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December 29, 2009

Ahead in the Count

For the Long-Term Investors

by Matt Swartz

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Last week, we discussed when bad teams should attempt to sign free agents. The primary scenarios in which this makes sense are when the team stands an outside chance of competing, and when there also will be a valuable market for that player at the trade deadline in the likely scenario that the team is not competitive. In this case, the premium that competitive teams should place on having players for the stretch run is often to allow the team to recoup some of their lost money on the player.

On one hand, signing players for which there is commonly a lot of demand, such as starting pitchers, makes a lot of sense. On the other hand, if you believe that your team is going to be competitive in a year or two, you may risk having an opening at a certain position where there is not free-agent talent available. This is why I have looked at what type of players are usually available on the free-agent market, and whether it may be advantageous to sign them in advance of being competitive. I looked at the top 50 MLB Free Agents as listed by MLBTradeRumors.com and recorded what position they played and what type of production they provided over the life of the contract.

Firstly, starting pitching is always available. Going into the 2005-06 offseason A.J. Burnett, Kevin Millwood, Jarrod Washburn, Matt Morris, Esteban Loaiza, and Braden Looper all signed deals of three years or more. Burnett, Looper, and Millwood all provided a WARP3 of at least 2.0 to their new teams in 2006. However, none of them provided a WARP3 of 2.0 in the second or third year of their contracts. During the 2006-07 offseason Barry Zito, Jason Schmidt, Vicente Padilla, Ted Lilly, Gil Meche, Jeff Suppan, and Adam Eaton all signed deals of three or more years, and both Daisuke Matsuzaka and Kei Igawa were posted by their Japanese teams. That list is certainly less than attractive for teams considering improvement a couple of years down the road. Only Gil Meche, Vicente Padilla, and Ted Lilly provided WARP3 of 2.0 or higher in the second year of their contracts, and only Ted Lilly did so in the third season of his deal. In 2007-08, very few pitchers signed multi-year deals. In fact, only Carlos Silva and Hiroki Kuroda did, and neither provided a WARP3 above even 0.2 in the second season of their deals. Going into the 2008-09 offseason, many pitchers signed deals of three or more years: CC Sabathia, A.J. Burnett, Derek Lowe, Ryan Dempster, and Oliver Perez all agreed to long-term pacts. Obviously it is too soon to look at the second and third years of their contracts, but this certainly seems like a more promising group.

Among players who signed two-year deals in 2006-2008 off-seasons, only Mike Mussina in the second year of his deal in 2008 provided a WARP3 above 2.0 in the latter years of his deals-indeed, he provided a WARP3 of 5.0 in 2008 for the Yankees.

What we can gather from this is that there is almost always starting pitching available, and that these starting pitchers are always risky quantities. Therefore, if you do sign starting pitchers to a team that is not that competitive, it had better be on short deals and it had better meet the criteria that we discussed last week.

Turning to relief pitching, we also see that there are frequently relief pitchers available, although this is less certain from year to year. However, they are more volatile and provide even less help in latter years of deals. Of the free-agent relievers going into the 2006 off-season, Billy Wagner provided a second year of solid performance (3.9 and 3.4 WARP3 in 2006 and 2007) before unraveling in the third and fourth years of his contract (with WARP3 of 1.4 and 0.6 in 2008 and 2009). Trevor Hoffman also maintained a solid performance in the second year of his two-year re-signing with the Padres (4.1 WARP3 in 2006 and 2.5 in 2007). Bob Howry stayed good both years with WARP3 of 2.3 and 2.4 in his two years. The 2007 relief crew was essentially fruitless with only swingman Miguel Batista even signing a multi-year deal, and he provided no real benefit in the second and third years of his deal. The 2008 reliever market found Mariano Rivera back with the Yankees with obviously strong performances in both years, and two solid years to start off Francisco Cordero's deal with the Brewers. Last offseason provided a number of attractive relievers at first glance-Francisco Rodriguez, Brian Fuentes, Kerry Wood, Jeremy Affeldt, Damaso Marte, and Jose Cruz-but only Fuentes and Affeldt provided WARP3s above 2.0.

