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April 11, 2006

Prospectus Today

Evaluating Extensions

by Joe Sheehan

It was a day for spending money Monday, as two sluggers signed lucrative contract extensions to stay with their current teams.

The deals for Derrek Lee and David Ortiz are similar in a number of ways. Both involve local heroes who play on the left end of the defensive spectrum, and who are coming off monster seasons. Both players are 30 years old, and in what we would consider the back end of their primes.

It's where the players differ, though, that I think is most interesting, and that provides a basis for analyzing the two extensions.

First, we'll look at Lee, whose deal runs through 2010 at an average salary of $13 million a year (the breakdown is unavailable as I write this). He was the best player in the National League last season, his second with the Cubs following a trade from the Marlins in November of 2003. In addition to being a very good hitter with power and a decent walk rate, Lee is one of the better defensive first basemen in the game, athletic and rangy, with a glove that has been worth two to three wins above replacment a season. In addition, he has good speed, although he is slowing as he ages. He's as complete a player as a 30-year-old first baseman can reasonably be.

Lee's speed and athleticism are reflected in his PECOTA projection. While Nate Silver's system-which, I should note, pegged Lee's continued improvement the past two seasons, if not the extent of his 2005-projects a slow decline for Lee, it does see him retaining a good deal of his value over the next three years.

Year    WARP      MORP      Salary      Diff
2006     6.8    $13.68      $13.0      $0.68
2007     6.0    $11.68      $13.0     -$1.32
2008     5.7    $11.23      $13.0     -$1.77
2009     4.6     $8.28      $13.0     -$4.72
2010     3.8     $6.35      $13.0     -$6.65

Total   27.0    $51.22      $65.0    -$13.78

All dollar figures in millions

MORP: Marginal Value Over Replacement Player
Note that the MORP figure is based on a standard formula. If we concede that marginal wins mean more to a team on the brink of the playoffs-a conclusion reached in Baseball Between the Numbers-and project the Cubs to be a contending team for at least part of the next five seasons, the $51 million that Lee's performance is projected to "earn" rises, because the wins he produces have additional monetary value. You can further argue that PECOTA's regression approach may be leading to conservative projections for Lee, especially in 2009 and 2010. In truth, it's very hard to project performance that far out; the Cubs are rolling the dice a bit on Lee's aging process, and the back end of this deal may not look very good.

Even with that falloff projected in 2009 and 2010, though, this isn't a terrible deal for the Cubs. Granted, Lee is being paid for his performance in his career year, and he's unlikely to have that kind of season again. (His batting average will almost certainly drop this season, as it did in the second half of 2005. The rest of his game, however, is still very good.) However, if Lee plays at his 2003-2004 level, and is a six- or seven-win player through 2008, he'll be earning his money for a Cubs team that should be in the playoff hunt, if not necessarily a favorite, through that year.

Lee is a popular player in Chicago, a factor that no doubt influenced the Cubs in these negotiations. So you can imagine the pressure the Red Sox felt to get David Ortiz, who hasn't paid for his own meal in Boston in two years, signed past 2007. He's an icon in this city, famed for his role in the 2004 championship season and for a laundry list of key hits during his time with the Sox. Whether he really is "The Greatest Clutch Hitter in the History of the Boston Red Sox" doesn't matter; what matters is that the city thinks he is.

While Ortiz has icon status going for him, he lacks many of Lee's markers. He's barely even a first baseman at this point, having played just 10 games and 78 innings in the field last year, and he has no speed at all. All of his value comes with a bat in his hand, and that's what raises some red flags.

Keith Woolner put together a list of players who were primarily DHs at 28 and 29 years of age. Twenty-four players have met the criteria of playing in at least 75 games at those ages with at least 75% of those appearances coming at DH. The last three columns are games played at 30 and older, WARP produced at 30 and older, and age when they last played ("A" indicates "Active"). All stats through 2005.

