Archive for Moneyball

Early Free Agent Salary Projections

A few moments ago I happened to run across an article by Stan McNeal on the next free agent class. I thought I’d take a moment to project the salaries for his “Best bets for big bucks” in the upcoming offseason. I’m slowly breaking out my new marginal revenue product projection system, so this year’s performances are incorporated roughly into the projection. I may provide updates after the season is over.

1. Matt Holliday, OF, Cardinals. He would have been in line for a nine-figure deal in the old economy but might have to “settle” for something closer to $80 million over four years. Holliday still has plenty in his favor: He has had a strong second half with St. Louis, he is only 29 and his agent is Scott Boras. St. Louis fans shouldn’t get too enamored with him.

Four years, $68 million ($17 million per year). I don’t know about $80 million. If he joins a good team, he might get it (my estimates assume the player is added to an average team).

2. John Lackey, SP, Angels. The big righthander, who turns 30 in October, has pitched well enough lately to cement his status as the market’s best available starting pitcher. The chances of Lackey re-upping with the Angels are no better than 50-50.

McNeal doesn’t suggest a length, so I’ll guess four years, which projects to $56 million ($14 million per year). The recent injury may scare some teams away, but it looks like he has returned to healthy form.

3. Jason Bay, OF, Red Sox. He enhanced Red Sox general manager Theo Epstein’s already considerable reputation by productively and professional succeeding Manny Ramirez. But there is little room for sentiment in Boston’s front office. Given a choice, the Red Sox would take Holliday.

I’ll go with four years again (why not?): $58 million ($14.5 per year)

4. Chone Figgins, 3B, Angels. Improved discipline has improved his on-base percentage to .400-plus and made him the game’s top leadoff hitter this season, guaranteeing him a significant raise from the $5.775 million he is making this season. A prototypical Angel, Figgins says he wants to stay. Just don’t talk bring that hometown-discount talk his way; he has heard there will be interest from the big-money teams.

Four years, $38 million ($9.5 million per year). Significant raise is a go.

5. Jason Marquis, SP, Rockies. His numbers are similar to another sinkerballer, St. Louis’ Joel Pineiro, but Marquis makes this list because he has posted his numbers at Coors Field. Marquis should get a slight bump from his current three-year, $21 million deal, but is he a $10 million a year pitcher? Don’t think so.

The most-frustrating pitcher in the world. Four years, $29 million ($7.25 million per year). Nope, not a $10-million man.

Should the Braves Pick Up Tim Hudson’s Option?

Like all Braves fans, I was happy to see Tim Hudson make his return to the mound for the Braves last night. This led me to wonder whether or not the Braves will pick up Hudson’s option for next season. If the Braves decide to keep Hudson, they will have to pay him $12 million; if they decline, they must pay him $1 million. Therefore, the cost of hiring Hudson for the 2010 season is $11 million—$1 million is a sunk cost and therefore not relevant. If Huddy’s value is close to this figure, then it may be a worthwhile investment.

Valuing Hudson is a bit difficult, because of his recent past performance. He pitched well in 2007, but his 2006 and 2008 seasons weren’t as good—the latter season was marred by injury. Let’s just assume that 2007 was Hudson’s true-talent level. Given aging and league salary growth, I project Hudson will be worth $11.25 million in 2010. The Braves having an above-average team pushes this value upward a bit, but slower-than-normal revenue growth would lower the value. In addition, injury recovery isn’t guaranteed, which makes him riskier than I have assumed in this analysis.

By the rosiest of scenarios, Hudson will be worth the option. Given the dearth of pitching already owned by the Braves, and the possibility of a weak free-agent market (Update: by weak, I mean talent will be cheaper than usual, not weak in talent), I suspect that the Braves will pass on Hudson’s option.

Postscript: The salary estimates presented in this post—and from now on—are derived from an updated methodology that differs from estimates that I previously presented before my blogging hiatus. The underlying marginal revenue product framework is the same, but the calculations have changed significantly following updated analysis. I shall be presenting this new method in the future.

