A-Rod opts out (and oh yeah, Red Sox win World Series)

Has there been a free-agent on the market of this calibre since, well A-Rod was last on the market?  (Oh yeah, congratulations to the Red Sox for winning the World Series.)  For those of you who somehow didn’t hear, Alexander Emmanuel Rodriguez announced that he’s tearing up the most expensive contract in baseball history (that rush of wind is the sigh of relief coming from Arlington, Texas) and pursuing the free agent market.  And the Yankees have already sworn that they won’t talk to him (but they will need someone to play third next year!), and leaving New York is never easy.  But, do you want a reigning MVP (has that been made official?), who can play third base or if you asked him nice enough, shortstop, who will probably get himself up to 700 homeruns (or more?) while playing for your team?  Maybe you’d like the man who will go down as the “Greatest Hitter of All-Time” (debatable, but another day) will go into Cooperstown wearing your hat?

All it will cost you is around $30 million per year (want to take a guess on exactly how much?), or roughly, what the Florida Marlins paid everyone on their roster this past year.  Don’t worry about buying a lemon.  Every sign points to you getting the real deal.  I suppose A-Rod could decide to join a Trappist monastary halfway through the contract, but that’s a danger with every MLB player.  We’ve got a good idea of A-Rod’s talent level, and let me tell you, it’s quite high.  He’ll probably start to decline a little bit, but he’s going to be the best in the world for a bit longer.

But he’s not worth $30 million per year, at least not for what he does on the field.  This past all-star break, I asked the question of how much a run costs.  I’ll ask it again.  I have 2007 salary data for most MLB players, but I stuck to those making $1 million or more.  The reason is that rookies and young guys who tore it up this year (Ryan Braun, Hunter Pence, Jack Cust) were all generally making the minimum salary because they haven’t had a chance to hit free agency/arbitration yet.  The guys making a million have at least had the chance to do a bit of negotiation on their behalf.  I also have Baseball Prospectus’ rating of Runs Above Replacement (if I’m not mistaken, it’s just batting stats taken into account here).  I regressed salary on Runs Above Replacement.  The equation of what MLB teams will pay for a run was roughly, a base salary of $4M for a bum who does nothing more than a AAA/waiver wire/bench guy could give you (a sad statement right there), and roughly $110,000 for each run above replacement thereafter.  A-Rod had 85.6 runs above replacement, leading the league by 8 runs over 2nd place finisher Magglio Ordonez.  When you work it out, he’s worth about $13.6 million based on his 2007 performance, or about $9 million less than he was actually paid.  No one is worth $25 million per year.  (If it makes Yankee fans feel better, he was only the fifth most over paid hitter in baseball behind Jason Giambi, Derek Jeter… I swear this is supposed to make Yankee fans feel better… Richie Sexson, and Jason Kendall.) 

This isn’t to say that A-Rod isn’t worth more than just his on-the-field performance.  He will sell t-shirts, and extra tickets, and maybe even prop up a fledgling cable network for your team.  But, if you pay him $30 million per year, it looks like you’d better be getting $15-20 million extra in revenue from A-Rod being a part of your organization.  In Baseball Between the Numbers, there’s a chapter on just this topic.  They suggest that a team that could best benefit from A-Rod financially in the “extras” that he brings is a team that’s on the cusp of a playoff birth, where A-Rod would make the difference between the playoffs and golfing in October (after all, there’s only one October!)

So we need to find a team that can afford to splash out $30M, needs a third baseman or shortstop, and where A-Rod would be the difference between making the playoffs and not making the playoffs.   Well, looking at team payrolls, we can probably exclude all the teams south of $70 million.  I have no rationale behind that other than I just pulled it out of the air.  We’ve eliminated 11 teams. 

