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Jose Bautista Cashes In

As first reported by Enrique Rojas, the Blue Jays and Jose Bautista have apparently agreed to terms on a five year, $65 million dollar contract. That is a lot of money for a guy who has had one good year, no doubt, and there will be a lot of discussion over whether it is wise to invest significant cash in a player coming off a year that could have been a fluke. That said, I think this deal actually does make some sense.

Let’s start with what the Jays are not paying for – this deal does not pay for the expectation that Bautista will hit like he did in 2010 again. He was a +7 win player last year, and if they were paying for that kind of performance going forward, they would have had to add another $100 million to get a deal done. At $65 million over five years, we essentially come up with the following expectation:

2011 – +3.4 WAR, $5 million per win, $17.5 million value
2012 – +2.9 WAR, $5.25M $/win, $15.23 million value
2013 – +2.4 WAR, $5.51M $/win, $13.23 million value
2014 – +1.9 WAR, $5.69M $/win, $11.00 million value
2015 – +1.4 WAR, $6.08M $/win, $8.51 million value

Total: +12 WAR, $64.96 million value

That’s the standard aging curve and an assumed inflation rate of 5% per year. In order to live up to the contract, Bautista has to be something like a +3.5 win player next year, and then age normally each year after that. Or, to put it into 2010 player terms, Bautista essentially needs to be about as good as Casey McGehee was last year. McGehee hit .285/.337/.464 while playing below average defense at third base. Do you think Bautista is capable of that next year? (If he moves to the outfield, he’d need to be somewhat above average defensively out there or hit a little bit better than this, but you get the idea.)

The Jays aren’t paying for 2010 Bautista. They’re paying for 2010 McGehee, and our expectations should be adjusted to reflect that. He doesn’t have to hit 50 home runs again to justify his contract. He doesn’t even have to hit 40. He just has to be a good hitter with a bit of defensive value and stay relatively healthy, because that’s generally what the Blue Jays are paying for.

With all that said, I’m still not sure I’d have done this deal if I was Toronto. I don’t think it’s crazy, but I do wonder if it was necessary. Bautista filed for $10.5 million in arbitration with the Jays offering $7.6 million, giving us a $9 million midpoint. Even if the Jays would have had to go up to $9.5 to avoid the hearing, they had Bautista under team control for 2011 at a more than reasonable salary. That means they paid approximately $55 million for his four free agent years.

What are the odds that Bautista would have done significantly better than 4/55 next winter? Obviously, it depends on how well he did in 2011, but we can look at some other free agents from this winter to try and get an idea of how the market values this skillset.

We can essentially throw out the three position players who landed the largest contracts this winter, as Carl Crawford, Jayson Werth, and Adrian Beltre all have significant edges in defensive value and much longer track records of success. Even if Bautista followed up with a strong 2011 season, he wouldn’t be able to sell himself as an all around player, so a Werth-like contract was probably out of reach.

Instead, the best comparables from this winter seem to be Adam Dunn, Victor Martinez, and Paul Konerko. All three are players whose primary expected future value comes from their abilities at the plate. Bautista is a better defensive player than either Dunn or Konerko, but he doesn’t have their track record of success. A strong repeat season would allow him to favorably compare himself to Martinez at the plate, but he can’t fill in at catcher. None of these are perfect comparisons, but I think it’s fair to say that the differences mostly come out in the wash, and that these three are each decent comps for Bautista next winter.

Dunn got 4/56, Martinez got 4/50, and Konerko got 3/37. In terms of annual average value, they were all right in the same range, and essentially in line with what Bautista just signed for as well. Konerko got the shorter deal because he was a little bit older than the rest, but I think we can safely say that Bautista would have been able to command a four year contract next winter had he followed up with a good 2011 season.

So, essentially, the Jays gave Bautista something like the market rate for this kind of player, but they did it a year before he got to free agency. If they’re convinced that his power is for real, and he’s going to to hit 50 bombs again, then I can see why they’d make this deal now – they essentially are locking him in at a price that expects him to be good but not great, so if he’s great again, they’re saving a good chunk of change. They did get an option for a 6th year as well, though given our projection, it seems that the expectation would be that it will not get picked up.

In exchange for that potential cost savings, though, they’re taking on the risk that it was an aberration, and Bautista will revert back to something more resembling his pre-2010 self. This contract essentially argues that it was more likely that Bautista would produce enough to command a premium over the Dunn/Martinez/Konerko deals than it was that he would revert back to prior form and have to settle for a lesser, prove-you-can-do-it-again type of deal. Is that actually the case? I don’t know.

I get why Toronto made this deal. I think there’s a pretty decent chance he lives up to the contract, even if he’ll likely be perceived as a bust for not repeating his 2010 line each year going forward. However, for me, I’m not sure Toronto got enough of a discount on his expected free agent price to absorb the extra risk of doing this deal now. If my option was take this deal now or let him play out 2011 and re-evaluate at the end of the year, I think I would have waited.