December is unquestionably one of my favorite months of the year, and the week of the winter meetings is unquestionably one of my favorite weeks of the year. I revel in the rapid-paced chaos and rampant rumor-mongering about as much as one possibly can. What I'm finding, however, is that the lead-up to that week is a tad less enjoyable -- from a personal standpoint, at least -- when your team is pursuing this rare and precious commodity, but refuses to disclose any information about that pursuit, and you're left with this inordinate quantity of misinformation, overemphasis on trivial details, and even-more-baseless-than-usual speculation from "baseball people" that invariably carves a path to the newstands.
The commodity I'm referencing is, of course, Cliff Lee, and one of the discussion points that has arisen time and again concerns his projected value over the life of his upcoming five- to seven-year deal against the value of the deal itself; in other words, how will his actual production compare to his robust annual salaries? And though it's generally accepted that whichever team signs Lee will be overpaying for his services by the end of his contract, for how long (and to what degree) will that overpayment be an issue? I'm finding that most of the analysis of these issues is too qualitative in nature to be genuinely useful in answering these questions, and so I'd like to take a more quantitatively-minded (albeit simplistic) crack at the problem.
Statistician Tom Tango frequently employs a straight-line aging method where he takes a player's presumed true talent level (measured in wins above replacement) and subtracts a set number of wins with each passing season; under this method, fan-favorite shortstop Joe Cool -- who is presumed to be a three-win player in terms of true talent at the beginning of 2011 -- would be projected for 2.5 wins in 2012, 2.0 wins in 2013, and so forth. This number is then multiplied by the going rate for wins in the free-agent marketplace to generate those value-in-dollars numbers you see thrown around willy-nilly ("Franklin Gutierrez was worth $27.7 million in 2009!"), and compared against the existing or projected contract to determine the cost-effectiveness of the deal.
Now, Tango has himself acknowledged that the half-win convention may not be aggressive enough (particularly with older free agents), and we're all well aware that Lee isn't likely to decline in a perfectly linear fashion. The point is to get as close as possible while bringing some objectivity into the mix and not arbitrarily tossing around player comps and other such items. To that end, I ran through two scenarios where the constants were (a) Lee's true talent level being around six wins above replacement in 2011, (b) Lee signing a six-year, $140 million deal, and (c) a single win being worth $4.5 million in 2011, and then progressively increasing by five percent each season thereafter.
In Scenario 'A', Lee ages gracefully, losing only 0.5 wins per season, and plays out the final season of his deal at a comfortably above-average clip (3.5 wins); assuming straight $23.3 million annual salaries across the board (and this is a reasonable assumption, given the linear payment structure of most other monster contracts in baseball), Lee is only slightly overpaid in the final year or two of his deal, and ultimately generates $143 million in value -- right in line with his $140 million contract, give or take a few million. In Scenario 'B,' Lee ages less gracefully, dropping 0.7 wins per season, and plays out that final season only a few ticks above average (2.5 wins); here, he generates only $127 million in total value, and ends up being overpaid by nearly $15 million in his final two seasons combined.
Truthfully, I feel more comfortable with Scenario 'B' being the way that this ultimately plays out, but the beauty of this method is that it's so easy to mold to your liking. If you'd like to start Lee out at seven wins above replacement rather than six, you can do that. If you want to dock him for a full win with each passing season, you can do that too. (Interestingly, doing both still leaves him at $133 million in total value.) What I found most surprising in running through these numbers is that even in the fairly realistic Scenario 'B,' his worth still works out to $125-130 million, with a very real shot at $140-plus million if he ages as well as some like to think that he will.
Now, again, that isn't to say that the Rangers are the team that should be dropping that much money on Lee, but I think -- actually, I know -- that there are some out there who consider $140 million to be utterly insane and far beyond what Lee should actually be willing to accept ... and I'm just not seeing it. It's entirely possible he won't generate $140 million, $130 million, or (in an absolute worst-case scenario) even $50 million in value, but as of today $140 million for Cliff Lee still looks a hell of a lot more reasonable than throwing eight-digit sums at mediocre players. And it's today that counts.