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 Chicago #WhiteSox want to sign free agent OF Alex Gordon or Yoenis Cespedes, but only if they're willing to take 3-year deal or less.

— Bob Nightengale (@BNightengale) January 1, 2016

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.