Do large dollar, free-agent pitching contracts actually work out?

[mikelink45]

 

Thanks Mike, good information.  I read a few of those links yesterday as well.  As mentioned I got lazy and didn't bother with some of the bad FA signing but two jumped out at me yesterday (because of the Twins affiliation) that I almost wrote about.  Thanks for mentioning them both...Sanata/Mets and Silva/Seattle.

 

One point about these long-term FA contracts that hasn't really been discussed is the guaranteed money aspect.  MLB is unusual in that these contracts are all guaranteed.  Unlike other sports where that is not always the case (some or very little of the large contracts are guaranteed).  Its gotta drive the finance guys within these clubs nuts doing forward time value of money calculations and future cash flow analysis.  I'd love to see the insurance policy premiums on some of these contracts as well.  It probably adds another 10% to the cash outlay these teams make when doing these big contracts.  Maybe they self-fund the insurance pool to save costs...

You are absolutely right - in the NFL the big contract has a portion of guaranteed money, but then the team can walk away.  I have long wondered where the business acumen is for these billionaire owners in the way that they run their league.  To blame the union is lazy - the union is doing its job, the agents are doing their jobs, but the owners often compete with themselves. 

[Mike Sixel]

 

You are absolutely right - in the NFL the big contract has a portion of guaranteed money, but then the team can walk away.  I have long wondered where the business acumen is for these billionaire owners in the way that they run their league.  To blame the union is lazy - the union is doing its job, the agents are doing their jobs, but the owners often compete with themselves. 

 

You blame the owners for seeing profits go up, and the value of their teams going up? I'm not sure I understand......the players are getting a lower percent of revenue than they have in a long time.

[gunnarthor]

 

 

 

Overall, I think the Sanchez deal worked out fine. He produced between 7 - 12 WAR (depending on the flavor) over the 5 seasons of his deal - basically, one elite season, one elite but injured season, and three mediocre to crappy seasons. For $16M/yr, that is more or less market price. And honestly, given his age and injury history, that's kind of Darvish's, well, not best-case scenario, but a good-case scenario. 

5 years, 80m, 118 starts, 92 ERA+, 720 innings, 7 WAR is fine? I sure hope you judged the Nolasco and Hughes deals similarly.

 

Hughes, in case you're wondering, 4 years, 40m, 77 starts, 93 ERA+, 477 innings, 5.5 WAR. (He does have two more years yet)

 

If the Twins think Darvish is going to perform like Sanchez, they should run away.

 

[TheLeviathan]

I'd rather get bad value on the backend of a FA contract than dump a bunch of prospects chasing a rental mid-season.  

 

Of course, you can do both, but I'd rather lock in an asset with cash as opposed to trades.

[Otto von Ballpark]

 

5 years, 80m, 118 starts, 92 ERA+, 720 innings, 7 WAR is fine? I sure hope you judged the Nolasco and Hughes deals similarly.

 

Hughes, in case you're wondering, 4 years, 40m, 77 starts, 93 ERA+, 477 innings, 5.5 WAR. (He does have two more years yet)

 

If the Twins think Darvish is going to perform like Sanchez, they should run away.

Context matters. $/WAR over 5 years is not the only way to measure a contract, and often it's not the best way.

 

The Tigers signed Sanchez coming off a WS appearance.  His work in taking them back to the playoffs the next 2 seasons was valuable to Detroit, even if he did not help in the last few seasons (although he was only really a hindrance in one).

 

Nolasco was signed coming off a 66 win season, and Hughes was extended coming off a 70 win season.  They were signed/extended to provide long-term rotation stability and pretty much failed at that goal completely (although Hughes' first season was very valuable, his original contract was on much different terms so it's not terribly appropriate for this comparison).

 

No one "thinks" Darvish is going to perform like Sanchez. I believe you are the one who brought up Sanchez. Just that $/WAR isn't the best way to evaluate Sanchez's deal in Detroit, and it may not ultimately be the best way to evaluate Darvish's deal either.

[mikelink45]

 

You blame the owners for seeing profits go up, and the value of their teams going up? I'm not sure I understand......the players are getting a lower percent of revenue than they have in a long time.

No blame and I do not want the owners to get richer, but I would like to see performance based pay.  Which might mean more money when  the player is young and less when he gets older.  

 

[jimmer]

 

No blame and I do not want the owners to get richer, but I would like to see performance based pay.  Which might mean more money when  the player is young and less when he gets older.  

And what would we be looking at when rating performance?

[diehardtwinsfan]

 

No blame and I do not want the owners to get richer, but I would like to see performance based pay.  Which might mean more money when  the player is young and less when he gets older.  

