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Early Returns on Free Agency

After taking a look at some of the early trades this off-season, it is time to take a look at some of the early free agent deals, including a few that are yet to be finalized, but appear to be pretty close. Given MLB's record revenue and scarcity of big-time free agents, it seemed reasonable to expect that mediocre players could get way bigger contracts than they should. However, teams to this point seem to be spending their money relatively wisely. All projected values use my pay calculator, which takes and projects an expected cash value based on my hitter and pitcher rating formulas:

  • It pays to be a Yankee, quite literally. The first to re-sign was Jorge Posada, to the tune of 4 years, $52 million. This deal is going to look horrible, perhaps as early as next year, but Posada's 2007 season should have been worth $15.1 million a year on the open market according to my projection formula. So, in theory, he should have received a 4 year, $60.4 million contract at the least. Given how strongly free agent deals are usually tied to performance in the most recently completed year, this is not as terrible of a deal as I expected.
  • It pays to be a Yankee, the sequel. Alex Rodriguez opted out of his contract rather unceremoniously (to say the least), but he got his money in the end. Exact financial terms have not been disclosed, but the deal sounds like it will be in the neighborhood of 10 years, $275 million, with major bonuses if/when A-Rod gets career milestones. My projector said A-Rod should get about $20 million a year on the open market, but his case is special. First of all, he was already making $27 million a year (thanks to the horribly irrational deal the Rangers gave him in 2001), and given that he just wrapped up one of the greatest seasons in history, it was highly unlikely his salary would drop. Second, Scott Boras is correct, A-Rod is making history, and that history translates into increased revenue for a team. So, it is justifiable to go beyond $20 million for him. Boras is lucky that the Yankees were willing to listen when A-Rod contacted them though, because I don't think any other team would have gone beyond $20 million to get him. Still, I do think opting out was the right option. Scott Boras is a very shrewd man, and he realized that A-Rod's income potential now, at 32 years old coming off a historic season in which he became the youngest player to reach 500 career home runs and received his second MVP award in the last four years, is greater than it would be if he had hit free agency at 35 after completing the final three years on his old deal. The way Boras opted out of the deal probably cost A-Rod a good chunk of cash, but I still think he is ending up with more than if he had played out his old deal. The bottom line is I don't think Boras bumbled these negotiations as badly as people think he did.
  • It pays to be a Yankee, III. It's only fitting that free agency in the Big Apple can be told in the context of a trilogy. All signs are that Mariano Rivera will sign a 3 year, $45 million contract to stay in pinstripes. From a competitive standpoint, this deal makes the least sense of the three. Rivera is still good, but he's clearly on the back side of his career. His performance last year was worth "only" around $10.7 million on the open market, and on top of that the Yankees have a more than capable replacement in Joba Chamberlain, who will earn the major league minimum. However, Rivera is a Yankee icon, and that probably is worth the $4.3 million per year or so that they overpaid to keep him around, especially considering that they have the money to burn. Rivera will likely go down in history as the greatest closer of all-time, and the market value projector does not account for that.
  • Speaking of living legends, Tom Glavine is returning to the Braves after four years with the Mets. He got a 1 year, $8 million contract, which is well above the $4.4 million he was worth. However, like Rivera, there are major extenuating circumstances. First off, Glavine's 303 career wins are worth something, and the chance for him to retire as a Brave has great sentimental value for both him and the organization. There is no way Glavine's 2008 performance will justify the money, but there are other factors that do justify this move.
  • There are practical deals happening on the market too, with no sentimental strings attached. Luis Castillo signed a 4 year, $25 million deal with the Mets. He was worth about $8.5 million a year according to last year's performance, so this is a very good deal for New York. Furthermore, word is today that Mike Lowell is close to re-signing with the Red Sox for three years, $37.5 million. This is great news for the free agent market, because I had his value estimated at $12.2 million a year, which means a 3-year deal for him should have been worth about $36.6 million. Lowell was expected to be one of the most sought free agents, which could have driven his market value up considerably. Since he appears to have received a very fair market price, it seems plausible that others will sign fair deals.
  • Here are my estimated values for some notable free agents yet to sign: Torii Hunter $9.3 million/year, Aaron Rowand $10.9 million/year, Andruw Jones $5.2 million/year, Francisco Cordero $14.6 million/year, Kyle Lohse $5.7 million/year, Carlos Silva $6.2 million/year, Hiroki Kuroda $5 million/year. I expect Hunter, Jones, Lohse, and Kuroda to get more money, and Cordero to get quite a bit less, but we will see.
Last year it seemed like teams were happy to throw their money around with reckless abandon, especially for any breathing body that could pitch (3 years, $19 million for Danys Baez, enough said). However, rationality seems to be predominant in this market.