YEAR  Name             Age     G30+    WARP30+   Last Played

1973  Ollie Brown       29     299        4.6        33
1976  Carlos May        28       0        0.0        29
1977  Craig Kusick      28      48        0.4        30
1977  Carlos May        29       0        0.0        29
1980  Mitchell Page     28     104        0.9        32
1980  Otto Velez        29     118        1.4        32
1982  Roy Howell        28      68        0.2        30
1982  Mike Ivie         29      12        0.1        30
1984  Willie Aikens     29      12        0.0        30
1984  Ken Phelps        29     576       13.5        35
1986  Ron Kittle        28     248        5.3        33
1987  Harold Baines     28    1548       39.4        42
1988  Harold Baines     29    1548       39.4        42
1989  Larry Sheets      29     142        1.1        33
1994  Jose Canseco      29     744       19.6        36
1995  Greg Vaughn       29     930       31.7        37
1997  Bob Hamelin       29     109       -0.1        30
1997  Reggie Jefferson  28      83        0.4        30
1998  Tim Salmon        29     739       25.4        37A
2003  Erubiel Durazo    29     183        4.8        31A
2004  Brad Fullmer      29       0        0.0        29
2005  Travis Hafner     28       0        0.0        29A
First off, you can see how unusual Ortiz's career path has been. Just two other players, Carlos May and Harold Baines, were full-time DHs by the time they were 28 years old. The other thing that jumps out is that Ortiz is almost certainly the best hitter on this list, and that should be a marker in his favor.

But 29-year-olds aren't full-time DHs by accident. Let's not forget that the Red Sox have played some very mediocre first basemen over the last two seasons, and on into this one, while keeping Papi away from the bag. They endure Manny Ramirez's interpretations of defense rather than using him at DH. Clearly, Ortiz is a DH because that's where the Sox feel he's best used. This is a considerable indictment of his ability as a first baseman.

The list above is largely a list of players who were so one-dimensional in their late 20s that they had nothing left to offer by their early 30s. The exceptions don't seem to have a lot in common with Ortiz: Baines was betrayed by his knees, but was an otherwise in-shape player who was forced to DH solely because of those knees. Greg Vaughn had a bum shoulder that kept him from playing the field at 29, but he went back to the outfield in 1996 and was an above-average cornerman from 1996 through 1999. Tim Salmon, too, was a regular outfielder for years after his season at DH.

Ortiz isn't playing out of position at DH, waiting for an injury to heal. He has no more defensive value to give. He is a big guy with something of a gut, and it's hard to not look at him sometimes and see another heavy-set left-handed slugger who was very popular in Boston. In fact, Mo Vaughn shows up as the #9 comp on Ortiz's PECOTA card, a thought that should frighten Sox fans to their very core. On the other hand, Ortiz is more comparable to hitters like Fred McGriff and Willie McCovey, hitters who retained their stroke deep into into their thirties.

So what to conclude? Honestly, I was a lot less worried about this contract before I saw the list above. Ortiz is certainly better than most of the players above, but there seems to be a powerful force that drives twentysomething DHs out of the game quickly. The inability to play a position on the field seems to be a leading indicator of a rapid, early decline.

Here's what PECOTA thinks:

Year    WARP      MORP      Salary      Diff
2006     5.3     $8.85       $6.5      $2.35
2007     5.6    $10.33      $12.5     -$2.17
2008     4.4     $7.35      $12.5     -$5.15
2009     3.6     $5.65      $12.5     -$6.85
2010     2.8     $4.03      $12.5     -$8.47

Total   27.0    $36.21      $56.5    -$20.29

All dollar figures in millions

MORP: Marginal Value Over Replacement Player
Remember, the Sox already had Ortiz signed through 2007, his age-31 season, for a bargain $8.4 million. While the new deal wipes out that option year, financially it means they're paying an additional $38 million for his ages 32 through 34 seasons. They, too, get more from the marginal wins that Ortiz produces, but he's just not likely to retain his value as well as Derrek Lee will.

With both these signings, there are off-field concerns that can be, and have been, cited. As I mentioned, teams with playoff aspirations can overpay from marginal wins because those wins will bring on more revenue, assuming they lead to playoff appearances. Playoff appearances, success and championships have a powerful effect on future revenues, and are worth paying extra for.

On the other hand, the Cubs and Red Sox are two teams for whom demand has become nearly inelastic. The idea that the teams would have taken a hit had they not signed their popular stars seems silly to me. Both teams could probably start selling tickets that require holders to sit on the laps of their current customers and find a market. Both play in parks that, while aging, remain destination sites for fans nationwide, and both are co-owned in concert with their primary broadcast outlets, allowing them to benefit directly from the interest in their teams.

While it's a popular media talking point, I don't see any way that the Cubs or the Red Sox would have taken more than a very small short-term hit by allowing their stars to test the market. It's particularly problematic in the Sox's case, with Ortiz signed through the end of 2007.

The difference between these two signings is the difference between being a good defensive first baseman and being a DH. It's also the difference between a contract extension that makes good sense and one that s likely to be problematic. The Cubs made a fairly good deal for themselves, while the Red Sox did not.

Joe Sheehan is an author of Baseball Prospectus. 
Click here to see Joe's other articles. You can contact Joe by clicking here

Related Content:  Carlos Lee,  The Who,  David Ortiz,  Year Of The Injury

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