Neither the owners, nor the union, will back that.

[beckmt]

Smart FO's will look at the age of the player and his expected value.  Darvish may turn out to be a bust, but I would take the risk.  Japanese pitchers in the major leagues have had their value longer than your average American pitcher.  Not all but the ones who turn 30 and are good, tend to do well later.  Tanaka being the best case, though the Seattle one did well until arm surgery. 

[markos]

 

5 years, 80m, 118 starts, 92 ERA+, 720 innings, 7 WAR is fine? I sure hope you judged the Nolasco and Hughes deals similarly.

 

Hughes, in case you're wondering, 4 years, 40m, 77 starts, 93 ERA+, 477 innings, 5.5 WAR. (He does have two more years yet)

 

If the Twins think Darvish is going to perform like Sanchez, they should run away.

If you could guarantee me that Darvish will provide 9 WAR over the next two seasons, I think I'd make that deal no matter how badly years three through five turn out. Wins are so valuable to this team right now (where they are on the win curve, where they are compared to their competition, where they are in their competitive window), and their financial situation is so good in the near future. 

 

I guess it is partially a philosophical question. Sanchez basically went 6 WAR, 3, 1, -1, -2 over the five years of his deal. Would he have been better if he had gone 2, 2, 2, 2, 2 over that same window and ended up with something like 150 starts, 100 ERA+, 950 innings, 10 WAR? I think there is a decent argument that the former is better, even though the overall value is worse. And as spycake pointed out, the Tigers certainly wouldn't have been better off with the latter version.

 

Anyway, we can certainly agree to disagree on this. I just think that with Sanchez, the Tigers paid for and got some elite performance. Obviously not as much as they would have liked, but enough to make the deal "fine" in the end.

[darin617]

Ask Arizona how they feel right now about Zack Greinke and his massive contract. Pretty much $35M a year through 2021.

 

Actually, Greinke might be the solution to the Twins problem if you want a starting pitcher to anchor the staff. Get Arizona to eat like $12-15M a year & a fair prospect package.

[Seth Stohs]

 

Let me add some more names - I have put urls in many of the conversations about Darvish and free agents.  So considering you went to the HOF free agent or big contract list lets put together another list and I would suggest that when the contracts were signed there were some expectations that never got met:

 

1. To keep this controversial - start with Johann Santana and the Mets last big contract.
2. The historic contract or money dump for Mike Hampton
3. The continuing saga of the James Shields heist
4. Another old Twin Carlos Silva bedazzling Seattle for four years and too much
5. John Danks - yuck
6. Edwin Jackson - double yuck
7. Josh Beckett - world series hero to helpless on the mound
8. Barry Zito - Cy Young winner who lost his smoke and mirrors. 
9. Igawa - Yankees - similar to a shortstop and a slugger we signed and only had play in the minors before going home.
10. A. J. Burnett - Yankees, who knew he could only pitch in Pittsburgh
11. How about one more former Twin who cashed in and checked out - Carl Pavano, Yankees.
12. Kevin Brown was a star pitcher, his contract became an albatross
13. Matt Cain took one good year and got 6 great pay checks for an average of less than 1 WAR per year.
14. Homer Bailey is cruising along with .2 WAR per year.  Good thing his paycheck has enough to drown those sorrows. 
15. Another ex-Twin - Matt Garza - got a nice contract from our neighbors to the East and has earned a total of negative WAR in return. 

For your own continued enjoymend - The 10 worst contracts in MLB - https://www.foxsports.com/mlb/story/worst-contracts-mlb-history-050316

2013 MLB's worst Pitcher contracts https://www.cbssports.com/mlb/news/mlbs-worst-contracts-pitchers/

 

Top 20 worst contracts - https://www.thesportster.com/baseball/top-20-worst-contracts-in-mlb-history/

 

This article attempts to find a metric to measure poor contract performance - 

http://bleacherreport.com/articles/2700091-mlb-metrics-101-exposing-the-worst-contracts-of-baseball

 

I mean, this is the reality of free agent pitcher contracts of more than 4 years... They very rarely pan out. It's generally the same with hitters too. 

 

I'm all for the Twins signing Darvish. 4 years, $110 million works for me... Odds are it won't pan out for whoever signs it. Also, it'll likely take 5 years to sign him, which of course makes the likelihood of it panning out less likely.

 

But, the Twins time frame to win could be the next three years, and hopefully he'd be at least a 2-3 for those three years. 

[mikelink45]

 

And what would we be looking at when rating performance?

