More About the Free Agents

In one of his recent ESPN chats, Rob Neyer asked his readers for their ideas about this year’s surge in free agent salaries for starting pitchers. Never one to shy away from expressing myself, I sent Rob an email with a theory I’d been thinking about. Here tis:

My theory is that we’re seeing the effects of postseason success. Sort of a repeat of the Schilling/Johnson World Series. In this year’s Series, the Sox and Cardinals presented startling contrasts. Obviously, the Sox had Schilling and Pedro, but the Cardinals simply didn’t have a dominant starter. That is, a starter who could dominate and not just rely on his defense. And they lost the Series.

Arguably, the Yankees lost because they didn’t have that dominant starter. And the Astros had a great Series thanks partially to Clemens. These were high-profile events. Obviously, Beltran and others had a lot to do with all this. But my guess is that we’re seeing a semi-return to the “Dominant Pitching Wins Short Series” theory. (as opposed to the “It’s All Luck” theory).

Most of the teams paying big bucks for top starters have been contenders (Red Sox, Yankees) or teams that think they’re pretenders (Mets, Diamondbacks). Which brings me to the other part of my theory.

Dominant starters are getting awesome salaries because postseason games are worth more than regular season games. So if a GM believes his team can/will make the playoffs, and he believes that starter will make a difference in the playoffs, he’ll pay more for a starter than a regular player. This actually makes some sense economically, as long as the GM isn’t delusional.

I’m not trying to justify these salaries. Some of them can’t be justified. But I tend to think that’s what’s going on in some people’s brains.

Really, I don’t know these things. I’ve never talked to a Major League GM in my life. But I think my theory makes a little sense. However, in a recent column, Rob brought up the hole in my theory:

My colleague Studes, of Hardball Times fame, weighs in with this: (inserts part of quote)

Well, yes. They were. But the problem with this theory is that none of the pitchers signed for big bucks, with the possible exception of Carl Pavano, has more than a tiny chance of qualifying as a “dominant starter” in 2005 (or beyond). Russ Ortiz? Jaret Wright? Kris Benson? These are exactly the sort of pitchers the Cardinals did have in the World Series.

Of course, you can imagine my reaction to his article: “Colleague! He called me a colleague!” (feel free to use a Sally Field inflection as you read this). As I struggled to read the rest of his column through the tears welling in my eyes, I came across Rob’s own theory:

Maybe there’s a simple explanation, so simple that we’ve missed it. Maybe a good number of baseball franchises are wallowing in so much dough that they just have to spend it.

Yeah, I’ve got to admit, that’s a pretty good theory too. Certainly, the Diamondbacks and Mariners have upped their free agent budget this year. Not to be a business geek, but teams should view players as investments, not expenses, and all businesses have to invest wisely to thrive. Perhaps these two teams, among others, have come to realize that.

I also wonder if the now-tenuous prospect of not having to pay for the Expos’ operating losses (while also making a bundle from the sale of the franchise) has had some impact. Again, just a theory. Did I mention that Rob Neyer called me a colleague?

Coming down from my euphoria, I thought of a simple way to test our theories. Let’s figure out how much money major league teams are spending on all free agents this offseason, not just pitchers, compared to previous years. Then let’s compare pitchers and position players to see if there is a significant difference between them.

To make the comparisons, I used the same methodology I used in my article from a couple of weeks ago. That is, I totaled up all free agent multi-year contracts, plus any single-year contracts worth $3 million or more, to compare all the high-profile signings from 1998 through 2004. Here are the results for all position players:

    YEAR    AVG SAL/YR    AVG YRS      #
    1998    $4,427,976       3.06     35
    1999    $3,561,905       2.50     14
    2000    $6,601,587       3.00     21
    2001    $6,038,810       2.85     20
    2002    $5,681,250       2.44     16
    2003    $4,590,947       2.39     28
    2004    $4,933,160       2.46     24
              ========     ======   ====
            $5,076,568       2.70    158

There have been 24 high-profile position player deals so far, which is more than most previous years, and Carlos Beltran, Carlos Delgado and probably several other guys haven’t signed yet. But the total dollars per year ($4.9M) are still significantly below some previous highs. In fact, the average payment per year this year is about equal to the overall average ($5.1M).

The difference in free agent position players this year doesn’t appear to be happening at the high end of the spectrum. For example, Adrian Beltre just received $64M for five years; last year, Vladimir Guerrero received $70 million for five. When you look at the data, you see that the real difference is at the lower end. So-so players seem to be getting better deals.

Last year, Vinny Castilla received a one-year deal for $2.1M. This year, he got two years for $3.1M a year. Cristian Guzman, Mike Matheny, Omar Vizquel, etc. etc. seem to be outweighing last year’s Fernando Vinas and Scott Spiezios. Also, two-year contracts seem to be a bit more in vogue this year (witness Juan Castro and Mike Redmond in Minnesota, or Henry Blanco with the Cubs).

It’s still too early to make a call, and this analysis doesn’t include an assessment of the supply of free agent players (there do seem to be more marquee players available this year than last year). But the early returns indicate that teams are indeed spending more money on position players at the lower end of the “regular player” spectrum.

Now here’s a look at the pitchers (note: I didn’t include the Matt Clement, Carl Pavano and Jaret Wright deals, because they haven’t yet been officially announced):

    YEAR    AVG SAL/YR    AVG YRS      #
    1998    $4,438,426       2.78     18
    1999    $3,998,485       2.27     22
    2000    $4,896,635       2.92     26
    2001    $5,379,861       2.72     18
    2002    $5,088,531       1.94     17
    2003    $4,507,887       2.14     28
    2004    $5,690,104       2.31     16
              ========     ======    ===
TOTAL       $4,798,454       2.45    145

This table tells an entirely different story. So far, high-profile pitchers are making more per year ($5.6 million) than in any previous year. Last year, only five pitchers signed a deal worth $7 million or more per year (Colon, Millwood, Pettitte, Maddux and Ponson) and there was also the Roger Clemens discount ($5 million!!!).

This year, $7 million seems to be the going rate for a good major league starter. Seven pitchers have already signed deals for $7 million a year or more (not including Clement, Pavano or Wright) and several pitchers — Morris, Wells and Williams – have deals with playing time incentives that will get them to the $7 million mark if they stay healthy.

By comparison, Wells signed a one-year deal with the Padres last year for $1.25 million. In 2001, he signed a two-year deal with the Yankees for $3.25 million a year. This year, he got a minimum of $4 million a year, for two years, with that $7 million upside.

Last year, Benitez signed a one-year deal for $3.5 million. This year, it’s $7.2 million a year for three years. Last year, Cory Lidle signed a one-year deal for $2.75 million. This year, he’s at $3.2 million per year for two years.

As I said before, it’s still early. And maybe there are more good pitchers available this year than in past years. But the market for pitchers does seem to be up, and it seems to be up for all pitchers — starters, relievers, frontline and mid-rotation. So perhaps my good buddy Rob and I are both right; maybe there’s just more money being spent AND maybe teams are overvaluing pitchers. Can’t wait to discuss this with him over a couple of beers…

References & Resources
Leone for Third has a very nice analysis of the free agent contracts, in which he includes the quality of the free agents and some illustrative graphs. Nice job.

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