The Other Side of the Chris Davis Contract

At the kind of money he wanted, Chris Davis basically had a one-team market. Other big-spending teams didn’t have openings at first base, and other big-spending teams weren’t buying Scott Boras’ pitch of Davis as a versatile could-be outfielder. The Orioles sensed even a month ago they would be bidding against themselves, and they attempted a couple leverage plays to try to force Boras’ hand. Yet Boras won, as he almost always does. Here’s what’s being reported: Davis re-signed with Baltimore for a seven-year deal worth $161 million. Somehow, the commitment got bigger from what was reported weeks back. The Orioles were the only team around $150 million, and Scott Boras got them to add on more.

That makes it kind of a bad look for Baltimore. The easy takeaway is that Peter Angelos just got played. And at the end of the day, it’s highly unlikely another team would’ve been willing to come close to this, had the Orioles walked away. But for one thing — however much this is worth — this does send a good message that the Orioles will spend to keep good players around. People have doubted that in the past, and now Davis joins Darren O’Day as a returning key player. And there are other factors, as well, in support of the idea this isn’t a certain catastrophe. This isn’t quite a straight-up $161-million commitment. There are, let’s say, special considerations.

Start with the on-the-field stuff. That’s the stuff fans care about most. There should be no doubting Davis is a good player. A risky player, absolutely, but last year he was a top-20 position player by WAR, and three years ago he was top-10. There’s a big range of potential outcomes, but it’s centered around a good stat line, and the Orioles, like everyone else in the American League, are a potential contender. Last year they won 81 times, yet the year before they won 96 times, and the bullpen looks fantastic. The rotation needs help. The team is thin. It could make the playoffs, though, is the point. This isn’t a cellar-dweller throwing money at wins that don’t matter.

Whenever you see a big contract like this, you see analysis based around player comps. And with Davis, there’s one comp that’s impossible to ignore. Almost without question, the most similar player to Davis, in recent history, has been Ryan Howard. And, yeah.

Chris Davis and the Uh-Oh Comparison
Player Ages BB% K% wRC+ ISO HR/FB% IFFB% Contact%
Chris Davis 27 – 29 12% 31% 140 0.292 28% 4% 68%
Ryan Howard 27 – 29 13% 29% 132 0.299 29% 2% 66%

It’s freaky how similar they look. It’s just about an identical skillset. Since turning 30, Howard has been worth right around one win above replacement. You know how Howard has gone. You can’t just shut this out, when you get to worrying about Davis’ future.

But you need to be careful with how you think about these things. Player-comp analysis, in general, has significant drawbacks, since every player is his own person, and everyone faces different circumstances in different eras. And, specifically, Howard here is legitimately a worst-case scenario. His performance fell off, and he sustained a major injury. Using Howard as a comp is kind of like using Brandon Webb as a comp for excellent starting pitchers. It’s a good reminder that things can just suddenly fall apart, but Webb isn’t a reason to never invest long-term in a starter. Webb was awesome. Howard was his own kind of awesome. He took a bad turn, but you’re talking about a sample size of literally one.

Not to mention, even with this comparison, Davis appears to be the better athlete. He moves around better, he rates as the superior defender, and Davis has played in the outfield without embarrassing himself. Davis has also played some third base. Again, teams wouldn’t buy Davis as anything other than a first baseman, but the recent versatility does suggest Davis isn’t just a classic one-tool slugger.

I remember reading some of the same stuff about Adam Dunn. People would defend Dunn’s athleticism as being better than it seemed, and that didn’t really seem to help Dunn age. It’s not promising that Dunn, also, struggled in his 30s. But one of the reasons it’s hard to find good Davis comps who succeeded in their 30s is there just haven’t been very many of these players. Not at Davis’ extremes. The best possible outcome, of course, is Jim Thome, and he’s hardly a worse comp than Howard. And, remember Russell Branyan? Branyan, in his 30s, actually out-hit himself between 27-29. He just wound up bothered by injuries, but the bat didn’t disappear. Branyan is proof this skillset can sustain, and it has sustained recently.

Moving on now to the financials, one issue is this isn’t just $161 million. It’s not an ordinary seven-year contract.

Adds Ken Rosenthal:

I’m not the econ guy — Dave is the econ guy — but even if you’re a non-econ guy, you have some basic understanding of what deferred money means. We went over this a year ago, when Boras designed a Max Scherzer contract with the Nationals that deferred even more. Future money is less valuable than present money, but it still finds itself into headlines like everything’s equal. Boras and Davis get to say they got $161 million. They’re not wrong, even if there’s an asterisk. This is one way of maximizing the commitment, and this might be what Boras and Angelos were working through the past few weeks. Some sort of compromise, that gave Davis the biggest superficial terms, while not actually costing the Orioles more than they were comfortable with.

