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Dodgers Overpay Ethier, But Will It Matter?

Late last night, word came down that the Dodgers had come to terms with Andre Ethier on a five year contract extension that will keep him out of the free agent pool this winter. The price for keeping him away from the market? $85 million guaranteed with a vesting sixth year option that could push it to $100 million total. There’s no two ways around it – this contract means that the Dodgers will be paying Ethier at a rate that he probably won’t be able to justify for very long.

If we assume that we’re going to see price inflation of 5% per win over the next few years, the Dodgers essentially just paid Ethier for something close to +15 wins from 2013 to 2017, or pretty close to exactly what he’s been worth in previous five year increments in his career.

2006-2010: +13 WAR
2007-2011: +13 WAR
2008-2012: +14 WAR (and counting – likely will end the year with +15 or +16)

There’s just one problem, of course – those five year windows covered Ethier’s 24-28, 25-29, and 26-30 timeframes, but this contract buys his age 31-35 seasons. If you have a guy who is worth about +15 WAR during his prime five years, he’s almost certainly not going to be worth +15 WAR during the first five years after he turns 30. The Dodgers essentially paid for in-his-prime Ethier and will be happy with the contract until age begins to catch up with him. Whether that happens in 2014 or 2016 remains to be seen, but it’s pretty likely that this contract is going to end with the Dodgers giving a significant amount of cash to a guy who isn’t playing well enough to justify the cost.

However, contracts should not be evaluated by how likely the player is to still be earning his keep at the end of the deal. This has become an en vogue criticism of recent long term deals – “I don’t want to pay Player X that much money when he’s 38, so this is a bad contract” – but it misses out on the fact that deals are intentionally structured to give value to teams up front and value to the player at the end. Everyone goes into the negotiations understanding that the player is looking for security (both financial and job related) at ages when he probably wouldn’t be able to command a large paycheck without the deal. Players use the leverage of their services when they’re still good to command contracts that pay them into years when they will not likely be as good. If you decide that you never want to sign a contract that has a good chance of ending with the player being overpaid, you’re just never going to sign a free agent. These deals are intentionally setup to be team friendly at the front – Ethier is clearly worth more $13.5 million for 2013 – and player friendly at the end.

So, we have to evaluate the deal as a whole, and from that standpoint, the deal is still an overpay, but probably not a significant enough one that it will cause serious harm to the Dodgers franchise. For instance, let’s take a look at the last time an aging good-but-not-great outfielder signed a similar contract to play in Los Angeles – Torii Hunter‘s five year, $90 million deal to join the Angels in 2008.

Hunter’s contract with the Angels started at age 32, so he was a year older than Ethier will be when his new contract takes effect. While they’re not exactly the same type of player, both were similarly valuable during their prime years, averaging about +3 wins per full season. Hunter, like Ethier was a productive player who became a bit overrated and got a contract that was a bit rich for what he was able to produce on the field. Over the last five years, Hunter has produced +14 WAR (and counting), so he’ll probably end up giving the Angels +15 or +16 WAR over the five years covered by the deal. However, because the price of a win was a bit lower in prior years, $90 million meant that the Angels probably needed +19 or +20 wins to justify their investment on the field. Even though he’s aged well, Hunter hasn’t played quite well enough to earn his contract.

But, here’s the rub – that overpay didn’t really hurt the Angels much at all. After they signed Hunter in 2008, they also found room in the budget for Juan Rivera, Brian Fuentes, and Darren Oliver. In 2009, they signed Bobby Abreu, Fernando Rodney, and Hideki Matsui. 2010 brought in Scott Downs, Joel Pineiro, and Hisanori Takahashi, plus absorbing nearly all of the remainder of Vernon Wells‘ contract. And then, this past winter, they splurged on Albert Pujols and C.J. Wilson, while also signing LaTroy Hawkins. During this same time period, they also gave extensions to Jered Weaver, Howie Kendrick, Erick Aybar, Ervin Santana, Bobby Abreu, and Maicer Izturis.

The only notable players to leave the Angels for more money elsewhere during Hunter’s tenure were John Lackey and Chone Figgins, and in both cases, the team looks pretty astute for letting them walk. There just aren’t really examples of players that the team wanted to obtain or retain but were prevented from doing so because of the fact that they were overpaying Torii Hunter. They pursued Carl Crawford and Adrian Beltre, but in both cases, made offers below what Boston and Texas offered due to philosophical differences about value, not about financial ability to pay – the Vernon Wells acquisition clearly illustrates that they had the money to spend that winter, they just chose the wrong guy.

I’m not saying every big market team can sign whoever they want for whatever price they want and it doesn’t matter, because even teams with $200 million payrolls have constraints that they have to play within. But, in this case, Ethier is probably something like a $70 million player over the next five years, so the magnitude of the Dodgers overpay is in the $15 to $20 million range, or about $3 to $4 million per year. Perhaps losing that value will prevent the team from signing a mid-range setup guy that they would have liked to add to their bullpen, or they’ll have to save a bit of money on their bench to make up for it. Either way, this just isn’t the kind of overpay that is likely to have a big impact on the Dodgers future.

From an abstract point of view, Ethier’s not worth this contract, but when you consider the Dodgers specific financial position, the team’s attempts to rebuild credibility with an alienated fan base, and the fairly minor scope of the overpay, this just isn’t something that anyone should get all that worked up over. The Dodgers paid a nice player a little bit more than he’s worth in order to keep him, and the difference probably won’t have much of an impact on their ability to do anything else. It’s an overpay, but an irrelevant one that shouldn’t garner all that much criticism.