Even assuming that all the remaining teams had a league average hitter playing 3B (the Twins have Nick Punto at third!  A-Rod was 110 runs better!), A-Rod is worth 82 runs over the league average guy, so eight wins.  Teams remaining that were within eight wins of the playoffs?  Detroit.  Seattle.  The Mets.  Atlanta.  Milwaukee.  St. Louis.  San Diego. The Dodgers.

Detroit could use an upgrade over Brandon Inge.  Seattle already has their own mistake of a contract at third base in Adrian Beltre.  The Mets have David Wright.  Atlanta has Chipper Jones, who could, in theory, move back to left field.  Milwaukee has Ryan Braun, who might move anyway because he’s an awful fielder.  San Diego is the land of Kevin Kouzmanoff, who’s been less than thrilling to Pads fans.  St. Louis and Scott Rolen?  LA and Nomah?  So, we’re down to Detroit, and maybe Atlanta, Milwaukee, San Diego, St. Louis, or the Dodgers.  With the exception of the Dodgers, they’re not the sorts of markets where an investment of an extra 15 million over what a guy’s worth can be recouped from the size market base that they have. 

The Cubs and Angels, playoff teams both, although mostly in name, and ones in big markets, have been mentioned as possible suitors as well.  Apparently, they have money to burn.  Speaking of money to burn, I left out one team that needs a third baseman, is non-playoff team without A-Rod, but a playoff team with him, and they have plenty of money.  They play in a big media market and could probably benefit from A-Rod’s presence on their own cable network.  The Yankees!  For what it’s worth, the Red Sox also need a 3B with Mike Lowell about to become a free agent, but other than sticking it to the Yankees, the move doesn’t make financial sense.  (But then again, they could stick it to the Yankees!  If they do that, however, don’t the Red Sox become the very Yankees they hate?)

So, this could become a Yankees-Dodgers-Angels-Cubs-Red Sox? bidding war.  My guess is that someone will end up with a $32 million dollar per year trophy for the next five years (I completely made those numbers up) but when looked at with a hard eye, will live to regret buying something that just isn’t worth that much.

A-Rod is really good, but he’s just not quite that good.  No one is.

Oh and by the way, the Red Sox are World Champions.  Which is nice, but not the news of the day.

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13 Responses to A-Rod opts out (and oh yeah, Red Sox win World Series)

  1. tangotiger says:

    The average team payroll above the minimum is about 75 MM. The average team (.500) wins above replacement (.300) is 32.4. So, the cost per win is 2.3MM per win. Free agents, rightly or wrongly, earn double that.
    If you assume ARod is worth 7 wins above replacement, he should get 16MM next year. But, as a free agent, he gets to earn double that.
    If all teams decided to not go after free agents, their prices should go to where it should be. However, that’s not how teams operate. They operate given a budget, and WILL spend to that budget. And where do they put taht money, on the second or third year guy earning way too little? Of course not. They put it in free agents pockets.
    That’s the market speaking.

  2. Pizza Cutter says:

    Ah, my old radio days are coming back to haunt me:
    That’s the market speaking. This is Statistically Speaking!

  3. Theo says:

    Ok…so what’s wrong with the Hardball Times’ Win Shares Value Calculator? It says at 26 win shares over bench, he was worth what he got paid this year.

  4. Pizza Cutter says:

    My method looks at what the actual retail price currently being paid is for a run. What I’m saying here is that A-Rod’s performance is worth $13.6 million based on the prevailing salaries of the 2007 season. After factoring out the projections of what extra revenue A-Rod will generate independent of his field performance, and assuming that his performance will stay relatively consistent, if a team is paying more than $13.6M or so for his services, they are overpaying the market rate. You never want to pay too much for something that you can get somewhere else more cheaply.
    As to why not the THT calculator, RAR were more quickly available to me. And it was 2:00 am.

