Analysts need to change the way they evaluate new contracts

The lackluster free agency of the past two winters and the huge amounts or recent extensions have concerned many writers and fans over the perception that the league is trying to suppress players’ salaries.

Perhaps for the first time ever, you are much more likely to find an article complaining that a player’s new contract is underpaying him as opposed to overpaying him. Bryce Harper’s then-record setting contract of $330 million was seen as a bargain by multiple outlets. Even Mike Trout’s $430 million extension, the current record, was seen as a bargain! They are right, too.

The analysis has been the same for a decade or longer. A player signs a new contract in free agency, and all the baseball sites write articles evaluating how well the team did, because it used to be that many teams had to be somewhat careful with how they spent their money. The analysis began focusing on whether or not the team evaluated the player appropriately, because not too long ago, front offices used to stubbornly stay behind the times in terms of player evaluation.

The infamous Ryan Howard contract that guaranteed him $125 million over five years is a great example of this. Besides the fact that he was given a market rate contract two years before he hit free agency, the deal grossly mis-evaluated Howard’s skills as a baseball player.

Thankfully, now that teams have learned how to properly value a player’s skills, this sort of thing really is not much of problem anymore. Yes, you do get the occasional Eric Hosmer contract and Chris Davis contract that are still fair to criticize, but they are more the outliers than the norm.

Contract analysis over the past several years has focused more on how well a team has evaluated a player based on the contract given. Sometimes it is done purely on a $/WAR basis, a model that is fine as a start, but it is too oversimplified to draw conclusions on without further information. A lot of comprehensive analyses will conclude that a new contract is some degree of “overpay” or “underpay,” though often not to an excessive degree.

Now every team has some kind of analytics department, with their own set of internal projections telling them how much a player is worth. The thing about projections is that they do not tend to vary by very much, which is a possible explanation as to why some free agents shared their suspicions over the similar offers they get from multiple teams.

Of course that still does not rule out collusion, and one should never overestimate billionaires’ desires to become richer, but at least at the team level, it appears that front offices are taking the concept of “value” too far.

Dallas Keuchel and Craig Kimbrel remain unsigned (though I argued that the Kimbrel situation is not so simple). Ronald Acuña and Eloy Jiménez recently signed ludicrously team-friendly extensions that appeared to show that the problems with players’ salaries had reached a nadir, and then Ozzie Albies signed that abhorrent contract that is so team friendly that it is down right exploitative.

To be perfectly clear, players should never be criticized for accepting these kinds of deals. It’s their lives, and it’s their families that will benefit from the life-changing money. They are the ones who will suffer the consequences if they turn down an extension and then suffer an injury or series of injuries that prevents them from setting themselves up for life.

The problem is a players union that failed to foresee baseball’s current economic situation. Players on their rookie deals are woefully underpaid, and by the time they hit free agency, they are either too old and/or not good enough to make that money back on the market unless they are superstars. As a result, young players have little leverage during negotiations for an extension. These cheap extensions then set a precedent that makes it even harder for players to make money in free agency, but especially so in arbitration.

(I don’t understand why someone would side with billionaires over millionaires, but they are out there. They will frequently say things along the lines of “it’s a business” or “I’d love to get paid that kind of money to play a game” or “it’s still life-changing money anyway.” I could go on. These are nothing more than tired strawman arguments that miss the point entirely.)

I recall push-back on the way writers evaluated new contracts starting a couple of years ago. I remember seeing some writers on Twitter emphasizing the importance of getting those extra wins on the market regardless of what they might cost. The league is raking in money, after all.

The concept of opportunity cost prevented me from buying into this completely, because money wasted is money that can’t be spent elsewhere. It made sense to me, though. Last year, I wrote an article criticizing the Cubs for not spending more money on Yu Darvish. Hopefully I will never write anything again that will age that poorly, but I stand by the points I made in that article.

When I wrote up my analysis on the Dodgers signing A.J. Pollock, my argument was very simple: one of the most competitive and richest teams in baseball paid money to fill a need. As long as the player acquired can be reasonably projected to be significantly more productive than the in-house alternative, the money doesn’t matter.

I would argue that as long as this hypothetical player is at least average and taking the place of a replacement level player, or is it at least a two-win upgrade, then it’s fine. Reasonable people can disagree over how to define how productive the incoming player has to be and for how long, of course. What is not reasonable, however, is claiming that a player making $25-30 million a year on a new contract with a competitive team needs to be one of the best players in baseball in order to be worth it.

The Blue Jays raised some eyebrows not long ago when they extended Randal Grichuk. They gave the 27-year-old a five-year, $52 million deal, and they did so while he was still two years away from free agency. He would have been a mid-tier free agent at best if he had been allowed to hit free agency. That being said, he is a fine defensive center fielder who is an above-average hitter, though that is more for his pop than his OBP. I don’t have a problem with this deal whatsoever. If his performance falls off a cliff, the Blue Jays will still be able to pay whomever they want.

The game of baseball has never been more lucrative. The league made $10.3 billion last year, and it is made up of teams owned by billionaires whose franchises are worth at least a billion dollars each. Any team could have afforded to sign both Bryce Harper and Manny Machado, and for far more than they ended up signing for.

As long there is reasonable expectation to get production, and outside of the extremes where a team failed in its evaluations, there should no longer be any such thing as an “overpay” in dollars. Value just isn’t that important anymore, not when teams are making so much money that they can easily live with contracts that go bust. Teams need wins! To quote Tom Tippett, the former head of analytics for the Red Sox: “If you’re the most efficient 85-win team in baseball, then you’ve failed.”

The players are the ones putting the product on the field. The players are why we watch. They deserve to get as much of MLB’s revenue as they can.