Thoughts on Garret Anderson

The Braves signed Garret Anderson to a one-year $2.5 million deal yesterday. What do I think of this deal? Here is what I wrote to a friend via e-mail last November.

I think the Braves would be wise to pass on [Will Ohman], because they need to get a better team before they start picking up veteran relievers. I am so afraid that they’re going to sign AJ Burnett and Garret Anderson. I’ll breathe easier when/if those guys are on another club.

I have changed my mind on Anderson. I was afraid that the Braves would sign him early and to a much bigger contract, possibly for several seasons. The outfield is better, and at a low price. I’m just going to have to live with Joe Simpson praising his Hall-of-Fame credentials for the rest of the season.

Frank Wren deserves credit for a successful offseason. While problems with potential acquisitions of Peavy, Furcal, and Griffey dominated the news coverage, the actual acquisitions of Derek Lowe, Javier Vazquez, and Kenshin Kawakami have made the Braves a playoff contender.

Addendum: Jayson Stark sums up the team’s improvement.

File Under Markets Will Find a Way

The draft-pick compensation required to sign Juan Cruz is hindering his signing with another team. Any team that signs Cruz, who is a Type-A free agent, would have to forfeit a top draft pick to the Diamondbacks. It appears that price is too steep for any interested team, which means that Cruz won’t get paid and the Diamondbacks won’t get any picks. I see some gains from trade here. The solution: sign Cruz to a below-market contract, then trade him to another team.

General manager Josh Byrnes said on Monday that it is possible that the right-handed reliever could agree to financial terms on a deal with another team. The D-backs would then sign him to a contract at that price and deal him to the other team in exchange for a player or players.

I can’t say too much,” Byrnes said. “But of late, they’ve talked to the union, we have talked to the Commissioner’s Office to see if there is a way where they could sign through us and then we would receive in trade what we would deem as enough value.”

Cruz, who made a little more than $1.9 million last year, is a Type A free agent. That means that the team that signs him would have to give the D-backs its No. 1 Draft pick — unless that pick falls in the top 16, in which case that team would give up its second-round pick. In addition, the D-backs would get a pick in the compensation round between the first and second rounds.

There is a feeling that teams have been reluctant to sign Cruz because they do not want to give up their Draft pick. The scenario that Byrnes laid out would be a way around that.

It’s moves like these that make me like Josh Byrnes.

The Elias rankings that determine free agent class are embarrassing. Though it’s not the entire problem, it’s not helping here. I’m a Cruz fan, but to classify him as a Type-A free agent is ridiculous. In the next CBA, I expect this will be addressed, possibly through eliminating draft-pick compensation altogether.

A Lesson in Bilateral Monopoly Bargaining

In the 2007 draft, the Braves selected UGA closer Josh Fields in the second round. He didn’t like the offer he got—niether did his agent, Scott Boras—so he went back to UGA for his senior year.

Negotiations between his agent, Scott Boras, and the Braves — as they are wont to do when the infamous Boras is involved — got hairy. A few weeks into the process, the Braves called Fields directly and gave him an ultimatum: sign now or talks would go dead until August. He didn’t sign. Talks went dead. And the more he hung around Athens, the more he prayed about it, the more he considered the logistics of the deal, the more staying seemed like a better option. “It just became a no-brainer,” Fields said. “It felt right to come back.”

One report indicates that the offer he rejected was likely between $400,000 and $450,000.

Fields had a good senior season, and was selected in the first round by the Seattle Mariners. Though the negotiations have been long, yesterday Fields agreed to a deal between $1.5 and $2 million.

Not every man could turn down nealy half-a-million; but Fields did, and it was the right decision. Scott Boras does know what he’s doing.

Is Bud Selig Worth $18 Million?

According to Sports Business Journal, that is about what Bud Selig received in compensation in 2007. It’s difficult to know his marginal contribution to revenue growth, given that the books are not open and I’m not exactly sure about what he does. However, what I am sure of is that Bud Selig has presided over an exceptionally prosperous era of baseball. While he may not deserve all the credit, he ought to get some.

