Pricing Alex Gordon on a Three-Year Deal

Traditionally, baseball teams spend most of their money before Christmas and then, after the New Year, they start bargain hunting. Historically, free agents who are still on the market six weeks before Spring Training begins start getting lowballed, as teams begin to exert some leverage knowing that players want to have a job lined up before the calendar starts pushing too far towards Opening Day. There are still big contracts signed in January and February — after all, Max Scherzer got $210 million on January 19th last year — but, for the most part, January and February deals come a bit cheaper than deals signed in November and December.

So perhaps messages like this one shouldn’t be that surprising:

The idea of Cespedes taking a three-year deal is probably a pipe dream. He’s a 30-year-old coming off a +7 WAR season, and there’s probably not a great reason for him to try and hit the free agent market again after his age-32 season, when his physical skills — where he derives almost all of his value — have begun to decline. If Cespedes can’t get a five- to seven-year deal this winter, he’s probably best off just signing a deal with an opt-out for next winter, when he could reasonably expect to be the best free agent bat on the market, given the weak supply of available talent in next year’s class. Maybe the White Sox can get him to sign a three-year deal if they gave him the first year opt-out and a high-enough AAV, but I’d still expect some team to step up and give Cespedes north of $100 million.

A three-year deal for Gordon, though, is more interesting. He turns 32 in a month, is coming off a season where he spent two months on the disabled list, and a large part of his value is based on elite defensive performance, which is subject to more variance than offensive performance. Back when I did my free agent predictions, I had Gordon signing a four-year deal, so a drop to three guaranteed years wouldn’t be a huge discount, necessarily; certainly less of a concession than it would be for Cespedes.

So let’s think about what a three-year deal for Gordon might look like. To start off, let’s just plug Gordon into our contract estimation tool. This will come with all the standard assumptions we’ve used all winter.

Alex Gordon’s Contract Estimate — 3 yr / $75.3 M
Year Age WAR $/WAR Est. Contract
2016 32 3.5 $8.0 M $28.0 M
2017 33 3.0 $8.4 M $25.2 M
2018 34 2.5 $8.8 M $22.1 M
Totals 9.0 $75.3 M

Assumptions

Value: $8M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), 0 WAR/yr (28-30),-0.5 WAR/yr (31-37),-0.75 WAR/yr (> 37)

Pretty straight forward. Steamer has Gordon projected as a very good player for 2016, and with normal aging for a player of his age, a 3/$75M contract would seem to be a fair deal. Except Gordon isn’t a traditional free agent; he’s a defensive specialist coming off an injury-shortened season, so there’s additional risk involved for the buyer. So what if we make the aging curve more harsh, and knock off 0.75 WAR per season instead of the normal 0.5 annual decline?

Alex Gordon’s Contract Estimate — 3 yr / $68.7 M
Year Age WAR $/WAR Est. Contract
2016 32 3.5 $8.0 M $28.0 M
2017 33 2.8 $8.4 M $23.1 M
2018 34 2.0 $8.8 M $17.6 M
Totals 8.3 $68.7 M

Assumptions

Value: $8M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), -0.25 WAR/yr (28-30),-0.75 WAR/yr (31-37),-1 WAR/yr (> 37)

Because of the short-term nature of the deal, moving the aging curve around doesn’t change the calculations that much; even with a negative assumption of how well Gordon’s skillset will hold up, you’re still looking at 3/$69M, in the same range as the first assumption. But both of those assumptions are based on the $8 million per win value, which has been roughly the going rate for wins this winter. But 75% of the money spent this winter has gone to pitching, with a good chunk to relief pitching, and pitchers have historically cost more than hitters on the open market. And among hitters, defensive specialists have historically cost less than sluggers, so Gordon is unlikely to get paid market value for his production.

So let’s tinker around with the other numbers. Here’s what a three-year deal for Gordon would look like if teams priced his wins at $7 million apiece.

Alex Gordon’s Contract Estimate — 3 yr / $65.8 M
Year Age WAR $/WAR Est. Contract
2016 32 3.5 $7.0 M $24.5 M
2017 33 3.0 $7.4 M $22.1 M
2018 34 2.5 $7.7 M $19.3 M
Totals 9.0 $65.8 M

Assumptions

Value: $7M/WAR with 5.0% inflation
Aging Curve: +0.25 WAR/yr (18-27), 0 WAR/yr (28-30),-0.5 WAR/yr (31-37),-0.75 WAR/yr (> 37)

If you use the pessimistic aging curve and the lower $/WAR assumption, then the assumption drops to $60 million instead of $66 million. Given that we’re in January, and Gordon is still competing with not only Cespedes but also Chris Davis and Justin Upton for the remaining free agent dollars, it doesn’t seem that unreasonable to expect Gordon to end up settling for something in this range. It would be a disappointing outcome for Gordon relative to the early-winter estimates that he might be able to get a $100 million contract himself, but with most teams deciding to spend their cash on pitching this offseason, a three-year guarantee for north of $20 million per season wouldn’t be a disaster.

