“If I'm going to spend $20 million [on Carl Crawford] and go to $144 million without taking care of the bullpen or third base, as a fan, when do you get to the place where you say, 'What are my expectations of the owner, and what am I willing to pay for a ticket?'” –Arte Moreno (Source: Los Angeles Times)
What, indeed, Mr. Moreno?
As expressed previously on The Biz of Baseball, backing away from Carl Crawford’s megadeal was understandable when the money had a chance to be well spent elsewhere. Spending only conservatively on relievers makes plenty of sense, too, although one might argue that is not quite what the Angels did with their multi-year signings of Scott Downs and Hisanori Takahashi. Third base, though, was a painfully obvious place to invest. If the Angels had signed Adrian Beltre at the same terms the Rangers did, he would have been directly replacing a replacement-level combination of third basemen at a cost of $14 million for the first year, setting a break-even point of about 2.7 WAR, which essentially remains the break-even point throughout the contract. Beltre has produced less than 2.5 WAR just once since his first full season in 1999, and that was in 2001. He has a median 3.9 WAR since then and, by the way, is fresh off a 7.1 WAR mark last year, demonstrating that his bat is still a force outside of Seattle and making his contract a calculated risk well worth taking.
The Angels had taken plenty of heat already for their failure to catch either of their seemingly clear top two free agent targets. Initially, at least Moreno had his principles and lower ticket prices to which he could cling for the hope of good PR. Those did nothing for the Angels’ playoff chances, naturally, but even for a big market team, there are worse offenses than being risk-averse.
Then, it happened.
In one fell swoop, the Angels rid themselves of two relatively cheap, useful pieces, Juan Rivera and Mike Napoli, in order to take on one of the consensus worst contracts in Major League Baseball, that of Vernon Wells. Due to the significant backloading of Wells’ deal, this increases the Angels’ 2011 payroll from what it would have been before the trade by approximately $11.5-12.5 million, depending on Napoli’s arbitration outcome. From 2012 onward, the commitment is simply Wells’ salary since the Angels could have had the option to non-tender Napoli after 2011 if they really wanted to save money, or Napoli would become eligible for free agency after 2012. In other words, accounting for the shed Rivera contract and lack of commitment to Napoli, the Angels committed something like $75 million to Wells over the next four years.
Note that Adrian Beltre is only making $62 million over those four years. Oh, and Carl Crawford is only making $74 million.
Now, it would be (quite literally) short-sighted to compare Wells’ deal to only the first four years of Beltre and Crawford’s contracts since, obviously, the ends of those contracts are what makes them most daunting. However, Moreno’s argument for avoiding Crawford was that he would have to raise ticket prices; that argument is driven by the annual salary commitment, not the fact that the deal extends three extra years. Plus, as is well established by research in sabermetrics and sports economics, fans—especially in big markets—are willing to pay more for a superior product. Two years down the road, the Angels’ payroll will be just as high as it would have been if they had signed Crawford or Beltre, and the fans probably will not be nearly as excited to pay the difference.
As for the risk of those extra years on each deal, all of it can be analyzed somewhat conceptually. To earn his contract, as described previously, Adrian Beltre does not even need to match his career average performance. The expectations of Beltre, using a 5% revenue growth estimate, are essentially as follows:
2011: $14 million, $5.25MM/fWAR = 2.7 fWAR
2012: $15 million, $5.5MM/fWAR = 2.7 fWAR
2013: $16 million, $5.8MM/fWAR = 2.8 fWAR
2014: $17 million, $6.1MM/fWAR = 2.8 fWAR
2015: $18 million, $6.4MM/fWAR = 2.8 fWAR
2016: $16 million, $6.7MM/fWAR = 2.4 fWAR
The Angels’ would-be expectations of Crawford, then, are as follows. (Note: These are slightly different than Boston’s expectations due to the luxury tax.)
2011: $14 million, $5.25MM/fWAR = 2.7 fWAR
2012: $19.5 million, $5.5MM/fWAR = 3.5 fWAR
2013: $20 million, $5.8MM/fWAR = 3.4 fWAR
2014: $20.25 million, $6.1MM/fWAR = 3.3 fWAR
2015: $20.5 million, $6.4MM/fWAR = 3.2 fWAR
2016: $20.75 million, $6.7MM/fWAR = 3.1 fWAR
2017: $21 million, $7.035MM/fWAR = 3.0 fWAR
Finally, the Angels’ expectations of the Vernon Wells trade, including the salary shifts described above and the realignment of the Angels’ left field/catcher/DH situation:
2011: $12 million, $5.25MM/fWAR = 2.3 fWAR
2012: $21 million, $5.5MM/fWAR = 3.8 fWAR
2013: $21 million, $5.8MM/fWAR = 3.6 fWAR
2014: $21 million, $6.1MM/fWAR = 3.4 fWAR
This is where intuition comes into play a bit more in the absence of strong projection systems. Nonetheless, few would argue with the claim that Crawford and especially Beltre are significantly more likely to exceed their contract values than Wells, especially in the first four years. Wells’ 2010 season provides the sole glimmer of hope, as he bounced back to 4.0 WAR after accumulating just 3.0 WAR total from 2007-09. Still, there is significant risk that he never reaches that level again, a stark contrast to Beltre and Crawford, who appear poised to outplay the first several years of their contracts with relative ease. Whether the surplus value they create early on will justify the closing years of their contracts is difficult to say, but at least their teams can be confident that some amount of surplus value is on its way.
So what does this mean for Arte Moreno? What should the fans say when the owner goes to $75 million for the wrong player, still without taking care of third base? Well, they should say what they are saying right now, and they should stop wanting to pay. In the future, Mr. Moreno, put wins on the field, and do so not stingily, but wisely, whether that involves big contracts or not. Supply and demand will take care of the rest.
Lance Gurewitz is currently a freshman at the Wharton School of Business at the University of Pennsylvania. He also serves as the MLB Trade Rumors Florida Marlins Team Coordinator. You can read and discuss his baseball analysis and other sports musings in 140 characters or less by following @LanceWG42 on Twitter
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