All in all, we see that teams looking to build for the long-term should look within to find pitching as the common perception about pitchers available on the free agent market is true. Both starters and relievers frequently provided most of their benefit in the first year of their deal, and teams can hamper themselves dearly with empty, expensive performances towards the back end of deals.

However, when we look at position players, we do not see the same kind of security that talent will be available the following season, although we see the same indication that hitters taper off over the course of their contracts as well.

The catching position is a particularly difficult place to find talent on the free agent market. This year's top catcher available is Bengie Molina-and he's not a reliable guy to add wins to your club. The only catcher to receive a multi-year deal going into the 2009 season was Jason Varitek, and he has already been displaced by Victor Martinez and is still with his club only by virtue of a player option that he picked up. Going into 2008, both Jorge Posada and Yorvit Torrealba were available and signed multi-year deals. Posada struggled mightily in the first year of his deal, but bounced back to provide a WARP3 of 3.7 in his second year. Torrealba, on the other hand, produced a combined WARP3 of 1.0 at a cost of $7.25 million in 2008-2009. No catchers signed multi-year deals in the offseason before 2007, and the 2006 offseason yielded Brad Ausmus, who obviously disappointed in his two-year deal, and Ramon Hernandez signed a four-year deal with the Orioles. Hernandez provided a WARP3 of 3.7 in 2006 and a combined WARP3 of just 2.6 in 2007-2009, all at a cost of $28 million. The catching position provides too much wear and tear on the body to trust a catcher who already has six years of service time to last through multiple years of a contract.

The first-base market does not always provide a major contributor either. In the 2006-2009 offseasons, the major signings included Paul Konerko's five-year, $60 million deal with the White Sox in 2006, and Mark Teixeira's eight-year, $180 million deal with the Yankees in 2009. Konerko performed best early in his nearly expired deal, with a WARP3 of 3.8 in 2006 and 2.5 in 2007. However, it fell to 1.5 and 1.9 in the previous two offseasons. Teixeira's deal is far from complete and is tough to evaluate. This offseason, the only free agents available at first base are Russell Branyan, Adam LaRoche, and Carlos Delgado, and Nick Johnson signed a one-year deal to be the Yankees DH. Signing free agents at first base is not always easy to do, and therefore, this may be a position that you may want to sign a player to a long-term deal. However, up-and-coming teams should be careful to grab players who age well, as teams risk signing Mo Vaughn-type players and being stuck with the bill years later.

Second basemen are particularly hard to come by on the free-agent market. Since 2006, the largest contract given out to a second baseman was to Kaz Matsui in 2008, when the Astros inked him to a three-year, $16.5 million deal. Unsurprisingly, he provided only 3.7 WARP3 during this time period. Jose Valentin signed a two-year, $4.7 million deal in 2006 and provided a WARP3 of 5.3 in the first year, but this plummeted to 1.0 in the second.

Shortstops have reached free agency more often in recent years. Rafael Furcal signed a three-year, $39 million deal with the Dodgers going into the 2006 season, producing WARP3 of 5.6, 3.9, and 2.1 in 2006-2008, respectively. Julio Lugo signed a four-year, $36 million deal going into the 2007 season, but has failed to put up a WARP3 higher than 0.8 in any of the first three seasons. No free-agent shortstops signed multi-year deals going into 2008, but both Furcal and Edgar Renteria signed major deals going into 2009. Furcal put up a solid WARP3 of 4.7 this season, while Renteria only reached 1.0. The lesson for shortstops seems to be that if you signed Rafael Furcal, at least, you can do well in the first year of the contract.

This offseason, Chone Figgins and Placido Polanco have signed contracts to play third base for big money, and Adrian Beltre and possibly Mark DeRosa may do so as well. The free-agent market has not typically been a fruitful place to find third basemen in recent years, with the obvious exceptions being Aramis Ramirez and Alex Rodriguez re-upping with their old teams. Both of these players declined as the deal moved into even its second year as well.

