It’s Hot Stove Season, the time of year when we fill our baseball-less hours with baseball talk. Hot Stove Season used to be all about trades and how much players were worth compared to each other. Now, it’s all about money and how much players are literally worth. It’s not as much fun, unless you’ve gone to business school or something. Which, ahem, I have.
So, no, I don’t mind all this talk about money. I’ve spent the better part of a career valuing businesses and product lines and I actually kind of enjoy doing the same thing with baseball players. And you already thought I was a sick puppy, didn’t you?
The approach I use incorporates two simple things, salary information and Win Shares. I won’t go into an explanation, because I did that last year when I talked about Net Win Shares Value for 2004. Suffice to say that we’ve updated Net Win Shares Value for 2005 in The Hardball Times Baseball Annual 2006. Specifically, the Annual includes the methodology, rankings and various comparisons for 2005 Net Win Shares Value. We look at which player contracts were the best deals and which were the worst; which 2004 free agents were the best signings for 2005; how arbitration players compare to free agents; and how first basemen compare to second basemen etc. etc.
Plus, everyone who buys the Annual will be given a spreadsheet that lists every player’s 2005 salary and Net Win Shares Value, as well as other stats like his major league service time and the year he signed his contract. The Annual is at the printer and will be shipping in about a week, so be sure to purchase your copy now.
But here are a few simple factoids for you. When you compare a player’s Win Shares Above Bench (WSAB) to the salary he was paid over the minimum, you find that major league teams paid $790,000 for every Win Share over bench. Since it takes three Win Shares to equal a win, that means that teams paid $2.37 million for each win above a bench player. If you looked at last year’s article, you’ll notice that $2.37 million is actually less than last year’s figure, but that’s because I changed the parameters somewhat this year. Sorry about that.
However, that figure includes all players, whether they were free agents or arbitration-eligible or not. If you break players into those three categories, following is the amount that was paid for each WSAB:
- Free Agents: $1,302,607
- Arbitration Eligible: $703,030
- Not Arbitration Elgible: $16,218
What’s more, if you break down arbitration-eligible players into the number of years they’ve played, you see the salary “ladder” that is built into the arbitration system (as outlined by the Collective Bargaining Agreement). For instance, players with three to four years’ experience were paid $481,058 per WSAB, players with four to five years’ experience were paid $764,105 per WSAB and players with five to six years’ experience were paid $903,603 per WSAB.
Don’t forget that it takes three Win Shares to equal a win, which means that major league teams paid, on average, $4 million for each free agent win above bench ($1.3 million times 3). If you’re looking at next year’s free agents, that’s the most relevant number because it’s the going rate. It’s what I call “Fair Market Value” for a player. By that I mean that it’s not necessarily the “right” salary to pay a player, but it’s what the “market” paid, on average, to all free agents last year.
So what does that mean for this year’s free agents? Let’s talk Brian Giles. Last year, Giles created 23 Win Shares Above Bench. If you were to pay him the going free agent rate ($1.3 million) for that many WSAB, he would be worth $30 million next year. That’s a lot of moolah, as we say in the biz.
However, it’s unlikely that Giles will produce 23 WSAB next year. The Bill James Handbook projects Giles’s batting stats for next year, which I’ve figured are equal to about 18 WSAB, or $23 million. However, the Handbook also states that his injury risk is high, which further cuts into his value. Plus, he’ll be 35 years old next year, which means that he could experience a sudden dropoff in production. These things are hard to predict.
In short, Giles is a high risk/high reward kind of guy, the J.D. Drew of this year’s free agent season. I wouldn’t be surprised if someone takes that risk and offers him a three-year, $45 million contract. If he’s willing to absorb some of that risk, his salary could be even higher.
Rafael Furcal produced 14 WSAB this past year, and he’s a bit more predictable than Giles. In fact, the Handbook‘s stats place him around 12-14 WSAB next year as well, which would make his one-year worth equal to about $17 million. Think that’s a lot? I agree, but if Furcal were willing to sign a one-year deal he could probably receive that much money. Players give up salary for security when they sign long-term deals and, at the age of 28, Furcal is liable to sign a four-year deal for something like $12 million a year. The shorter the contract, the closer his salary will get to $17 million.
I’ll have more to say about Fair Market Value in a few weeks. In the meantime, we have the 2005 Net Win Shares Value Calculator, which calculates a player’s relative contractual value in 2005. And we’ll tell you more about the THT Annual over the next week as well.
The Net Win Shares Value Calculator
To calculate a player’s Net Win Shares Value, you need just a little bit of information. Specifically, you’ll need his Win Shares and Expected Win Shares, as well as his contractual status (free agent, arbitration-eligible or not arbitration-eligible) and his salary. For salary information we recommend the USA Today Salaries database. For a player who is not eligible for arbitration, the calculator will compare his contract to all contracts.
References & Resources
One site I plan to visit a lot this offseason is MLB’s free agent tracker.