I am sure that these MLB teams and their analytics guys can give you an answer - I cannot.  I just know the burden of the remainder contract on a team when the player is no longer providing value impacts the quality of the team and the ability to give more appropriate players contracts.

[old nurse]

 

Signing Sanchez probably would have precluded them from signing Nolasco and Hughes, not Santana and Castro. Also, it is a little misleading to say Sanchez never topped 200 innings, because 1) he topped 195 innings three years in a row prior to his contract, and 2) he did top 200 innings in 2012 if you include the 20 playoff innings.

 

Overall, I think the Sanchez deal worked out fine. He produced between 7 - 12 WAR (depending on the flavor) over the 5 seasons of his deal - basically, one elite season, one elite but injured season, and three mediocre to crappy seasons. For $16M/yr, that is more or less market price. And honestly, given his age and injury history, that's kind of Darvish's, well, not best-case scenario, but a good-case scenario. 

More or less market price?  The market when he signed was 4-5 million per war.  Signing a contract for the expectation of 17-22 WAR is not more or less a good contract  when 12 is produced.

[mikelink45]

 

Neither the owners, nor the union, will back that.

I agree, but my intent was to create discussion not to write for either of these factions or the players.  I am only writing as a fan of the game.

[Otto von Ballpark]

Ask Arizona how they feel right now about Zack Greinke and his massive contract. Pretty much $35M a year through 2021.

I bet the Arizona fans feel pretty good about it, Greinke was worth 6.3 bWAR last year and helped them to the postseason.

 

With deferred money, the present-day remaining value of Greinke's deal is 4/130. If Darvish gets something near that range, it quite likely justifies the Greinke deal, rather than pushes Arizona to get out from under it.

 

Spotrac shows the Diamondbacks with a $109 mil payroll for 2018. They should be a lesson that the Twins absolutely can make a market rate contract for Darvish work for them. (Arizona also has a billion dollar TV deal, so I am guessing any Greinke deal would have to make sense from a baseball perspective, not as a salary dump.)

[mikelink45]

 

I mean, this is the reality of free agent pitcher contracts of more than 4 years... They very rarely pan out. It's generally the same with hitters too. 

 

I'm all for the Twins signing Darvish. 4 years, $110 million works for me... Odds are it won't pan out for whoever signs it. Also, it'll likely take 5 years to sign him, which of course makes the likelihood of it panning out less likely.

 

But, the Twins time frame to win could be the next three years, and hopefully he'd be at least a 2-3 for those three years. 

I hear about front loading a contract and I know they do not do it, but I would prefer to offer a bonus amount for 3 - maybe 4 years.  If they are still going strong another FA signing would be available. 

​I know how bad negotiations were with legendary GMS like Branch Rickey and I do not want it to go back to that model, but models and times change and I think we are at a point where all of baseball has to examine how it does business. 

[Riverbrian]

 

The job of the Twins front office is not to identify the number of bad FA pitching contracts and simply sit the whole market out. 

 

I bolded and increased the font size of this sentence because it's the best sentence of the off-season thus far. 

 

 

[Otto von Ballpark]

More or less market price? The market when he signed was 4-5 million per war. Signing a contract for the expectation of 17-22 WAR is not more or less a good contract when 12 is produced.

That seems low for the 2012-2013 offseason. Dave Cameron pegged it at $4.5 mil per win already in the 2008-2009 offseason:

 

https://www.fangraphs.com/blogs/win-values-explained-part-six/

 

Here is an article estimating it was close to $7 mil by the time Sanchez was signed:

 

https://www.fangraphs.com/tht/methodology-and-calculations-of-dollars-per-war/

 

And I have no idea where you get your range going up to 22 WAR. It was a 5 year, $80 mil contract, including the signing bonus and option buyout. Note that Greinke signed for 6/147 that winter with an opt out, Hamilton signed for 5/125, and BJ Upton scored 5/75, so it's not like Sanchez's deal was any kind of market anomaly at the time. (If you want examples of bad deals, those latter two fit the the bill. I wouldn't call the return on the Sanchez deal great or anything, but it turned out pretty close to fair.)

[Riverbrian]

 

No blame and I do not want the owners to get richer, but I would like to see performance based pay.  Which might mean more money when  the player is young and less when he gets older.  

 

Mike... what you want is going to clash with the current CBA.

 

 

 

 

Edit: I see you've already answered the question that I originally asked so I have edited this post. 

 

 

 

 

 

 

[Riverbrian]

 

I agree, but my intent was to create discussion not to write for either of these factions or the players.  I am only writing as a fan of the game.

 

Is your overall viewpoint on the Darvish signing or large free agent pitching contracts either based or influenced by this "Fan's perspective".