From 2002–2007, MLB’s revenue increased 12.44% per year on average. During this same span baseball attendance was up 3.23% per year; and though attendance was down 1% in 2008, it was still up 3.4 % over 2006.

In addition, Selig seems to do a good job of handling the unique personalities of many proud owners. He’s kept labor peace, and he’s handled significant pressure from the federal government on several fronts. A lot of people don’t like Bud Selig, possibly for being rich or ending one All-Star game in a tie, but it’s hard to argue that he’s bad at his job. And considering that he is 74, no one would blame him for retiring, and I think the owners feel his compensation is what they need to retain his services.

There are a lot of rich people in the world. If you don’t like it, fine; but, it’s not Bud Selig’s fault. He possesses valuable skills, just like players on the field, and he’s going to be compensated for those skills or go somewhere else.

Is Francoeur Worth $4 Million?

Jeff Francoeur and the Braves swapped arbitration figures yesterday, and there is a significant spread between their salary expectations.

Coming off a season during which he hit .239 with 11 homers and a .359 slugging percentage, Francoeur is asking the Braves for $3.95 million. The club has offered the 25-year-old right fielder a salary of $2.8 million.

Is Francoeur worth $4 million to the Braves? The quick answer is yes, absolutely, and it’s not even close. Despite all the flaws in his game and his failure to meet misplaced expectations, he’s still a major-league baseball player. Even during his awful 2008 season, his marginal revenue product (MRP) contribution for his play in the field was approximately $12 million. This may seem like a lot, but all major-league quality baseball players are valuable assets. During the first six years of service, the Collective Bargaining Agreement (CBA) limits player compensation, and that is why we can easily say that many players are worth more than they are being paid.

However, that is not really the relevant question here. We want to know what he can expect to get. After completing three years of service—I’m simplifying here, because the exact criteria are complicated—players are eligible for arbitration. Each team and player submits salary figures that represent options to an arbitration panel. After a brief hearing, the panel decides which side’s figure is most appropriate and the player is awarded that salary: there is no compromise. The no-compromise requirement is designed to encourage the parties to negotiate a solution, or risk the other party’s preferred outcome.

The criteria for determining a player’s worth are set out in the CBA.

(12) Criteria
(a) The criteria will be the quality of the Player’s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal), the length and consistency of his career contribution, the record of the Player’s past compensation, comparative baseball salaries (see paragraph (13) below for confidential salary data), the existence of any physical or mental defects on the part of the Player, and the recent performance record of the Club including but not limited to its League standing and attendance as an indication of public acceptance (subject to the exclusion stated in subparagraph (b)(i) below). Any evidence may be submitted which is relevant to the above criteria, and the arbitration panel shall assign such weight to the evidence as shall appear appropriate under the circumstances. The arbitration panel shall, except for a Player with five or more years of Major League service, give particular attention, for comparative salary purposes, to the contracts of Players with Major League service not exceeding one annual service group above the Player’s annual service group. This shall not limit the ability of a Player or his representative, because of special accomplishment, to argue the equal relevance of salaries of Players without regard to service, and the arbitration panel shall give whatever weight to such argument as is deemed appropriate.
(b) Evidence of the following shall not be admissible:
(i) The financial position of the Player and the Club;
(ii) Press comments, testimonials or similar material bearing on the performance of either the Player or the Club, except that recognized annual Player awards for playing excellence shall not be excluded;
(iii) Offers made by either Player or Club prior to arbitration;
(iv) The cost to the parties of their representatives, attorneys,
etc.;
(v) Salaries in other sports or occupations.

The exact rules seem to place great emphasis on the most recent season; however, the “length and consistency” of career provision does open the door for mention of past performance. I don’t know the extent to which arbitrators are allowed to consider the quality of play from past seasons. Still, it seems that Francoeur’s bargaining position will suffer from having his worst season just prior to arbitration.

On his side is his 2007 Gold Glove Award. It is certainly a significant achievement that is eligible for consideration. However, once you bring up defense, his most-recent season is brought to light. And according Plus/Minus, 2008 was a poor defensive season for Francoeur: he made 17 fewer plays than the average right fielder, ranking him 30th in the league.