So when you’re comparing the Davis contract to what you think he should’ve gotten on the market, you can’t just use that $161 million, straight. He’s effectively earning less than that, even if not by that much.

Now there’s one final consideration, that might ultimately be the most important of all. When we talk about whether contracts are “good” or “bad”, we lean upon a critical assumption — there’s a fixed amount of money beyond which owners won’t go. So if a team has a budget of, say, $120 million, then the team needs to be careful to maximize its efficiency below that line. Every dollar spent poorly is a dollar that can’t be put to better use. This is the risk of dead money. Dead money reduces the “effective” budget.

What if the assumption is wrong, though? What if an owner decided to just spend more? A contract isn’t bad if an owner just spends his way out of it. Then the team wouldn’t really be affected at all. We don’t see this very much, but Peter Angelos clearly believes Chris Davis is special.

The idea presented: the money budgeted for Chris Davis wasn’t being budgeted for just anyone. Angelos has a particular fondness for Davis, and a particular appreciation of everything he’s done. It’s not quite that Davis is being paid right out of Angelos’ pocket, from a completely separate budget, but there are hints that the Orioles’ payroll might go higher with Davis than it would’ve without Davis. If that’s in any way true, then it has to also be a factor, because it means the Orioles would spend more on a team with Davis than they would on a team with, say, Yoenis Cespedes. Again, if that’s true, it would mean Davis is getting money that wouldn’t have been put elsewhere.

So that would further complicate the evaluation — making it no less friendly for Davis, who doesn’t care where the money comes from, but making it less not-friendly for the team. It’s a hell of an assumption, but Angelos clearly thinks of this player and circumstance as unique, and the easiest way to think of it is just by chopping some money off the top when you’re figuring out the team’s commitment here. It’s not like all the money would be coming from a separate budget, but it would be a fraction.

There are problems — maybe in time, Angelos would change his mind. Maybe especially if Davis declined. And as a fan it could be frustrating to think about this situation because you’d want the same amount of money to be available regardless. This is getting into weird territory, where it’s difficult to prove almost anything. But if there’s “free” money involved here, then the team itself assumes less risk, because Angelos would be deciding to dip into his own piggy bank.

I think we all have a pretty good idea that the Orioles spent more than anyone else would’ve been willing to spend. Just in that sense, the Orioles are taking a big risk, and this is a huge win for Davis and Boras. All else being equal, the Orioles probably would’ve been better off luring Cespedes or Justin Upton. But for one thing, there’s no guarantee Davis begins a steep decline, just because a few players with his skillset have done that. His future doesn’t have to be dark. And then there are financial considerations — deferred money, and Davis being one of Peter Angelos’ favorite players. There’s a chance Angelos is putting money into the team here he wouldn’t have put in otherwise, and if that’s true, that’s more good than bad. We should all want for owners to spend more than they do. The alternative is that the money stays with the owners.



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Jeff made Lookout Landing a thing, but he does not still write there about the Mariners. He does write here, sometimes about the Mariners, but usually not.


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walt526
Member
walt526
4 months 8 days ago

They’re paying Davis $119M/7yr with a $42M obligation (that has a NPV of ~$18.6M) following the end of the contract. It’s not a great contract as it still has nothing but downside for the Orioles, but it’s not quite the disaster a standard $161M/7yr would be.

n0exit
Member
n0exit
4 months 8 days ago

Not a finance specialist, but what discount rate did you use and why?

walt526
Member
walt526
4 months 8 days ago

7.5%, because presumably the Orioles have a competent investment advisor and the time horizon is 22 years.

If you use 5% instead, then the deferrals have a NPV of $17.3M.

jcxy
Member
jcxy
4 months 8 days ago

no reason to use anything more than 3-4% for these purposes. t-bill rate is what, 2%? there’s not a whole lot of logic to it other than for a back of the envelope calc other than you’d prefer to err on the conservative side. 19MM seems fair.

Phillies' Front Office
Member
Phillies' Front Office
4 months 7 days ago

Almost any business of the Orioles’ size, or for that matter, any accredited walk in financial advisor, could easily beat a 3-4% annual return over the given time frame.

Antonio Bananas
Member
Member
Antonio Bananas
4 months 7 days ago

Over that length of time, you survive bear markets. Simply putting every dime in the ETF “SPY” or “DIA” would probably beat that rate.

RolDer
Member
RolDer
4 months 8 days ago

Another big difference b/w Davis and Howard is that Davis produces vs lefties.

Howard really never has done well against lefties and in his later years cratered against southpaws.

Arjon
Member
Arjon
4 months 8 days ago

Does this have predictive value?