After all, if the forecasts are correct about Gordon’s value, he’s not going to be worthless when a three-year deal expires. Even the pessimistic aging curves have him ending as something like a league-average player, and if he’s still a useful player at age 35, he could probably expect to land a one-year deal for 2019 in the $15 million range, maybe even pushing up towards $20 million if MLB keeps seeing salary inflation at the rate it has been lately. After all, mediocrities like Alex Rios and Torii Hunter topped $10 million on one-year deals last winter, and Gordon would have to decline dramatically to get down to their level in the next three years.

While getting the fourth year guaranteed would obviously be better from a risk-mitigation standpoint, something like 3/$65M — with a reasonable assumption that he’d get ~$15M on a one-year deal when this contract ends — would put his total compensation over the next four years in the same range as what we were estimating back at the beginning of the winter. And because this is the winter of the opt-out clause, Gordon could probably make up some of the lost value of giving up the fourth guaranteed year by asking for an opt-out. If he got a one-year opt-out, had another good season and stayed a bit healthier, getting $20-$25 million for 2016 and then hitting the market looking for a 3-4 year deal at the same AAV next winter could be a good outcome for Gordon.

The Scott Kazmir deal — three years, $48 million guaranteed, with an opt-out after the first year — is probably not a terrible model for Gordon, though he should get more in guaranteed money. If the White Sox are serious about adding another quality player to their offseason overhaul, giving Gordon 3/$60M with an opt-out wouldn’t be a bad use of funds. And for Gordon, given the amount of competition he has left for the remaining free agent dollars, getting a Kazmir-style deal with a higher guarantee could be a reasonable option as well.

The White Sox certainly need another outfielder, and if they’re all in on trying to win while they have Chris Sale in his prime, now isn’t the time to stop spending. Gordon would be a big improvement over Avisail Garcia, and if they could then find a shortstop after that, the White Sox might actually be in position to make a run at the AL Central next year.



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Dave is the Managing Editor of FanGraphs.


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prosenblum
Member
prosenblum
4 months 27 days ago

interesting idea but seems like the same things you write about Cespedes apply to Gordon. Why take a 3 year deal if there is something longer on the table, maybe you are saying we might only get a 3 year offer

senor_mike
Member
senor_mike
4 months 27 days ago

Dave covered that in detail in the article. The difference is due to Gordon being 32 and Cespedes being 30, and the length of time teams would likely be willing to go for players of their age and caliber.

reggiethomaslive
Member
reggiethomaslive
4 months 26 days ago

The question is still valid. Why would Gordon willingly choose to become a free agent again at age 35? If he has a choice he won’t, this is where he gets his best contract.

Now maybe no-one offers him more than 3 years, but I doubt it, it’s just a question of the AAV. Anyone willing to pay him $65M for 3 years would clearly be willing to pay him $75M for 4 years. If he does take a 3 year deal my guess is it would have to have a vesting clause for more years. Or he takes a 6 year deal at some absurdly low price like $15M a year.

Curious Gorge
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Curious Gorge
4 months 27 days ago

You know things are getting bad when the bargain shopping/small market White Sox think you’re a legitimate option.

cornflake5000
Member
cornflake5000
4 months 27 days ago

I can’t imagine the Sox offering more than the Royals, and if the money is similar, why would Gordon leave the Royals for the Sox?

Rational Fan
Member
Rational Fan
4 months 27 days ago

What?

White Sox Payroll rankings the past 10 years:

2006 – 4th
2007 – 5th
2008 – 5th
2009 – 12th
2010 – 7th
2011 – 5th
2012 – 11th
2013 – 8th
2014 – 20th
2015 – 15th

Yeah, real small market and bargain shopping. The White Sox have been dreadful the past three years as well.

In relativity to their attendance, they spend by far the most in baseball. I believe they have spent the highest percentage of revenue on payroll over the past 20 years as well.

