What Are Teams Paying Per WAR in Free Agency?

After a quiet 2020 offseason, and in advance of the ongoing lockout, the early 2021-22 free agency period saw a sudden burst of activity. Teams shelled out more than $1.5 billion in new contracts, a record-breaking pace. Not only did they act earlier in the winter than we’re used to, they also spent far more than last offseason. Is free agency fixed? We’ll need to dive into the data to find out.

See, “how much money was spent on free agents” is an inexact measure of teams’ spending appetites. Imagine an offseason where, due to strategic contract extensions and a wildly immoral use of cloning technology, the only players on the free agent market are 37 versions of Alcides Escobar and 25 copies of Jordan Lyles. Free agency spending would crater, and it would be hard to blame teams for it. It’s not as though you have to give the best player on the market a $300 million deal; contracts are, obviously enough, affected by the caliber of player signing the contract.

Rather than come up with some new form of analysis, I decided to use a methodology advanced by former FanGraphs writer Craig Edwards. The idea is straightforward: take players projected for 2 or more WAR by Steamer in the upcoming season, apply a naive adjustment for aging, and project how much WAR each free agent will accrue over the life of their contract. Like Craig, I applied some discounting for playing time projections. That lets us create expected $/WAR numbers for each year’s free agency class:

Last year’s free agency class had it rough. With teams licking their wounds after an abbreviated and crowd-less season, they offered far less in free agency. The raw numbers show how little money was being thrown around, and even that understates it. Out of the 18 free agents projected for 2 or more WAR, only five received contracts of three years or longer. Not only were teams hesitant to spend on a per-win basis, they stayed away from long-term deals while doing so.

The early results from the current free agency period suggest that this decline was a one-off. Before the 2020 season, 12 of the 15 contracts signed by players who were projected for 2 or more WAR were for three years or longer. This year, 14 of the 20 similarly-projected free agents who have signed received three years or more. After a brief blip of short-contracts-only thinking, the length of contracts appears to be rebounding.

Despite that rebound, teams are still paying less per win on the open market than they did before the COVID-shortened 2020 season. The total outlay this year might be higher than, say, the Gerrit Cole/Anthony Rendon/Stephen Strasburg bonanza that took place in the pre-2020 offseason, but that’s because the players who have signed project to accrue more WAR. Merely among players who have already signed – which excludes 10 of our top 25 free agents – the players projected for 2 or more WAR in 2022 project to be worth roughly 175 WAR across the length of their contracts. That number checked in at 135 in 2020 after all was said and done.

In other words, this year’s class is deservedly getting paid for its future contributions. That helps explain both why so many teams have needs in free agency and why so many deals have been signed. Teams lost good players – better than the ones who reached free agency in any of the last four years – and there were good players available in free agency. Absolute dollars spent only matters so much, and this year’s overall outlay is mostly in keeping with previous years after accounting for that.

While we’re here, we might as well update Edwards’ other investigation: is the cost of WAR still linear? I used the same methodology as his last study. The key step here is removing all reliever contracts, as teams compensate them differently (read: more money per projected WAR) than starters and position players. Since there are rarely (if ever) any relievers in the 2+ WAR cohort, removing them makes the comparison more even. Here’s that analysis:

Of note, my data for 2020 low-WAR players differs from Edwards’ previous finding. He had that group at $6.7 million per projected WAR. My guess is that this is due to the number of low-WAR players who had not yet signed when he ran his analysis. Several of them projected for 0-ish WAR; adding those players increased the dollar-per-WAR metric there. It’s also possible that our cohorts and WAR projections differed; I used Steamer exclusively, whereas Craig may have used a Depth Charts blend. In addition, the numbers for this offseason could still change meaningfully — the signed 0-2 WAR group only numbers 19 players so far, while it frequently ends up numbering in the low 100s in regular years.

What does this mean going forward? There still appears to be a meaningful discount applied to role players and part-time contributors. While salaries are rebounding, they haven’t even reached the levels that prevailed before the pandemic, much less outstripped them. Teams might yet shell out record contracts this offseason. As of now, though, they haven’t – and they’ve continued to pay a premium for stars while the middle class of free agency gets a discounted rate.