Famous Mortimer
Member
Member
4 months 8 days ago

As much as any regular past display of skill had on future displays of that same skill, yes?

Cidron
Member
Cidron
4 months 8 days ago

Payouts til 2037? Is Chris Davis the new Bobby Bonilla? (payouts for a ludicrous length of time?)

MockeryEnsues
Member
MockeryEnsues
4 months 6 days ago

Yuck.

TJ
Member
TJ
4 months 8 days ago

It doesn’t seem so crazy to me that Boras got more money stacked on, if the last conversation involved the payments for 22 years. Is it really a steal once you calculate the NPV, then?

LHPSU
Member
LHPSU
4 months 8 days ago

It’s not a steal because it’s still a lot of money for a player with above-average risk of turning into a pumpkin.

It’s not much different from the deals some other players have signed in the recent past, however, and it’s hard to say that it’s really any worse than, say, the Josh Hamilton contract.

phoenix2042
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Member
phoenix2042
4 months 8 days ago

General question: money in defered payments and/or signing bonus– do these count towards luxury tax purposes?

walt526
Member
walt526
4 months 8 days ago

For luxury tax purposes, it’s AAV (i.e., guaranteed money divided by years of the contract). In other words, $161M/7yrs=$23M.

phoenix2042
Member
Member
phoenix2042
4 months 7 days ago

I understand that, hence my question. He is NOT getting that money over the course of 7 years. It’s much longer. And for contacts (not this one) that have money in the form of signing bonus and not salary, does that get treated differently because that’s not part of their salary?

walt526
Member
walt526
4 months 7 days ago

Again, he’s under contract for 7 years. Luxury tax is based on the AAV as calculated by dividing the total amount of guaranteed money by the number of years the player is under contract. That a significant portion of the money is deferred does not alter the AAV for luxury tax purposes in any way.

Danny Middaugh
Member
Danny Middaugh
4 months 7 days ago

Good for the Orioles, spending big to keep their mediocre team together.

keefer
Member
keefer
4 months 6 days ago

Since 2012, the “mediocre” Orioles lead the AL East in wins, and are fifth in all of MLB in wins.

I thought people at Fangraphs actually paid attention to numbers.

AL EAST wins 2012 – 2015
BAL 355
NYY 351
TB 339
Tor 323
Bos 315

MLB Wins 2012 – 2015
STL 375
LAD 364
WAS 363
PIT 359
BAL 355

NickChristy
Member
NickChristy
4 months 6 days ago

But our projections said they were going to suck, who cares about actual results.

Jason B
Member
Jason B
4 months 5 days ago

Beware of specifically selected endpoints to advance an argument. (May look a little different if 2011 or 2013 were used as a starting point…)

1908
Member
4 months 7 days ago

One other thing to bear in mind – Chris Davis is appointment viewing for Orioles fans. The family that *might* go to one game a year *will* show up to see if this is the day that Davis hits the warehouse. If he’s not around, they might spend the afternoon at the aquarium instead.

There’s no easy way to put a dollar value on that, but Davis certainly generates more gate and gear sales than another first baseman would in Baltimore, and more in Baltimore than he would anywhere else.

jdbolick
Member
Member
4 months 7 days ago

I’m out of state so I can’t speak for who goes to the games, but when I watch the Orioles it’s not to see Chris Davis. I appreciate what he’s done, but I would have preferred to see this money spent elsewhere. Duquette has proven adept at finding undervalued first base-types. That being said, Mr. Sullivan’s point that the Davis money might not have been spent on anyone else is well taken. Even with all the deferrals, this move makes me very nervous.

Antonio Bananas
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Member
Antonio Bananas
4 months 7 days ago

Pretty sure the “superstar value” has been debunked. If the team is good, attendance goes up. No one cares about watching Davis hitting the warehouse on a .450 win % team. People will show up to see a .550 win % team regardless of who is on it.

barry6124
Member
barry6124
4 months 7 days ago

I buy the superstar value in extreme situations like Jeters farewell tour and bonds when he was a HR machine, but I am fairly confident unless Chris Davis is Irish Catholic and entire family lives in Baltimore I don’t think he will bring in much additional revenue.

1908
Member
4 months 7 days ago

Could be. It’s possible Angelos is a fatuous sucker easily gulled of his millions by Boras’ silver tongue. It’s also possible that he’s a gimlet-eyed skinflint clutching tightly to every one of his trillion pennies. But it’s unlikely he’s both, and in recent years it’s the miser that’s been much more on display. He may have made the Davis decision without any regard to the revenue consequences, but I kind of doubt it. Perhaps the quality of the data he’s relying on is poor, but I doubt this was an entirely data-free decision for him.

cornflake5000
Member
cornflake5000
4 months 6 days ago

I’m not totally sure about that. Cubs fans filled the park when Sosa was at his peak. They did make the playoffs on a couple of occasions, and Wrigley is Chicago’s biggest beer garden, but Sammy definitely added excitement to the park. Although it’s true that Chicagoans don’t need much of an excuse to celebrate anything.