Curious Gorge
Member
Curious Gorge
4 months 27 days ago

Their lack of attendance and corporate sponsorship makes them operate like a small to mid market team.

If they acted like a team that plays in the 3rd largest market, they’d sign him right now.

But they don’t have the money, because they don’t have big market fan support.

Rational Fan
Member
Rational Fan
4 months 27 days ago

This makes little sense – the Sox have spent more money than the Cubs over the past 20 years.

The White Sox haven’t signed him yet because there is a lot of risk attached to long term contracts with 30+ year old’s who are coming off an injury filled season, whose value is tied significantly into his defensive prowess.

Hahn, contractually, has proven to be very creative and innovative. He also isn’t one to outspend projected value; that doesn’t mean he hasn’t signed atrocious contracts, but at the point of signing it didn’t appear that way.

The White Sox are going to play the market like any other team; why haven’t any of the other 5 teams from the 3 largest markets signed him or the other two?

Bottom line is the White Sox don’t spend anywhere near like a small market baseball team; as was proven by my previous post.

jlongrc
Member
jlongrc
4 months 26 days ago

Seems an odd standard; why isn’t he signed by some other team with big fan support, if money in the bank is the only barrier? The White Sox, at least since Kenny Williams has been around, have maintained generally high payrolls but rarely try to throw that money around in free agency. Ownership, to be certain, feels like playing the big money free agent game is a losing one. And, of course, is ownership wrong in that case?

Brian Reinhart
Member
Member
4 months 27 days ago

off-topic Kudos/PSA post:

Kudos: to FanGraphs for implementing a “log in to reply” comments system. This is one of the 3-4 best comments sections on the entire internet, and I hope the login system will help prevent some of the recent flood of trolls, weirdos, and impersonators. I’ll miss Ruben Amaro Jr. and other gimmick posters (maybe someone can register those with alternate email addresses), and I posted as quite a few from time to time, but the trade-off will be worth it to maintain civil discussion. Thanks, team.

PSA: Due to the new system, my two accounts (as FanGraphs commenter and Hardball Times author) have merged. So, from now on, the username “Well-Beered Englishman” is hereby retired. He’ll still be here, because he is me, but after 5 years, the WBE name says goodbye. (I’m more of a wino now anyways.)

TKDC
Member
Member
TKDC
4 months 27 days ago

I’d like to believe that Fangraphs was just waiting for Amaro Jr. to be fired before making the switch. With him gone, the pendulum finally swayed just enough to make the log-in model more preferred.

Ruben Amaro Jr.
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Ruben Amaro Jr.
4 months 27 days ago

Johan Santa and Jorge Posada may come and go, but I’m here for the long haul.

Curious Gorge
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Curious Gorge
4 months 27 days ago

I am glad to to see the new system as well… but now I’ve got to be more careful about not being an asshole. It much easier changing usernames and personalities… and I admit that I did, but I do agree that this has been a great comment section for years and this should help keep it that way.

Sean Dolinar
Editor
4 months 27 days ago

I’ll miss that name.

phoenix2042
Member
Member
phoenix2042
4 months 27 days ago

I was about to say “who cares what you’re called now, buddy?!” but then I saw the that name was retired and wept.

Petey Bienel
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Petey Bienel
4 months 27 days ago

meh, you have not been English for a while.

Brian Reinhart
Member
Member
4 months 27 days ago

True! I was only a permanent resident of the UK in the first place, not a citizen, and am no longer there.

tz
Member
tz
4 months 27 days ago

So Well-Beered…I mean, Brian, who did you post as?

Brian Reinhart
Member
Member
4 months 27 days ago

Can’t remember anymore, but according to my web browser’s autofills, the most recent ones are “Mike Huckabee”, “couldn’t resist”, “Babe Ruth at Denny’s”, and “Babe Ruth and Ron Swanson Broing Out Cuz They’re BFFs”

tz
Member
tz
4 months 27 days ago

LOL, I’ve lost track myself. I do know that I’ve posted as both “Ruben Amaro Jr.” and “I Once Posted As Ruben Amaro Jr.”.

I agree about the new comment system. The biggest problem with the old system was that somebody could post as another regular commenter just to make trouble. This was the running joke on “everdiso”, but I also saw it happen to Phillie113 at one point. Glad that’s taken care of.

Fredchuckdave
Member
4 months 27 days ago

Just legally change your name to Well-Beered Englishman and all is well. Who’s this Brian Reinhart not Anonymous douchebag.

