Free Agents Are Not Free
How might a pricey free agent splash have impaired the Rangers' ability to sign Ian Kinsler to a long-term contract extension?This is the second article in a series dedicated to revealing what I consider to be the underlying principles to building a winning baseball organization.
[Editor's note: The first installment of David's multi-part series, entitled "You Can't Build A World Series Champion" and first published on June 20th, 2009, can be viewed here.]
PRINCIPLE NO. 2 -- FREE AGENTS ARE FOR SUCKERS
In the past four years, major league teams have signed free agents to contracts with salaries that total $4.75 billion. In 2009, free agents signed in the past four years are scheduled to earn $1.02 billion of the $2.75 billion that major league teams are scheduled to pay this year. Twenty-five percent of player payrolls are scheduled to be paid to the 65 free agents who earn at least $5 million per year.
On average, these recently signed free agents make more than three times what other players in the league earn per year, which begs the question -- are free agents worth the price? To answer the question, win shares were used to compare the productivity of free agents to non-free agents.
WIN SHARE INTERLUDE
The win-share concept is a Bill James invention that seeks to sum a player's offensive and defensive contributions to his team during a given year. The total number of win shares for the players on a given team is equal to three times the team's win total, thus each win share is equivalent to one-third of a win. Using this standard, a player with 24 win shares for a given season would theoretically have accounted for eight wins for his team. While the accuracy of the defensive metrics that are included in the formula used to calculate win shares has been questioned by some, the metric does provide a reasonable way to rank players for a given year.
To provide a sense of how win shares correspond to player performance, it is worth noting that the average number of win shares for players who spend at least half of the season in the major leagues is approximately nine. According to The Hardball Times, Albert Pujols led position players with 35 win shares in 2008, while Cliff Lee led starting pitchers and Mariano Rivera led relievers with 25 and 17 win shares, respectively. Seventy-eight players finished the 2008 season with at least 20 win shares, including Josh Hamilton, Ian Kinsler, Milton Bradley, and Michael Young. In general, All-Star-level position players accumulate 25-35 win shares, All-Star-level starting pitchers have 22-30 win-shares, and All-Star-level relievers have 15-20 win shares.
FREE AGENTS VS. THE OTHERS
The comparison of the performances of free agents to non-free agents was restricted to the 2008 season, since that is the most recent data available. The free agents included players who were signed to contracts in 2006, 2007, or 2008. The 'others' category included everyone else and was dominated by players on pre-arbitration and arbitration contracts, as well as deals that were signed by teams prior to allowing their own players to become free agents. Although free agents accounted for more than 35 percent of player salaries in 2008, there were no free agents among the top 10 players ranked based upon 2008 win shares, only two free agents among the top 25, seven among the top 50, and 13 among the top 100.
When viewed as a population, the performances of recently signed free agents were surprisingly underwhelming. Shown in the table below are the average 2008 win shares for 661 non-free agents and the 118 free agents who played in 2008 (an additional 45 free agents were paid a cumulative $145 million, despite not playing in the major leagues in 2008).
Comparing free agents to non-free agents reveals that teams that fill roster slots are generally receiving below-average performance. Breaking the free agents into the filthy rich (30 players with annual salaries greater than $10 million), the very rich (28 players with annual salaries of $5-10 million), and the merely rich (41 players with annual salaries of $2.5-5 million) reveals that highly paid relievers tend to significantly outperform their less well-compensated counterparts. Free-agent position players earning in excess of $10 million also outperform their non-free agent counterparts, though only slightly:
COMPARABLES FOR AVERAGE FREE AGENT PLAYERS
To provide a sense of the on-field performances that teams received for their free agent investments, consider that the average $10 million-plus free agent starting pitcher would have ranked behind Dana Eveland, Jon Garland and Jorge Campillo in 2008 win shares. The average free agent starting pitcher earning $5-10 million in 2008 would have ranked behind Cha Seung Baek, Jeremy Bonderman and Dallas Braden.