The Ghost of Johnny Dickshot
Member
The Ghost of Johnny Dickshot
4 months 6 days ago

C’mon man, let’s be honest here. There isn’t a single Oriole player that has “must watch” at bats.

NickChristy
Member
NickChristy
4 months 6 days ago

Manny Machado says Hi

Jason B
Member
Jason B
4 months 5 days ago

Tell him hello, but he still doesn’t have “must watch” at bats.

Mike Green
Member
Mike Green
4 months 7 days ago

Jim Thome as a comp for Chris Davis? Really? Thome walked almost as much as he struck out. Davis strikes out almost 3 times as often as he walks. There is a huge difference in plate control.

It’s hard to find decent comps. I ran a Play Index, players who had an IsoP of .250 or higher with 500 or more Ks and 250 or fewer Ws in 1500 plus PAs between ages 27 and 29. Davis had a considerably higher IsoP, and considerably more Ks and considerably fewer walks. Subjectively, I think of Dave Kingman, Rob Deer and Gorman Thomas. Thomas isn’t a bad comp offensively- a little less power and a little better plate control. He gave the Brewers two good years at age 30 and 31, and that was it.

Mike Green
Member
Mike Green
4 months 7 days ago

Ack. One line was edited out. There was only one player who met the play index criteria- Chris Davis.

tz
Member
tz
4 months 7 days ago

Closest comp, in my mind, is what Russell Branyan would have become if he had remained healthy. I see the next three years for Davis about the same as his last three, and after that he’s anywhere from an OK long-ball hitting DH to an albatross.

LHPSU
Member
LHPSU
4 months 6 days ago

I see Josh Hamilton, mostly.

gelezinis vilkas
Member
gelezinis vilkas
4 months 7 days ago

The one thing missing from this discussion: Manny Machado and how re-signing Davis to this type of contract affects the ability of the Orioles to proffer Machado a serious contract extension (presumably next winter).

1) It demonstrates to Machado that Angelos will be ready to open his wallet to keep good players around and that the team, for the near term at least, intends to be competitive.

2) The deferrals mean that it is more likely that the Orioles will make a substantial offer to Machado. That 42 million deferred is 42 million that can be applied to a Machado extension—though I think the extension offer will not be of the magnitude of a Stanton (or possibly a Harper) extension. Unless, of course, there’s an opt-out clause.

tz
Member
tz
4 months 7 days ago

Excellent point. This is a bit like the Cardinals giving Matt Holliday a big deal to help convince Pujols that they would keep competitive (and Machado’s agent, Dan Lozado, was Pujols’s agent at the time). Of course, Machado is a lot younger (won’t be 24 until July), and this makes it worthwhile for the O’s to try to sign Machado to a Trout-type extension. That should be their first priority right now, just like it was important to Duquette to lock up Pedro long-term after he snagged him from the Expos.

exxrox
Member
exxrox
4 months 6 days ago

Trout-type extension? I’d lean more towards him getting a Stanton-type extension. Trout gave the Angels an enormous discount and it’s not the bar for the market.

Johnston
Member
Member
Johnston
4 months 7 days ago

“Peter Angelos just got played.”

Yes, he did. Big time. I thought he was smarter than that.

RedsManRick
Member
4 months 6 days ago

From Baseball-Reference, Davis’ top 10 Comps through Age 29:

1. Richie Sexson (944)
2. Cecil Fielder (940)
3. Mark McGwire (935)
4. Glenn Davis (931)
5. Lee May (925)
6. Dave Kingman (918)
7. Tino Martinez (915)
8. Tony Clark (915)
9. Nick Swisher (912)
10. Willie Stargell (911) *

ElJimador
Member
ElJimador
4 months 6 days ago

I don’t know how B-R compiles these comps but the appearance of Glenn Davis here suggests to me not just a human element, but someone actually going out of their way to mess with Orioles fans. Because for all of his other flaws, Davis’s SO% for his career was actually a shade under the MLB average. Which makes me thing there must be at least 50 other guys who’d be closer comps than him.

Look It Up
Member
Look It Up
4 months 6 days ago

Here’s how Similarity Scores are calculated:

http://www.baseball-reference.com/about/similarity.shtml

As you can see, they’re based on traditional counting stats, and make no adjustment for league or park. So Sim Score comps need to be taken with a large grain of salt.

Only glove, no love
Member
Only glove, no love
4 months 6 days ago

Career 31% k rate.

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