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Is the Reliever Market Out of Whack?

News broke late Tuesday that the Philadelphia Phillies were on the verge of signing Ryan Madson to a 4-year year/$44 million deal. By Wednesday, there was news that the deal was “waiting approval” by Phillies ownership or “only a deal in principle” or “falling apart.”

However this plays out, the idea of a 4-year/$44 million deal for a top-line closer is likely to set the standard against which other closer deals are negotiated this winter. We’re looking at you, Jonathan Papelbon.

What should we make of a possible 4-year/$44 million deal for a pitcher like Ryan Madson?  Several things.

For one, Madson is a very good pitcher and has been so for some time. In 191 innings pitched over the last three seasons, Madson has posted a K/9 rate of 9.72, a BB/9 rate of 2.38 and a HR/9 rate of .60.  The strikeout and walk rates have held fairly steady over the three seasons, while the home run rate has been trending downward. That’s significant for a pitcher who plays half his games in hitter-friendly Citizens Bank Park.  It’s also significant that Madson posted these numbers as the set-up guy to Brad Lidge in 2009 and 2010 and as the closer in 2011. In other words, he didn’t wilt under the pressure of the 9th inning, to the extent any such phenonemon exists. Still, Madson’s combined WAR over the last three seasons is 4.3, which is less than single-season WAR for Roy Halladay, Cliff Lee and Cole Hamels in 2011.

By way of comparison, in 199.1 innings pitched over since 2009, Papelbon posted a K/9 rate of 10.81, a BB/9 rate of 2.78, and a HR/9 rate of .67.  Pretty similar walk and home run rates to Madson with a significantly higher strikeout rate, owing in part to Papelbon’s whopping 12.17 K/9 in 2011.  Papelbon accumulated 3.0 WAR in 2011 alone and had a combined 6.2 WAR over the last three seasons.

While Papelbon is the more established closer and is likely to command a more lucrative deal than Madson for 2012 and beyond, he was paid $12 million for 2011. That was the second highest yearly salary for a relief pitcher in 2011, after Mariano Rivera‘s $15 million (combined 6.2 WAR 2009-2011). So while legitimate questions have been raised about the length of a 4-year deal for Madson, the AAV of $11 million is not completely out-of-line with other annual contract rates for a very good closer.

Moreover, the Phillies were second only to the Yankees in payroll in 2011 and are expected to be a top spender again in 2012. Eleven million dollars per year — even over four years — eats up much less of the Phillies’ overall budget than the same amount would for most other teams.  And, as my FanGraphs colleague Eric Seidman noted over at Brotherly Glove, the rest of the Phillies’ bullpen is likely to cost pennies by comparison over the next several seasons, thus offsetting the larger costs for Madson.

Nevertheless, even for a top spender like the Phillies, every long-term commitment to one player affects a team’s ability and willingness to sign other high-value players. For the Phillies, if the Madson deal is finalized, it’s likely to impact negotiations with long-time shortstop Jimmy Rollins, who is now a free agent and has publicly stated that he wants a 5-year deal.

The Phillies aren’t the only team facing questions about contracts for relief pitching and how those costs may affect negotiations for position players. Last week, the San Francisco Giants announced a new 2-year deal with left-handed reliever Javier Lopez for $4.25 million per year and that they had picked-up the $5 million option on left-handed reliever Jeremy Affeldt. That’s $9.25 million the Giants will spend in 2012 on two lefty relievers who combined for .9 WAR in 2011. To be fair, the availability of quality lefty relievers heading into 2012 was pretty slim, with Lopez and Affeldt two of the better, if not the best, options.

But the Giants registered the second lowest wOBA (.294) and the lowest wRC+ (83) in the National League in 2011. To get back in contention in 2012, the Giants must add players who will boost the offense. With total payroll holding steady and salary increases due to Tim Lincecum, among others, the Lopez and Affeldt deals will significantly, and negatively, affect the Giants’ ability to sign the necessary position players.

Is the reliever market out of whack? If you look solely at return on investment through metrics such as WAR, you’d say yes. However, the answer for specific situations is more complex than that. Whether a team should pony up big money for a closer depends on a team’s needs, its total payroll, and the supply of comparable relievers.

Madson probably won’t be worth $44 million over the next four years, but the Phillies have already gone all-in on the short term. If re-signing him prevents them from keeping Rollins or making necessary upgrades at other positions, then it’s a deal they should walk away from, but if the Phillies can afford to keep their team together and have enough money to make Madson a highly paid closer, then they’re likely a better team in the short term than they would be by letting him walk. They may very well pay the price in a few years, but Ruben Amaro has shown a clear willingness to trade future value for present value, and giving Madson a four year deal would just be a continuation of that trend.