 

[prouster]

No blame and I do not want the owners to get richer, but I would like to see performance based pay. Which might mean more money when the player is young and less when he gets older.

You're describing free agency. Players with better track records earn more. Players with worse track records earn less.

[twinssporto]

 

I'd rather get bad value on the backend of a FA contract than dump a bunch of prospects chasing a rental mid-season.  

 

Of course, you can do both, but I'd rather lock in an asset with cash as opposed to trades.

This is actually a great point.  Think about the Yankees...One reason they are perpetually good is that they do large free-agent contracts and usually leave their farm system alone.  They rarely trade away their decent prospects to get good players. They just use cash.  Must be nice...

[ashbury]

You're describing free agency. Players with better track records earn more. Players with worse track records earn less.

Also the arbitration years are heavily influenced by performance. Only the pre-arb years are more or less "scale".

[old nurse]

 

That seems low for the 2012-2013 offseason. Dave Cameron pegged it at $4.5 mil per win already in the 2008-2009 offseason:

https://www.fangraphs.com/blogs/win-values-explained-part-six/

Here is an article estimating it was close to $7 mil by the time Sanchez was signed:

https://www.fangraphs.com/tht/methodology-and-calculations-of-dollars-per-war/

And I have no idea where you get your range going up to 22 WAR. It was a 5 year, $80 mil contract, including the signing bonus and option buyout. Note that Greinke signed for 6/147 that winter with an opt out, Hamilton signed for 5/125, and BJ Upton scored 5/75, so it's not like Sanchez's deal was any kind of market anomaly at the time. (If you want examples of bad deals, those latter two fit the the bill. I wouldn't call the return on the Sanchez deal great or anything, but it turned out pretty close to fair.)

Fangraphs had it listed as 88 million. By the logic used to say that Sanchez was a good contract then Nolasco was more or less a good signing because in the end he produced  5 fwar for his contract

[jorgenswest]

If in general long term deals are too often bad deals, then the amount of dollars/war calculated based on those deals is not going to be helpful in arguing whether a deal is good or not.

 

If teams are able to get better at projecting forward, we will see the dollars/WAR go down with the decrease in deals like those to Nolasco and Sanchez. Perhaps the slowness of the market this year is an indicator of teams realizing the pay off on their 4 year investment hasn’t justified the cost.

[Riverbrian]

 

If in general long term deals are too often bad deals, then the amount of dollars/war calculated based on those deals is not going to be helpful in arguing whether a deal is good or not.

If teams are able to get better at projecting forward, we will see the dollars/WAR go down with the decrease in deals like those to Nolasco and Sanchez. Perhaps the slowness of the market this year is an indicator of teams realizing the pay off on their 4 year investment hasn’t justified the cost.

 

I think your explanation of the slowness could indeed be a reflection of teams looking at similar spreadsheets and coming up with similar conclusions and attempting to execute some kind of metric principle.  

 

However... In the end... it's going to come down to:

 

How many choices the player has and how many choices the team has. Once that is established.

 

Cost will be determined and it probably won't match up with the algorithm. 

 

 

[Otto von Ballpark]

Fangraphs had it listed as 88 million. By the logic used to say that Sanchez was a good contract then Nolasco was more or less a good signing because in the end he produced 5 fwar for his contract

Setting aside that you are still ignoring all context, $80 mil for 11.6 fWAR = $6.9 mil per win

 

$49 mil for 5 fWAR = $9.8 mil per win

 

Sanchez's actual fWAR, at Nolasco's $ per win average, would have cost the Tigers $33.7 mil more than they actually spent. I wouldn't call a difference of $33.7 mil as "more or less" the same.

[old nurse]

 

Setting aside that you are still ignoring all context, $80 mil for 11.6 fWAR = $6.9 mil per win

$49 mil for 5 fWAR = $9.8 mil per win

Sanchez's actual fWAR, at Nolasco's $ per win average, would have cost the Tigers $33.7 mil more than they actually spent. I wouldn't call a difference of $33.7 mil as "more or less" the same.

When someone earlier  argued "more or less" there is no more context.  When 6.9 million becomes close enough to 4.5. to 5. million then there is no such thing as a bad contract.

[mikelink45]

 

You're describing free agency. Players with better track records earn more. Players with worse track records earn less.

That is true, but the issue for the team signing the playing is whether that track is about to come to an end.  Most of these large signings are based on past performance without real projection of what the future would be.  I know Zips and others do it on Fangraphs and I am sure that the analytic departments have the ability.  Projections mean more than the track record for the contract, the track record opens the door, the projections close it.