The average $10 million-plus free agent reliever finished tied with Joey Devine, Darren Oliver, and Dan Wheeler. The average $5-10 million free agent reliever finished tied in 2008 with three injured or discarded Rangers: Kameron Loe, Franklyn German and Joaquin Benoit. For position players in 2008, the average highly compensated free agent would rank behind a couple of former Rangers (Fernando Tatis and Jerry Hairston Jr.), while the $5-10 million free agents would rank alongside Gabe Kapler, Brad Ausmus and Ryan Spilborghs.
WHY FREE AGENTS ARE BAD BETS
Signing free agents tends to be an extremely risky affair due to three factors:
(1) With rare exceptions, players available on the free agent market are in their 30s. The peak performance for the vast majority of players occurs when they are in their mid-to-late-20s. Teams typically pay free agents for their post-peak performance at a rate that is set by the numbers that they put up during their peak years, since their peak years immediately precede their free agent years.
(2) Teams often sign their best players to contract extensions, rather than allow them to test free agency. This means that teams signing free agents are often paying top dollar for players that were considered expendable (or at least too expensive) by their parent teams.
(3) Signing a Type A Free Agent (as defined by the esoteric Elias Rankings) requires that the signing team give up their first- or second-round draft pick to the team losing the free agent.
One thing that is often overlooked by sportswriters and fans alike is the often-devastating effect that lavish free agent spending can have on a team's ability to maintain its core players. For instance, had the Rangers succeeded in signing Barry Zito in 2006, would Tom Hicks have been as willing to sign Ian Kinsler to what now appears to be an extremely team-friendly contract in 2008? And if the team had decided to put off signing Kinsler to save a few bucks in 2008, then they would now be faced with trying to sign him to a contract worth two to three times the one that he signed or risk losing him to free agency after the 2011 season.
For those who were disappointed that the Rangers failed to sign a starting pitcher like Derek Lowe or Oliver Perez or A.J. Burnett during the off-season, it is worth considering what effect adding one of those players would have on the Rangers' willingness to sign Josh Hamilton or Derek Holland or Jarrod Saltalamacchia or Elvis Andrus or Chris Davis to a long-term, team-friendly contract in the next few years.
Although signing big-name free agents can be a great way to create off-season buzz, the practice is far more prone to creating problems than solving them. Smart teams tend to eschew lavish free agent spending, instead using their available budgets to sign their own young, productive players to long-term contracts.
[Additional Reading: "You Can't Build A World Series Champion" (David Brown)]
9 Comments | in Analysis, The Season
Reader Comments (9)
nice stuff david, but this isn't really going to please the "spend some money and get some pitching in here" crowd. :)
Wonderful stuff, of course. Anyone else having trouble with the articles loading all the way down the page, and not at the top?
Excellent article, spur.
Hoow many parts will there be in the series?
This post doesn't include a discussion of some of these trade-and-resign deals. I think that's where the value is. You trade for the start player when he's still in his prime, and resign him. Thus, not a FA. Most guys who get to free agency were not good enough bring back decent trade compensation, which is why they reach free agency.
Another thing of note: The salary breakdown is a little wierd. Why are $10+ RP performing so much better than average, while $10+ SP are performing wy below average? Perhaps it's because, for the most part, RP are paid a lot less than SP. Therefore, when you say "$10 mil+ RP" you're talking about a guy who is being signed with the idea that he will be one of MLB's best relievers. But when you say "$10 mil+ SP" that starts WAY below the "Ace" level. True Ace-level SPs get $15-20 mil per year. I wonder what would happen if the positions were broken down as a percentile rank by position (i.e. FA SP in the top 10% OF SP salaries vs. those signed with between the 10th and 25th percentile, etc). Most of the guys at the very, very top of the free agent market perform fairly well, in the end (see Texiera, ARod, Clemens with Toronto and again with NYY, even Millwood).
