The Baltimore Orioles addressed their two biggest needs in one fell swoop Wednesday, agreeing to a two-year deal with left-handed reliever Mike Gonzalez while plucking third baseman Garrett Atkins off the scrap heap pile. For this article, we’re going to look at Mike Gonzalez and why Baltimore felt comfortable inking him to a contract that was worth more than he earned his team in 2009.
Gonzalez’s $6 million annual salary over the next two years represents a steal on the market. In a two-part series, Sky Andrecheck looked at the correlation between WAR and salaries and found that the dollar value of a win ranged between $8 million and $5.4 million, well above the commonly accepted theory of $4.5 million per win.
Without getting into the multi-year aspect of the deal, I ran the numbers off the model that projected $6.4 million per win and found that a WAR of someone making $6 million (this data is for 2009, the dollar value for a win in 2010 will be higher — although likely not by much) is 0.9. That just happens to be the WAR of Gonzalez in 2009, when he posted a 2.42 ERA in 74.1 innings, saving 10 games while striking out 90. FanGraphs valued Gonzalez’s contributions at $4.1 million.
Let’s recap quickly here to make sure the point is not lost: FanGraphs’ win values showed that Gonzalez was worth $4.1 million in 2009, but we just established that a market value of 0.9 WAR gives you a $6 million salary. FanGraph’s valuation has the true dollar value of Gonzalez’s production in 2009 being worth $4.1 million. In that lens, he just got grossly overpaid.
Ah, but there’s a difference between dollar value and market value.
Take, for example, Marco Scutaro. Scutaro inked a two-year, $12.5 million deal with the Red Sox to be their starting shortstop. His WAR was 4.5, suggesting a $28.8 million salary was commensurate for his production. FanGraphs agrees with this valuation, saying that to get Scutaro’s production from 2009 in hindsight, you would have to dole out $20.2 million.
Why did Scutaro, then, get underpaid by about $12 million a year as opposed to Gonzalez’s being overpaid about $2 million a year? Simple. Market value, plus expected role. Scutaro is not expected to repeat his 2009 season, which affects matters considerably. His age affects matters considerably as well, while Gonzalez was one of the premier relief arms on the market, and would have been one in any free agent market. (Scutaro was the best shortstop option on the 2009-10 market, but this was a product of availability.)
Middle relievers are paid incredibly depressed prices, mostly because of the volatility of the position plus the sheer number of talent available at that level. It’s a large reason why, despite elite status as a setup man, these elite players still don’t receive gobs of cash compared to the average middle reliever. Gonzalez is a great example. Even though he was worth $6 million in 2009, no one would have paid him that much money to repeat his role as a setup man — and Baltimore took advantage of that. Gonzalez saw his $4.1 million valuation and $6 million deal affected by his status as a middle reliever. While he accepted a deal that was over his dollar value in 2009, he should be expected to return significantly more now that he’s Baltimore’s closer and should notch at least 30 saves.
To use another comparison, I looked for a pitcher that had around 30 saves, a 10.9 K/9 like Gonzalez, and ERA of 2.42. I settled on his former teammate, Rafael Soriano. Soriano had 27 saves, a 12.1 K/9 and 2.97 ERA. That’s very close to what you can expect Gonzalez to do in 2010.
Soriano recently inked a $7.5 million deal with the Tampa Bay Rays to be their closer after accepting arbitration from Atlanta and being immediately jettisoned. FanGraphs valued him at $9.1 million in 2009 off of 2 WAR. It’s amazing how much saves can add to your bottom line. Gonzalez actually settled for less money than he would have received if he had spent 2009 closing.
Why? Because saves aren’t a statistic married to a player’s talents. Saves are a product of opportunity. Take Detroit’s Fernando Rodney, for example. 37 saves, 4.40 ERA, 7.3 K/9. His WAR was a paltry 0.3 in 2009 and worth $1.4 million because while he racked up the saves, he wasn’t particularly good while doing it. I’d take Gonzalez any day of the week over Rodney, and yet Rodney had 27 more saves. (It goes to show the ever-increasing intelligence of the baseball community, then, that Rodney finds himself frozen out of the free agent market. He will be forced to sign a bargain deal after entering the winter seeking a three-year, $30 million deal according to the Boston Globe. As early as two, three years ago, Rodney would have landed a deal similar to what he was seeking.)
Baltimore paid exactly market value for Gonzalez’s services — based off his WAR, meaning that they underpaid for someone who figures to be a great closer. Baltimore should expect to walk away from this deal having gotten a fantastic return on their investment.
To dredge up a previous article, this was the point I was essentially making when reviewing Brandon Lyon‘s contract — a deal that got much vitriol from the baseball community. I argued that Lyon would be considered neither under- nor overpaid by the end of his deal. I based this off Lyon’s likelihood of opening the season as the Astros closer and being worth the market value commensurate with a closer’s role. In essence, I looked at what he was likely to do over the next three years and reverse-engineered a contract from there. Even if he was an average closer, the salary paid would end up being commensurate with his market value.
The main difference between my glowing assessment of the Gonzalez deal and Lyon’s deal is that the Orioles paid a salary that was tempered by his middle relief role and his likely high value as a closer. Baltimore paid market value to take advantage of expected return on investment. Houston did it the other way around: they paid expected market value to take advantage of return on investment.
See the difference? Baltimore’s return on investment with Gonzalez can only go up. Lyon’s can only go down.