There have been major beneficiaries of large free-agent contracts among corner outfielders in recent years. The 2005-06 class boasts Hideki Matsui, who soon became a DH, though he provided an average of 2.2 WARP3 for his four-year, $52 million contract. It also yielded Brian Giles, who for three years and $30 million provided WARP3 of 2.9, 1.0, and 4.3 from 2006-08 with the Padres, Jacque Jones, with WARP3 marks of 2.8, 2.3, and -1.5 with the Cubs, and Juan Encarnacion, who provided a combined WARP3 of 0.1 for $15 million for 2006-2008. In 2007, Alfonso Soriano led the class with an eight-year, $136 million contract. His WARP3 has gone from 7.4 to 3.9 to 0.3 in his first three years with the Cubs. Frank Catalanotto signed a three-year, $13.5 million contract and provided 1.7 WARP3 during 2007-09. Dave Roberts provided 1.6 WARP3 for $18 million over 2007-09, and David Dellucci provided only 0.3 WARP3 for $11.5 million over the same time span. Jose Guillen declined rapidly after the first year of his deal with the Royals as well, putting up a negative WARP3 in 2009, after producing only 1.0 in 2008, but 3.1 in 2007. The 2008 market was particularly rough for corner outfielders, as the only player to sign a multi-year contract, Geoff Jenkins, was released before the second year of it was completed. There were an abundance of corner outfielders who signed before the 2009 offseason, including Manny Ramirez, Adam Dunn, Raul Ibanez, Pat Burrell, and Milton Bradley; excepting Ibanez and Ramirez, it is likely that the other three teams regret their signings at this stage. Matt Holliday, Jason Bay, and Johnny Damon all stand to receive multi-year deals this winter. This group of players also has shown to be a group that does not age particularly well either.

There have been center fielders who have signed multi-year deals in four of the previous five offseasons, including Mike Cameron this winter. Johnny Damon was useful throughout his four-year deal with the Yankees from 2006-2009, though he did finish as a left fielder, rather than in center. It's safe to say the 2007 class of center fielders-Gary Matthews Jr., Juan Pierre, and Jim Edmonds-all provided lessons to their teams about the risks of signing free agents. The 2008 class was stronger, but still weak, consisting of Torii Hunter, who provided his highest WARP3 in the fourth year of his five year deal with 4.0 in 2009, but also including Aaron Rowand, who has been disappointing for the Giants, dropping from 2.9 to 1.3 WARP3 in 2008-2009. Then there was Andruw Jones, who was released before the second year of his two-year deal with the Dodgers, and Kosuke Fukudome, who bounced back after an ugly second half of 2008 that left him with only 1.6 WARP3 (playing right field for the most part) back up to 5.0 in 2009 while playing center. So, center fielders also have proved to be a risky crop.

Looking at this list of recent signings, it is quite clear that signing free agents long-term is not a reliable way to improve your team. Combining all players from 2006-08 who signed multi-year deals, we see that the WARP3 is reasonably close in the second year of deals as compared with the first year-138.9 to 114.7. However, looking at 2006-2007, we see that among players who signed deals for three or more years, they fell severely by their third seasons-going from 80.8 in their first years, to 59.6 in their second years, and 31.7 in their third years.

Many players do provide benefits for a couple of years, but they typically decline quickly as their contracts go on. This is primarily because of the age of players by the time they reach free agency. Players need six years of major-league service time to reach free agency, and few players are able to do so while on the right side of 30. By the time they do sign, free agents are typically past their prime and can hamper teams. It's not that teams are stupid-it is very clear that signing a free agent can put you over the top. The point to be made here is that they typically provide most of their value early in contracts, and are therefore a poor way to gradually build up your team. Teams should improve by building within, and perhaps should only sign free agents when they expect them to put them over the top, or at least when they expect to be able to trade them for a gain early in the deal.

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

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