How about his “public appeal”? Jeff Francoeur has been the team’s most popular players for the past few seasons. Only recently have some fans turned on him; but even with that, he still remains popular. He’s a local boy who excelled when he was first called up, and fans still remember this. But how do you measure his popularity without resorting to press comments and testimonials, which are barred? Attendance likely isn’t going to help, as the team’s attendance fell by nearly eight percent last season. I’m not sure if marketing reports like a Q-Score are admissible, but if they are I think this information is going to have to carry the day if Francoeur is going to win his case.

I have done some analysis of player salaries during arbitration years, but I haven’t gone that in depth. In my book, I report that position players tend to receive 77 percent less than their estimated marginal revenue product during their fourth through sixth years of service (estimated). Based on his previous three-year average of his MRP ($13.78 million), that puts his expected salary at $3.17 million. Based on his past season alone, his expected salary is $2.84 million. The Braves appear to have the better offer on the table.

The estimates I present are rough, but I believe they are biased in Francoeur’s favor. I’m estimating his worth on the median difference in player salaries from their MRPs during four-to-six years of service. Francoeur is only entering his first arbitration hearing and therefore ought to be on the low side of this average.

The Braves Get Lowe

Finally, a bit of positive news for Braves fans. The team has supposedly agreed to terms with Derek Lowe on a four-year $60 million contract.

The Braves didn’t appear to be interested in Lowe early in the offseason. Whether this was a plan of playing hard-to-get or a desperate reevaluation when the other options fell through is difficult to know….well, actually it isn’t. ;-) I feel that Lowe has been an under-appreciated pitcher. I estimate him to be the ninth most valuable pitcher over the past three seasons.

Over the next four seasons, I estimate Lowe to be worth $57 million, which is close to what he will receive from the Braves. The rotation is now looking like Lowe, Javier Vazquez, Jair Jurrjens, Kenshin Kawakami, and some combo of Charlie Morton, Jo-Jo Reyes, Jorge Campillo, and Tommy Hanson. Now, if the team can get an outfield bat, they may be in business.

So, Why Don’t You Tell Us How You Really Feel?

I nominate this for Tyler Cowen’s “Markets in Everything” series.

ebay

SELLING THE HEART AND SOUL OF ONE USED ATLANTA BRAVES FAN. For 25 years I have proudly stood by my team in the good seasons and the bad. I’ve been around for worst to first and I was there when Sid slid. I grew up listening to Skip, Pete, Don & Joe call the games and felt like I had lost a family member when Skip left us. I have always been proud to call the Braves MY TEAM no matter what. When the Braves allowed John Smoltz to leave for Boston they allowed the heart of the franchise to walk right out of the front door and should be ashamed of themselves. Money should not have been an object in these negotiations…John Smoltx IS the Braves. The ownership and management of the Atlanta Braves should be ashamed of themselves, not only have the let down themselves, their team, and the city of Atlanta but they have shattered the core of the Braves family. Upon selling my support for the Braves I will no longer attend games, watch them on TV, listen on the radio, or follow them online. I am unable to support a team who so haphazardly gave up the FACE of the franchise. This is a sad day for Atlanta and for Braves fans everywhere. Congratulations Boston you just recieved THE CLASS ACT of major league baseball and he will literally pitch for you until his arm falls off. 100% of the winning bid for this auction will go directly to the John Smoltz foundation. The focus of The John Smoltz Foundation is to serve and fund organizations that change the lives of children and adults in a profound and positive way. The John Smoltz Foundation is dedicated to making a difference in the lives of people who in turn will pave the way for others to do the same.

Here’s an image from Talking Chop.

talking chop

I wouldn’t get too down. A year ago, Atlanta residents felt similarly about the Falcons.

C’mon Braves, At Least Be Honest

Before I get started, I am on the record defending the Braves’ decision to not match Boston’s offer for John Smoltz. I think it was the right move; and, even though many disagree, I think it should be understandable from a business perspective. So, why is the front office botching the PR of this difficult decision in a way that makes the organization look even worse?

