Are big free agent contracts worth it?

Editors note: Promoted from fanposts.

There have been lots of Blue Jays rumours so far this off season and they have spurred tons of discussion. Though purported Jays' targets like Yu Darvish, Carlos Beltran, and Gio Gonzalez have gone to other teams, one player who has consistently been thought to be a good fit for the Jays is Prince Fielder. Many objections to his potential signing focus on the large contract he is likely to command and whether this outlay represents good value for the signing team.

Some BBBers have questioned the utility of signing any free agents to large long term contracts given the likelihood that aging will catch up to the player well before the end of his contract. Certainly the extension JP Ricciardi handed to Vernon Wells has left a bitter taste in Jays fans' mouths and made some recoil from offering similar money to any big name free agent. But the question remains: is it ever a good idea to hand out 9-figure guarantees to a free agent? Do these contracts ever actually provide good value or do they all become albatrosses to their teams and cripple their finances?

The answer is after the jump...

To date, there have been 11 contracts of over $100 million handed out to free agent position players. Two were signed in the 2010/2011 offseason (Jayson Werth and Carl Crawford) and one in the 2011/2012 offseason (Albert Pujols). Given that these players have played one or zero years under their big deals, I did not include them in the primary analysis. However, I will provide projections for Werth and Crawford's worth at the end.

Also, this analysis looks only at free agent contracts, not extensions. Extensions are generally given out when players are still in or slightly before the player's peak years and, I think, fall into a separate category than free agent signing since the players tend to be earlier in their careers when signing big-money extension. I also didn't include pitchers to limit the size of the analysis and since it seems to me like an apples-to-oranges comparison, though whether they should have been included could be debated.

A final note before getting to the meat - this article is not meant to answer the question of whether Fielder is likely to be worth his free agent contract or if the Jays should sign him. Reasonable people can disagree over Fielder's projected WAR output, his likely career arc given his age and body type, and other factors that play into the Jays' decision to acquire him or not. I am merely trying to see if large outlays on free agent position players have represented sound investments for teams in the past.

The 8 players included in this analysis are Alex Rodriguez, Manny Ramirez, Jason Giambi, Carlos Beltran, Carlos Lee, Alfonso Soriano, Mark Teixeira, and Matt Holliday.

Let's look at these contracts one-by-one. The year cited is the first year the player played under his $100M+ free agent contract:

1) Alex Rodriguez, Yankees, 2001 (age 26 season). 10 years, $252M.

Rodriguez's contract had an opt-out clause which he exercised after the 2007 season. To that point, he had put up seasons of 10, 9.3, 6.8, 9.1, 4.3, 9.8, 9.8 fWAR, good for 59.1 fWAR in total on a salary of $161M. This represented a value of $2.72M/WAR, an outstanding value. Rodriguez then signed a new, more lucrative deal after 2007 and followed it with seasons of 6.3, 4.3, and 3.8 fWAR. Had ARod played as well under his original contract, he would have finished with 73.5WAR, costing the Yankees $3.42M/WAR over the life of the contract. Despite ARod's mammoth contract, he actually provided exceptional value for the money.

2) Manny Ramirez, Red Sox, 2001 (age 29). 8 years, $160M.

Ramirez played 7.5 seasons for the Sox under this deal and was then traded to the Dodgers. He accrued 5.2, 5.4, 6.2, 3.7, 3.2, 3.0, 1.5, 6.0 = 34.2WAR over that time, representing an average cost of $4.7M/WAR. Without the exact $/WAR values over this time period, this probably represents fair value, or possibly slightly above the average market rate.

3) Jason Giambi, Yankees, 2002 (age 31). 7 years, $120M

Coming into this analysis, I thought Giambi's the first true albatross in the bunch. However, his 7 years were worth 7.0, 5.0, 0.1, 4.3, 2.9, 0.5, 2.1 fWAR, good for 21.9 total. The $120M value breaks down to $5.5M/WAR. Not bad by today's standards, but given the lower market value of WAR in the early 2000's, that was a lot to pay at the time. Nevertheless, I would categorize this deal as bad, but not horrible or crippling by any means.

4) Carlos Beltran, Mets, 2005 (age 28). 7 years, $119M

Looking at his numbers, I didn't remember just how great Beltran was, especially at the peak of his career. After signing this deal, Beltran went 2.7, 7.9, 5.5, 7.6, 3.0, 0.8, 4.7 for 32.2WAR over the course of the contract. This gave the Mets $3.7M/WAR, very good value indeed.

5) Carlos Lee, Astros, 2007 (age 31). 6 years, $100M

Lee's contract is the first in our analysis that has not yet been completed. Over the first 5 years, Lee has not lived up to his deal. He has had seasons worth 3.4, 3.6, 1.2, -1, 3.2, or 10.4 total fWAR. Given his $81.5M total salary thus far, he has cost the Astros $7.8M/WAR, not good value at all. Given that he has one more year on his contract, I projected his 2012 season fWAR. For this and all other projections in this analysis, I used the player's fWAR from 2011, 2010, and 2009 using a 5-3-2 weighting to project his likely 2012 fWAR. Feel free to quibble with these projections, but I feel that it is a reasonable way to go about it.

