Valuing Meche

Following the 2006 season, Gil Meche inked a 5-yr/55 million dollar contract with the Kansas City Royals. The deal underwent immediate scrutiny due to Meche’s below average performance throughout the previous few seasons. His ERA ranged from 4.48 to 5.09, with an FIP entrenched in the 4.60-4.70 area. Simply put, an average annual value of 11 million dollars did not seem appropriate for someone with his credentials. Perhaps Dayton Moore, who apparently goes by the nickname DMGM, knew what he was doing, because Meche has established himself as a solid and consistent pitcher over the past two seasons.

2007: 34 GS, 216.0 IP, 6.50 K/9, 2.58 BB/9, 2.52 K/BB, 4.02 FIP
2008: 34 GS, 210.1 IP, 7.83 K/9, 3.12 BB/9, 2.51 K/BB, 3.61 FIP

His walk rate rose a bit this past season, but his WHIP remained in the same general vicinity as 2007, and his FIP improved by almost a half-run, all the while repeating his durability. So, the 55-million dollar question then becomes is he worth the 11 mil per season? As in, if Meche were a free agent right now, what would an appropriate contract look like? To figure out the answer, we turn to the ever familiar dollar valuation formula that Dave and I have used here recently.

For starters, we need to see what Meche is projected to do in 2009. Bill James and Marcel disagree, both in innings logged and FIP, with James calling for more innings and Marcel projecting a lower FIP. Averaging the projections, Meche in 2009 would pitch 199 innings with a 4.18 FIP. His value would be how this compares to a replacement level pitcher. For a starting pitcher, replacement level FIP is set at 5.50. Unfortunately, a replacement level starter would not be left out there for 200 innings. Instead, he would amass somewhere around 150 innings. The remaining 49 innings would be logged by a reliever. For bullpen hurlers, replacement FIP is 4.50.

Replacement SP:    150 IP  5.50 FIP  92 runs
Replacement RP:     49 IP  4.50 FIP  25 runs
Replacement Total: 199 IP            117 runs

Meche, with a 4.18 FIP in 199 innings, would be responsible for 92 runs. Conveniently enough, this cancels out with the 92 runs surrendered by the replacement starter, meaning Meche’s value above replacement level is +25 runs. Converted to wins, Meche would be worth 2.5 wins. Then, factor in that Meche is taking innings away from the bullpen, and I’m comfortable adding another quarter-win, bringing the total to 2.75 wins.

Last year, the average dollar figure per win was around 4.5-4.75 million dollars. With inflation, I’ll call this year’s amount a firm 5 million per win. 2.75 wins multiplied by 5 million dollars per win amounts to 13.8 million dollars. That is, if Meche were a free agent right now and signed a 1-yr deal, 13.8 million dollars would be an appropriate fee. For multi-year deals, we usually factor in a 10% discount rate, since players tend to sacrifice a bit of their monetary value for some security. With that in mind, a 3-yr deal for Meche would come out to 37.3 million dollars. A 5-yr deal would be valued at 62.1 million dollars.

Meche may not have seemed worth the money back in 2006, but as of right now, his average annual value would be somewhere around 12.4 million dollars, above the 11 mil in his actual contract.




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Eric is an accountant and statistical analyst from Philadelphia. He also covers the Phillies at Phillies Nation and can be found here on Twitter.


5 Responses to “Valuing Meche”

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  1. cannatar says:

    This doesn’t affect your premise much, but I think there’s a small flaw in your methodology: you don’t account for the value of reducing the bullpen’s workload by 49 innings. I’m not sure what the best way to value it is, but reduced bullpen innings have value to major league teams because they have a limited roster size.
    Think about this example – compare a team that has 5 starters who all have 4.50 FIPs and average 6 innings per start versus a team that has 5 starters who all have 4.50 FIPs and average 5 innings per start. Your methodology would value the two staffs equally, but the latter team is going to need 162 extra innings out of their bullpen, which means they are probably going to need to squeeze an extra 2 relievers onto their 25-man roster.

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  2. Eric Seidman says:

    Cannatar, at most, that would add a half-win to his total. I would probably be more comfortable adding a quarter of a win, making Meche a 2.75-win pitcher. Regardless, the point remains the same: he’s worth the same, or more than, the deal he signed.

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  3. Eric Seidman says:

    Correction made in the article.

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  4. Travis Leleu says:

    Eric,

    Nice post — you just got some traffic from Neyer’s coverage today, I’m guessing! One issue that I have with much analysis like this is that they are not adjusted for team context. While we make all kinds of statistical adjustments for parks, etc., we rarely make adjustments for team context. I’m borrowing the idea from “Diamond Dollars,” but the basic premise is that wins 92-95 are worth more than 70-73. Also, 3 wins are worth more to the Yankees than the Royals. The question, then, is this: given that the Royals will suck again, isn’t one win really worth significantly less to them than to a borderline playoff team? I have to think that it is.

    Again, this is off-field stuff, but once you start talking dollars, you have to account for team context (and situation in the projected standings).

    Thanks for the great post!

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  5. Eric Seidman says:

    Travis,

    I definitely agree, but this was really just more of looking at what his accomplishments in 2007-2008 deem him worth on the open market. As in, say he was a free agent right now and any team could sign him, what would the appropriate fee be? According to this, his market value right now would exceed the the value of the deal once deemed ludicrous.

    It’s different because we know he is signed with the Royals for the next three years at an AAV of 11 mil/season. If, however, he were to sign a multiyear deal right now, his market value would be an AAV of 12.4 mil.

    Now, for a team like the Yankees, getting wins 92-95 would be worth more than 70-73 because the difference between 91 and 92-95 could be a playoff spot. I would tend to think that for a team like the Royals, Meche would be valued at the lower end of the dollars per win range; so he would be valued at something like 4 mil/win for KC and 5 mil/win for the Yankees.

    Again, I’m not positive how we would firmly adjust for the team context, but I do agree it would make the analyses like this more interesting.

    Again, though, when Dave and I do these, we are really just looking at what someone should get given what they have done, free of team context.

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