Serbian to Vietnamese to French and back
Member
Serbian to Vietnamese to French and back
4 months 27 days ago

Fewer trolls, weirdos, and impersonators = fewer opportunities for me :(

chuckb
Member
chuckb
4 months 27 days ago

Could not agree more. I’m glad you said this. It needed to be said.

Joser
Member
Joser
4 months 27 days ago

Whoah, you’re “Well Beered Englishman”? Should I have known that?

I agree a more responsible comment system, or rather one that promotes more responsibility, was long overdue. Though I note this was accompanied (or perhaps presaged?) by a transition from ASP.NET to WordPress. Hope the tech crew here stays on top of things: WP is a well-featured platform that runs a lot of the sites on the internet, but that also makes it a much bigger target for all the black hats.

David Appelman
Admin
Member
4 months 26 days ago

We’ve always used WordPress as a CMS and ASP.NET for other things, so no actual changes under the hood.

Joser
Member
Joser
4 months 19 days ago

Ah, well, ok then! I had never submitted an article so until the comment log-in system got turned on I hadn’t seen the WP side of things exposed, whereas I had seen the odd ASP.NET error page or other tell-tales from time to time.

Things seem to have been mostly smooth from a technical standpoint for quite a while now, so… uh, keep it up!

TKDC
Member
Member
TKDC
4 months 27 days ago

These opt outs after one season are a bit curious as it has been well discussed that players really like deals that are long so they have some reasonable sense of long-term connection to the team. I guess since they are opt outs, there is still control by the players, so they find them acceptable.

I wonder if the price drops enough if the Royals might get back in the mix.

scooter262
Member
Member
scooter262
4 months 27 days ago

I think the one-year opt-outs are driven in part by the fact that there will be a new CBA next year. Maybe they are here to stay, though, as they seem to be a great deal for the players, and once they have something good like that, it doesn’t usually go away.

chuckb
Member
chuckb
4 months 27 days ago

Beyond the new CBA, the free agent pool next off season is considerably worse than this year’s. People like Rasmus, Kazmir, and Gordon are likely to look a lot better when they’re the best players on the market rather than fall back options for those who don’t get one of the better free agents.

Will H.
Member
Member
Will H.
4 months 27 days ago

So Dave, does this contract assumption include the loss to a team of their 1st round pick?

TKDC
Member
Member
TKDC
4 months 27 days ago

This is an important note. Presumably a team would weigh the risk of losing the draft pick for only one year of Alex Gordon. On the other hand, the only scenarios in which Gordon opts out are scenarios where the team would still extend a qualifying offer, so that mitigates the loss of the draft pick the year before (and for some teams it is actually a net gain).

rauce1
Member
rauce1
4 months 27 days ago

I suspect Nightengale’s tweet sheds as much light on the true market for Alex Gordon as did Jim Bowden’s likely erroneous tweet that the Royals had offered 4/~$50M.

Josh-
Member
Josh-
4 months 27 days ago

If there’s a team out there willing to pony up approximately 3/70, it’s hard to imagine they wouldn’t be willing to approach something like 4/85 and I would imagine Gordon takes that over a 3/70. I could see a fourth year being something that vests on plate appearances too. I wonder if an opt out after year one would be of interest.

domxbomb
Member
domxbomb
4 months 27 days ago

Gordon makes a ton of sense for the Angels. They should be trying to win now, and there’s a big need for a lefty bat in their lineup. When Eppler was hired he said he was big on tailoring ball clubs to their ballparks, which for LAA maybe means …focus on OF defense? Perhaps. I know they don’t want to go over the luxury tax but they would be first time offenders and with the tax almost certainly assured to rise with the next CBA, signing Gordon wouldn’t be hamstringing themselves with a massive bloated contract that would make them repeat offenders.

AngelsLakersFan
Member
AngelsLakersFan
4 months 27 days ago

It’s so logical it hurts. It seems Moreno is so burned by the Hamilton deal that he does not want to spend. They have a complete blackhole in LF, an ~83 win team, the best player in baseball, a young core and zero prospects but Moreno is only concerned that the luxury tax threshold might ‘actually decrease’ under the next CBA.

This team would have been much better served signing a younger, more talented, albeit more expensive LF than Gordon.

With regards to the Angels ball park, it is an above average sized outfield, but the most significant park factor is the huge depreciative impact the high wall in right field has. The team lacks bats from the left side, but it’s a good idea to avoid left handed bats that get most of their value from fly balls to right field.