  5. Theo says:

    Oh no, I believe you…(ok maybe I believe Tango), just wondering why win shares gives such a different answer.
    I do think trying to assign a value to runs is problematic though- it doesn’t take into account one of A-Rods biggest selling points, that all those runs come in the form of one player, who plays a very weak offensive position (assuming he returns to SS).
    You also end up comparing free agents to guys in their first few seasons when their performance can’t affect their pay that much. Ok, some guy in his first few arbitration years, getting a couple of million and adding half as many runs as A-Rod makes 30 million look bad, but those guys aren’t on the market anyway and are basically kept artificially cheap while they’re under control and don’t have any service time.

  6. Jay Gibbons says:

    baseball prospectus has a stat called morp (marginal value above replace player), which approximate player’s value based on warp and the fact that free agent pricing is non linear (http://www.baseballprospectus.com/glossary/index.php?search=MORP). I think it might only be available to subscribers, but if you look at albert pujols’ free pecota card, it predicted he would deserve $34,050,000 this year.

  7. Jeff Kent says:

    Thought I’d play along with the random-player-username game (hey, that even rhymes).
    When reading this post I pictured a man hunched over his desk in a dark room with only a desk light on, sipping on his 7th cup of coffee…. just to let you know.
    Jay and theo, is there a point that I’m missing with the random people/username thing here?

  8. Pizza Cutter says:

    Other than the fact that I despise coffee (tastes awful!), you pretty much nailed it.

  9. Guy says:

    “My method looks at what the ACTUAL retail price currently being paid is for a run…..if a team is paying more than $13.6M or so for his services, they are overpaying the MARKET rate. You never want to pay too much for something that you can get SOMEWHERE ELSE more cheaply.” (emphasis added)
    Pizza: the problem with your analysis is that it combines free agents with arb and pre-arb players. So you aren’t measuring what it will “actually” cost a team to go acquire 85 runs on the free agent market. Try to find some free agents who are actually getting paid $110K/RAR. You won’t find any. So a team cannot find what A-Rod offers “somewhere else” at a cheaper price. Would it be “better” to get Miguel Cabrera and have him provide cheap runs for your team? Sure, but the Marlins won’t let you do that. You really need to analyze free agents separately to make this work. And when you do, you’ll find that $30M is in the right ballpark for A-Rod.

  10. Pizza Cutter says:

    To correct for the pre-arb vs.FA problem (arbitration is something of a weird case… you have some leverage in negotiation, but not as much), I restricted the sample to those making more than one million. This way, I’m not lumping in the pre-arb guys who basically being renewed at 500K with the guys who got the full benefit of market competition. It’s not an exact proxy (washed up guys who sign 700K contracts are left out), but it does correct somewhat for the problem you mentioned.
    A-Rod is priced at $30M per because he benefits from the fact that he is something of a monopsony, which is really what will drive his price up. The market for “good 3B” (apologies to Mike Lowell) or “good SS” consists pretty much of him exclusively this year (and GMs have no incentive to be patient and wait for a better value to come along… they generally have a shelf life of a few years). There are no other players on the FA market that even come close to his run contribution. He controls the entire supply of A-Rods, so he can sell at his whim to the highest bidder. If there were a dozen A-Rods around, they’d probably all be priced at around $12-15 million or so. Teams are willingly engaging in an irrational market, made that much more irrational by things such as owners “wanting to make a statement”, and that makes no sense.

  11. tangotiger says:

    Sorry Pizza, but you are wrong. Your “1 million$” method doesn’t work (though good idea… maybe if you took 5MM or greater, it would work out much better).
    I analyzed virtually all free agent signings in the 2007 off-season, and their salaries were centered on the linear “going” rate of twice what they “should” have been paid.
    If ARod gets 31.5MM per year, it will be exactly based on him being a 7 WAR player (wins above replacement), an he’ll be paid twice whatever 3.5 WAR players will be around.

  12. Jose Gomez says:

    Alex Emannuel Rodriguez the best ever on a base ball field, for ever and ever

  13. [...] it looks like you’d better be getting $15-20 million extra in revenue from A-Rod being a … credit : [...]

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