue is non-linear, the reported values assume that the player is added to a .500 team. Players added to teams with above (below) average records generate more (less) revenue. The estimates are also gross (not net) marginal revenue product estimates, and therefore do not account for costs such as coaching, medical care, etc.

For projecting players into the future, I assume that league revenues grow at an annual rate of ten percent, which is consistent with the history of league salary growth. I also make an adjustment for aging.

4 Responses “How I Value Players”

  1. Kyle S says:

    I suspect that in the current economy, a 10%/yr revenue growth projection is aggressive. Baseball cannot sustain its historical growth rate forever; the only question is when that growth slows down. 

  2. Do you adjust for differences in league difficulty?

  3. “Then, I estimate the impact of player performance on run production (hitters) and run prevention (pitchers).”

    I’m interested in your thoughts on this part of your valuation process. The impact of player performance on runs is a widely debated subject, and since you’ve expressed dislike for sabermetric run models like EqA and wOBA, how exactly do you do it?

    Thanks JC.

  4. JC says:

    For older estimates I did  make a league adjustment, but for more recent updates I have not.

    The basic method is detailed in my book. The method I use in my book values hitters using OBP and SLG., but now I use linear weights (Base Runs).  Pitcher are valued according to strikeout, walk and home-run rates.