HamelinROY
Member
Member
HamelinROY
4 months 26 days ago

The luxury tax threshold decreasing seems crazy, if anything I expect the union to take a strong position to greatly increase it.

Eminor3rd
Member
Eminor3rd
4 months 27 days ago

If the price is 3/60, I can’t imagine the Royals don’t ultimately match it, or at least get close enough that Gordon would rather be there than in Chicago.

chuckb
Member
chuckb
4 months 27 days ago

Agreed, but if the price falls to somewhere around 3/60, I can’t see the Cardinals getting involved and driving the price up a little more.

Nathaniel Dawson
Member
Nathaniel Dawson
4 months 27 days ago

Is the going rate for free agent $/WAR really roughly $8 MM this off-season? Is Fangraphs assuming no inflation over last year? I’ve been using $8.5 MM myself, as you typically see year-to-year inflation in salaries.

Paul22
Member
Paul22
4 months 27 days ago

Salaries were up 8% and revenues over 10% but the FA market is not really a free market. The LT system and FA penalty costing teams a draft pick serve to inhibit the market, and also, the possibility some form of collusion is at work given MLB’s history and the legal cooperative that makes it possible

Mike NMN
Member
Mike NMN
4 months 27 days ago

The problem with the Royals first offer was that it wasn’t lucrative enough or creative enough. But, perhaps the same offer, maybe tweaked to 4/60, with an opt-out after the second year (and no QO), could work for both sides. KC was discounting the 4th year anyway by baking it into AAV. If Gordon has two strong years, he can opt-out, and seek longer and more. If he regresses to just good, or worse, he gets the back end.

Paul22
Member
Paul22
4 months 27 days ago

Some of these guys will be smart enough to sign a 1 yr deal or an 1 yr opt out and try again next year when there is less competition and perhaps a higher LT threshold as a result of the new CBA.

They can take out an insurance policy like Scherzer did to mitigate the risk (40 million tax free for 750K which is about 70 million in taxable dollars).

Teams may be shying away from hitters given the performance of many guys since 2009 after signing big deals.

Hitters with 100 million dollar contracts or extensions since 2009 signed after age 25, fWAR avg in 2014-2015

Name-contract start date, avg fWAR 2014-2015

Ellsbury-2014, 2.5
Cano-2014, 3.7
Fielder-2012, 0.7
Pujols-2012, 2.5
Crawford-2011, 1.5
Choo-2014, 1.8
*Votto-2014, 4.2
Kemp -2012, 0.9
Tulo-2011, 3.8
Agon 2012, 3.3
*Posey-2013, 5.7
Wright-2013, 1.4
Werth-2011, 2.3
Howard-2012, -0.4
*Cabrera-2016, 4.8
Pedroia-2014, 3.3
Reyes-2012, 2.0
Braun-2016, 1.8
Zimmerman-2014, 0.9
Longoria-2017, 3.8
Andrus-2014-1.4
Teixeira-2009-2.0
Hamilton-2013-0.7
Joe Mauer-2011 , 1.0

Great 4+ 13%
Good 3-3.9 22%
Mediocre 2-2.9 20%
Bad 1-1.9 25%
Barf under 1 20%

This does not touch on the expected decline for most of these contracts and for a couple of players the numbers are affected by injury and suspension, but it is what it is. In 65% of those cases the last 2 years have been disappointing, and only 13% of those contracts are really producing much surplus value and less than half are at least break even.

Its not all age related decline either as many of these disappointments start very soon. My best hypothesis is players get off the juice or just stop working out hard in the offseason.

tz
Member
tz
4 months 26 days ago

I love that scale on the bottom – I’m assuming that refers to the return on the big $ deal, not the actual performance (2-2.9 is a good year but a mediocre return for a huge contract).

For your hypothesis, it’s probably the case for some players. I know of two guys on my Red Sox who clearly limited themselves to fork-and-knife workouts when they signed their almost 9-figure contracts last winter. But there are also tales of guys who went the other way and cared too much, feeling the pressure of living up to the big contract. That’s allegedly what drove ARod to hitting the juice big time once he signed his record-breaking deal with the Rangers.

rosen380
Member
rosen380
4 months 26 days ago

I don’t see why you are using 2014-2015 for all players regardless of when they signed… what does a player’s 2014-2015 fWAR who signed for 2014 have to do with the 2014-2015 fWAR for a player who signed in 2009?

TangoAlphaLima
Member
TangoAlphaLima
4 months 25 days ago

4 years at $72 million! What a bargain!

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