Here is the response of CEO Terry McGuirk.

“John is a great guy,” McGuirk said. “He follows his own head, and I just don’t know what’s going on with him right now. We’ve offered less of a guarantee, but we’ve offered a substantial guarantee. Coming off an injury like this, we feel like it’s the right thing that we should be doing [in regards to the incentive-laden offer].

“We’ve offered him a package that would get him in the $10 million range, if he were to pitch a full season and pitch well. For him to walk away from that and to go to another place, I’m just shocked and surprised.

“I read today in something that his agent said the other set of incentives [from the Red Sox] were ‘more attainable.’ If John Smoltz pitches like John Smoltz pitches, I think [the Braves’ incentives package] is attainable. If he’s not healthy, it’s not going to happen.”

Supposedly, the Braves had a contract on the table for $2 million guaranteed, with a $1 million bonus for being on the active roster and an additional million for every month that he spends on the active roster. On it’s face, McGuirk’s statement is literally true. If Smoltz is on the roster opening day through the entire season, he would receive a total of $9 million ($2 million base, $1 million roster bonus, and $6 million for every month he is on the roster). I think it is fair to say that this is in “the $10 million range, if he were to pitch a full season.” However, this ignores the reality that Smoltz is not capable of pitching the entire season.

Rehab will most likely keep Smoltz off the active roster until late-May/early-June according to all the reports that I have seen. Thus, Smoltz’s contract would have maxed out at the $7 million which has been reported in the press. The Red Sox are guaranteeing around $5 million before another $5 million in incentives even kick in, and the incentives appear to activate with lower thresholds that are congruent with Smoltz’s recovery schedule. The difference between the Sox’s and Braves’ offers is $3 million, not $1 million, as McGuirk seems to insinuate—or maybe he thinks $7 million in the $10 million range.

We also have the following quote from GM Frank Wren.

“We were willing to pay John as much or more than the Red Sox to pitch,” Wren said early Thursday evening. “We just weren’t willing to pay him as much as the Red Sox were to not pitch.”

Again, this is misleading. I think it refers to the fact that the guaranteed bases represent the biggest difference between the two contracts. But, unless the Braves were offering greater marginal incentives than the Red Sox, the statement that the Braves are paying him “as much or more than the Red Sox” to pitch is incorrect. Let’s assume that the Red Sox and the Braves have the same incentive plan on the table ($1 million roster bonus plus $1 million per month); thus, here is what Smoltz will get in millions of dollars according to his time on the roster.

Months	Braves	Red Sox
0	$2	$5
1	$4	$7
2	$5	$8
3	$6	$9
4	$7	$10

Wren is apparently referring to the first derivative of the incentive schedule. For both teams, the change in the salaries with roster time is identical; however, Smoltz clearly gets more income from the Red Sox when he doesn’t pitch and when he pitches. Being healthy for the Braves wouldn’t get Smoltz up to the salary that he would earn with the Sox. Technically, what Wren said could be true—we don’t know the exact details of the Sox’s incentives—but from Smoltz’s perspective his he still gets more from the Red Sox even if he is healthy. Now, if the Braves had offered $2 million base with $2 million per month pitched, then being healthy for the Braves could get him a salary equivalent to what the Red Sox offered.

Why are the Braves doing this? I’m no PR expert, but I think it’s time for the Braves to scale back the whiny commentary. When the offseason started, I didn’t expect the Braves to have a healthy Smoltz on the roster in 2009 nor to acquire Rafael Furcal. Yet, fans are now up in arms complaining about the failure of the team to get these guys on the roster.

In Furcal’s case the team cried foul over alleged agent misbehavior. It doesn’t matter who is at fault. In both cases the team should have just said, “We tried to acquire a player that we thought would help the team; however, financially we were not willing to meet the salary demands without sacrificing the long-run competitiveness of the team. We wish him well, and we will continue to pursue other avenues to pursue the team.” This doesn’t eliminate fan disappointment, but I think the negative effects of the rejection wouldn’t linger in fans’ minds as long as they have because the team engaged in a meaningless blame game.