I think a lot of times a team puts together some money (say, $12 mil) to make a run at a big-name guy. That big-name guy ends up getting $13.5 mil from the Yanks, Red Sox, Dodgers, or Mets, and the small-market club is left with $12 mil that they feel they have to spend on... someone, don't they? At least that's how they see it. So they go spen $10 mil/yr on a guy who is really a number 3/4 starting pitcher woth $6-7 mil/yr, but would be their #2 starter on their crappy little team. And when he struggles (or, really, pitches like the #4 SP that he is), he goes down as a big free agent "bust".
The problem is that ALL of the FA value is at the very TOP of the market, and so if you can't QUITE spend at that level, you're best off not spending anywhere close to that top level. But that's a terribly hard sell to the fans. A league wide salary structure is an absolute neccesity.
I would still like to see Texas go out and get either Lackey or Sheets in the offseason, if only to keep them away from the Angels. But I am aware this is unlikely given the current financial state of the franchise and the unlikelihood that Hicks will be able to unload his share anytime soon. But I guess I'm jumping the gun - there will be plenty of time later to talk about FA. For now - pennant race!
I find it both interesting and curious that while a lot of ink is spilled over the salary of players, very little is mentioned about the renumeration of managers/coaches. Just about everybody (myself included) seems very happy that The Rangers aquired (stole?) Mike Maddux as pitching coach, and the consensus is that he's made a significant contribution to the pitching this season. Yet his salary is only (from memory)$600,000. I don't know what salary Ron Washington or the other coaches command, but I'll wager none of them approach the stratospheric levels of the top players. And yet following a close loss, or even worse a losing season, it's the manager/coaches that get blamed (and sacked!). If there are significant differences in the contributions made by managers/coaches why aren't the best paid more? And if it really doesn't matter very much who manages/coaches, why do they get so much of the blame? I'd be interested if anyone can add some actual salary numbers here.
Sorry for the late response, Gents.
dirty - I would really hate to irritate Galloway and his running buddies.
Thanks for stopping by, Brian Thomas. I actually drafted a five part series a few months ago which is why this article seems a bit dated. I plan to update the remaining three articles and post during the offseason.
Scooby - You are right about the $10M relief pitchers. Only four high dollar free agent relievers signed signed from 2006-2009 (Rivera, Wagner, Cordero, and Gagne) and three of them had very nice seasons in 2008. During the same period, 11 starting pitchers signed for $10M+ annual salaries. That list is depressing - Zito, Pettitte, Schmidt, Millwood, Silva, Mussina, Padilla, Meche, Burnett, Suppan, and Lilly.
Jim - I have been in the "Sign Sheets" camp for a while but my enthusiasm drops with each passing day. Assuming everyone remains reasonably healthy, the Rangers are going to enter Spring Training 2010 with 9 guys vying for spots in the starting rotation - Millwood, Feldman, Holland, Hunter, McCarthy, Nippert, Harrison, Feliz, and Moscoso. Mathis will be the long man who can handle spot starts when needed. Hurley, Kiker, and Poveda should be in AAA and available if injuries affect the major league rotation. There aren't many top-of-the-rotation types in that list but there are an awful lot of pitchers who deserve to get time in the major leagues next year. I'm just not sure that the possible upside with Sheets outweighs the cost and injury risk that he brings.
Anthony - I love the idea of spending lavishly on coaches and development staff. The extra money a team spends to support its players will be made up by eliminating a team's need to sign free agents.
Here's a crazy idea......insted of signing the elusive starting pitcher that is proven so risky, how about we use the depth we have there now and sign a player that you explained works out the most often, and that we don't have a lot of impact minor leaguers at, not to mention our weakness this year (hitting)........and sign Matt Holliday, Considering we just traded one of our most complete OF's for another high upside and CHEAP pitcher.
David
Took me a couple days to get to your article but I'm glad I did. Great stuff, very informational.
I hope someone at MLB runs across this. Seems to me that what's needed in baseball is an entire paradigm shift. The reality is that the drunken spending and subsequent hijacking of the consumer is second only to congress in absurdity.