Explaining the Depressed Market for Sluggers

With apologies to Pedro Alvarez, just about every decent bat in this winter’s free-agent class has signed. We heard all winter about how the market for the offense-first, defensively limited sluggers was a bad one this offseason, and we saw many players sign contracts for less than expected. This happened to those at the highest levels — like Edwin Encarnacion who took a shorter deal than anticipated — as well as at the lower end, where many players expected to receive multi-year deals had to settle for one-year contracts. There was a general lack of talent among free agents this offseason, but the glut of mediocre options likely played into a depressed market.

To illustrate how poorly this free-agent class fared relative to expectations, it’s probably best to provide those expectations. We can do that in the form of Dave Cameron’s Top 50 Free Agents post, which also included crowdsourced figures, as well. Of the players on that list, I took the 15 corner outfield/first base/designated hitters who seemed to fit into the prevailing narrative this winter. Here are the predictions from the beginning of winter.

In terms of dollar value, Cameron and the crowd are pretty close. The latter was a little bit more optimistic that players could get two-year deals rather one, while Cameron (for the most part) made up for that deficiency by estimating slightly more in average annual value. Ultimately, the figures mostly even out.

Before we get to the dollar figures for the contracts the players actually signed, read this caveat from Cameron in the introduction to the Top 50 Free Agents piece.

In terms of the numbers, keep in mind that the crowdsourced values are generally a good bit lower than what players actually sign for, because the player signs, most often, with the highest bidder, while the crowdsourced results are an average of what our readers think a player should get. My guesses are generally a bit higher than the crowd’s estimate, though that isn’t true for every player.

If precedent were to hold, we would expect the predictions above actually to underestimate what the players signed for. Now let’s add the actual contract values to the chart above.

Yikes! So the crowd estimates, which we thought might be a bit low, turned out to be very, very high. Overall, instead of getting more than the crowd thought, these players took a 30% discount. Around 60% of that discount came from the contracts of Bautista, Encarnacion, and Trumbo. That trio received 40% less than their predicted dollars, so maybe the numbers for the top players are actually bringing down the totals for the group as whole.

Well, we can test that theory. Let’s split them up. In terms of top contracts, we have a pretty clear tier down to Josh Reddick.

So this confirms what we thought regarding the top guys taking discounts. Collectively, this group received only about two-thirds of their estimated dollars.

Now, here are the guys at the lower end of the scale.

This table confirms the narrative that the bottom guys felt the squeeze, as well, if not quite to the same degree. Even Kendrys Morales’ fairly big deal doesn’t compensate for the low offers around him. This does lead to some question of whether these players are overvalued anyway — and perhaps suggests that front offices are getting smarter about their acquisitions. I’m not completely sold that this is what happened, though.

Let’s look at that first group again and add another column. The additional column includes the projected value for these players. I averaged the Steamer and ZiPS projections for the members of this group, accounted for aging, and placed the value of a win on the free-agent market at $8.5 million with 5% inflation. This is what would have been a decent value for these players.

Even compared to projected value, these players had to take a 10% discount. Cespedes and Reddick got what they deserved, while Trumbo got more and Encarnacion and Bautista got considerably less. Four of the five players above had draft-pick compensation attached to them, but that just makes the value of Trumbo even worse, while Bautista and Encarnacion still count bargains despite the value of the draft pick. Perhaps Bautista did turn down better offers to go back to Toronto, but his contract represents a big discount over the three years and $50 million that is probably his value.

Did the same hold true for the lesser players? Let’s see.

The market paid these players what they are worth. Morales got a little more and Saunders got a little less. Rasmus has injury concerns that drove his price down. The projections don’t like Brandon Moss at all. In total, these players signed for pretty close to what they are worth, even if it was well below expectations.

While the market developed very slowly, most players ended up about where they should. It’s possible that front offices are better valuing players with limited skillsets even if they have one pretty loud skill, but the Toronto sluggers in Bautista and Encarnacion appear to be pretty big outliers. The bargains weren’t made at the low end of the hitter spectrum, but at the high end where good players like Encarnacion and Bautista had to settle for less than they’re likely worth.