Yesterday, I learned that there are two crazy people in the world, Washington Nationals GM Mike Rizzo and me. Rizzo signed Jayson Werth to a seven-year, $126 million contract, and I stated that Werth was projected to be worth $127 million in terms of revenue generation over this time period. I understand why this contract is universally hated. This is a huge contract, a long contract that takes Werth into his late-30s, and while most fans understand that Werth is good he’s not considered a superstar.
Werth has risen from an injury-plagued and disappointing career to the top of the game, without being flashy. He’s played on a good team where he’s been overshadowed by Roy Halladay, Ryan Howard, Chase Utley, and the list could go on. In 2010, I estimate that he was the sixth-best player in the National League—just behind Adrian Gonzalez, who is apparently discussing a longer and more valuable contract extension with the Boston Red Sox. Werth is an excellent and valuable player.
How will Werth age? A lot of people feel that players age drastically, and that at 38 Werth will have aged out of the league. That is possible, but my research indicates that aging is rather flat. Good players tend to stay good, bad players tend to stay bad. When players get to their late-30s, it’s difficult to study aging, but I use my aging function to diminish his performance according to the past history of major-league players, so this value roughly accounts for that.
I also assume that league revenue will grow at nine percent per year. That may seem like an aggressive assumption—and revenue cannot continue to grow at that rate forever, or MLB will take over the US economy—but it is consistent with historical revenue growth. If you’d like to scale the growth rate back, I won’t argue with you. But, I can see where the Nationals might get their revenue projection.
And what about the argument that the Nats would have been better of by signing Adam Dunn? The Chicago White Sox signed away Dunn with a four-year, $56 million deal. I estimate that as a designated hitter, Dunn is worth $54 million. But, if he has to play the NL, where his defensive liabilities can’t be hidden on the bench, he’s worth only $49 million. The Nationals might have liked to have kept Dunn, but an AL team was going to value him more. Furthermore, Werth is a better player than Dunn: in 2010, I estimate that Werth’s play was worth about $5 million more than Dunn’s.
And what about the future? A few years down the road the Nationals may not just be a losing team, but a loser with an albatross contract. I think the Nationals signed this contract looking forward, rather than trying to make a splash now. The Nats may have needed some good press in DC, but Werth isn’t quite the household name to make that splash. The Nats have a core of good young players, such Ryan Zimmerman, Stephen Strasburg, and Bryce Harper. In a few years, when the team wants to add another piece to push them into the playoffs (and with players will be worth more) Werth could be worth more than his contract. Now, if the plan doesn’t work out, the Nats may end up having to cut their losses and deal away some of their good players. When that time comes, they can minimize some of their losses by selling away overpaid players for less—the loss isn’t the full salary of the contract. Yes, a loss is a loss, but risking a loss to make money is something that businesses must do every day.
I’m not sure I would have recommended this deal to Rizzo if asked, but I can understand why this deal was made. It’s aggressive, but reasonable.