Under this projection scheme, Lee figures to put up 1.5 fWAR in 2012, bringing his total production to 11.9 WAR for the $100M, or $8.4M/WAR. Unless Lee somehow puts up a career year, this contract will go down as a very bad one for the Astros. And even if Lee does bounce back with a great year, that will likely only bring the contract's status up to somewhere between "not terrible" and "meh."

6) Alfonso Soriano, Cubs, 2007 (age 31). 8 years, $136M.

Soriano has played 5 of the 8 seasons the Cubs guaranteed him. The first was great, worth 7.0 fWAR. After that, however, he has gone 4.1, 0, 3.1, 1.3 for 15.5 total fWAR to date. He has earned $82M in that time, providing a value of $5.3M/WAR, or a fairly decent return on investment. However, his projected 2012 output is a mere 1.6 fWAR. Using a -0.5WAR/year aging curve to project ever further in the future, Soriano figures to put up 3.3 more fWAR before his contract is up. This would total 18.8 fWAR for the $136M, or $7.2M/WAR. Though his value has not been awful to date, Soriano is unlikely to play well enough going forward to make his contract worthwhile over all. Chalk this one up into the bad contract column

7) Mark Teixeira, Yankees, 2009 (Age 29). 8 Years, $160M.

In three seasons, Tex has given the Yankees 5.2, 3.2, and 4.2 fWAR seasons, for 12.6 in total. He has earned $62.5M in salary, or $5M/WAR. This basically market value over that time, representing a pretty fair deal. I project him at 4.1 fWAR next year, followed bu 3.6, 3.1, 2.6, and 2.1 over the rest of the contract. This works out to 28.1 fWAR total, yielding $6.4M/WAR over the life of the deal. From 2009 through 2016, $6.4M/WAR is probably only very slightly above the average market cost in that time period. Therefore, I would categorize this contract as being a fair deal.

8) Matt Holliday, Cardinals, 2010 (Age 30). 7 years, $120M

Holliday has played only 2 seasons of his big time deal, but he has played very well in that time, accumulating 11.7 fWAR in 2 seasons. He earned $34M in that time, so has provided $2.9M/WAR of value, quite the bargain. However, he is entering his age 32 season, so probably won't be a 6WAR player for the rest of his contract. Using my weighting system, Holliday projects for 5.6, 5.1, 4.6, 4.1, 3.6 in the next three seasons, or 23 fWAR. This would provide 34.7 fWAR over the life of his deal, good for $3.5M/WAR. Given that the current $/WAR estimate is $5M and inreasing, this contract represents exceptional value and Holliday seems quite likely to continue to provide great value going forward.

EXTRA: Both Carl Crawford and Jayson Werth signed $100M+ contract last offseason. Neither had a particularly auspicious starts, with Crawford going for 0.2WAR and Werth 2.5. However, I think it's too early to count both these guys out entirely. Based on my projections, Crawford should be worth 3.6WAR next year. With -0.5WAR per year for aging/decline, Crawford projects to give 14.3 fWAR, or $9.9M/WAR. Unless he bounces back in a big way (which is not out of the question, if you ask me), Crawford's deal is looking pretty bad. Werth projects next year at 3.8WAR and 17.8 fWAR total over the 7 year life of his deal. Based on this projection, he will be worth $7.1M/WAR, probably a bit above market rate, but certainly not a ridiculously bad deal.

So what have we learned here? First, large contracts to free agent position players can work out well for the team. Rodriguez's enormous deal actually provided excellent value for the Yankees, though it's questionable whether any other team could have afforded such a large outlay even with the outstanding value it represented. Beltran also provided great value, and Holliday is well on his way to similar status. Also, perhaps predictably, the older the player is when signed to his deal, the less likely he is to provide good value. Given that Fielder is entering his age 28 season, this may support the idea that giving him a large contract won't become a huge burden for the signing team, although whether he will follow a "typical" ageing curve is a topic of hot debate.

Of the 8 offers qualifying for this analysis, I would categorize only 2 as "crippling" - Lee's and Soriano's. The rest fell into the range between "fair" (Ramirez and, probably, Teixeira) and "not good but not horrible" value (Giambi). Certainly giving large contracts to players at or nearing their decline phase is a risk, and occasionally can be exceedingly terrible deals. But given to the right player, long term free agent contracts can provide fair and even better-than-market value to the team willing to shell out the cash. This does not purport to predict which category Prince Fielder will fall into, but certainly it demonstrates that large free agent outlays are not uniformly terrible ideas. Indeed, it seems they can be great values, fair values, and poor values almost equally often.