Trends in Free Agent Spending on Hitters

In this series of articles, I have analyzed the changes in the free agent market since I last did public analysis on the topic over three years ago. I have found that teams no longer are overpaying by as much for “Other People’s Players” or for relievers. In my 2013 Hardball Times Annual article, I found a number of other types of players for which teams over- or underpaid relative to value, and those are the players I will be reviewing in my next two articles. In today’s article, I will focus on hitters.

Teams were already pretty smart about spending relative to value on hitters when I looked at free agent spending for hitters back in that piece. However, the main discovery about position players that I found was that defense and baserunning tended to be under-compensated by the free-agent market. I had suspected at the time that I began researching that article that teams would overpay for power hitters, but I found that this was not true once I controlled for position group (which I lump roughly into defense-first positions of catcher, second base, third base, and shortstop, and offense-first positions of first base, outfield, and designated hitter).

The approach I took to analyzing that article was somewhat different than what I am doing in this piece. In that piece, I did a prospective and retrospective analysis. I looked at which statistics correlated with teams paying more than other players with similar WAR histories in the prospective contract analysis. When doing the retrospective contract analysis, I checked which type of players tended to be paid more per WAR in actuality.

This was an important distinction. For instance, I found in that piece that OBP and SLG appeared overpaid when doing a prospective analysis (i.e. players who had higher OBP and SLG were rewarded with larger contracts than those with lower OBP and SLG but similar WAR). However, retrospectively it turned out that these high-OBP and high-SLG hitters actually were more likely to maintain their high WAR.

In this piece, I will only do a retrospective analysis because there is not enough data to really analyze changes on the prospective side. I will compare the cost per WAR in different groups of players from 2006-11, the pre-period for this analysis, and 2012-16, the post-period.

The first thing I looked at for this was defense, specifically using UZR. The below table summarizes my results, which suggest that players with high UZR at defense-first positions were undervalued as compared with players with average or low UZR at those defense-first positions, and that this undervaluation persisted into the more recent time period. Offense-first positions had a much smaller difference in cost per WAR among high UZR than average or low UZR players, and this disappeared in the post period.

Evaluating defense for infielders is probably easier than for outfielders, so if the issue was simply that UZR is an imperfect measure of defense, I might have expected the gap to close for defense-first positions but not for offense-first positions. However, this does suggest that teams still may be undervaluing defense. On the other hand, this could also be a wise decision made by teams who know the limits of defensive metrics. Several teams who invested in defense got burned earlier on in the sabermetric revolution.

Base-running is much easier to measure than defense, on the other hand. In fact, we do see a change in this case. Players who were above average at running the bases were relatively underpaid from 2006-11, but this difference has been neutralized in the 2012-16 time period for both defense-first and offense-first positions.

Next, I looked at changes in rate stats for hitters—specifically AVG, OBP, and SLG. My previous findings in the 2013 THT Annual suggested that AVG was overpaid, but that OBP and SLG were fairly paid using the retrospective analysis. My new analysis suggests that AVG was only overvalued in those older contracts at defense-first positions, and that more recently this has been corrected. Interestingly, at offense-first positions, the $/WAR has gone up for each of these rate stats. As we scrutinize some of this data further, there is some evidence that a handful of outliers driving these results.

In my older work, I also looked at old-school power statistics (HR and RBI) to see if players with propensities to outperform on these statistics were over- or underpaid. I found that HR and RBI were not actually overpaid at the time. Interestingly, these do appear to be overpaid now. However, a big part of this is a handful of players (e.g. Albert Pujols, Ryan Howard, Josh Hamilton, Prince Fielder, Mark Teixeira) who were probably overpaid but also have underperformed expectations—making the $/WAR cost look even worse than it would otherwise.

I had also found that strikeout rate was an underrated statistic in my earlier analysis, and this no longer appears true. I believed that this was because hitters with low strikeouts were more likely to improve their performances, which explained why the prospective analysis in my earlier work did not find that low-strikeout hitters were underpaid. Teams do seem to have gotten wise to this, and the low-strikeout players that were undervalued (which was really only for offense-first positions) are no longer compensated less per WAR.

Any individual one of these findings could easily have been a fluke at the time, and still could be now. A large contract for an individual player can sway the results in either direction depending on how he performs. However, by looking at all of these collectively, you can get a general picture of the free agent market. One may want to conclude that teams have gotten dumber over the years, and starting throwing money at HR and RBI, but that seems very unlikely in practice. It seems far more likely that teams simply got burned on a few bad contracts.

We do see that teams have gotten smarter at compensating good baserunners fairly. Defense is still up in the air, however, since we do not know if teams are simply undervaluing it or if they have better statistics available than UZR that they are throwing money toward. In my next article, I will look at similar trends in compensation for free-agent pitchers.