Will A-Rod opt out of New York?

Last week I looked at what size and length of contract Andruw Jones might snare given his struggles at the plate. The answer for those too lazy to read was that he’d probably bag an 80/6 deal, which while well short of Alfonso Soriano money is certainly nothing to thumb your nose at.

Of course, the Andruw contract saga will not dominate the Hot Stove like it threatened to do at the start of the season. No. That honor will almost certainly go to Alex Rodriguez, who is a veritable shoe-in for AL MVP even if he were to go 0 for 40 to end the season.

Many column inches have and will continue to be penned by commentators of all colors on this matter, including perhaps the most colorful of all (I’m looking at you John Brattain), but no-one has yet taken a close look at the economics.

And that is what we’ll do today.

The current deal

According to Cot’s Baseball Contracts, A-Rod collects a whopping $27 million this year and a cumulative $81 million between 2008 and 2010 (again, $27 million per year). The Rangers are still on the hook for a slug of this money—about $20 million over the next three years. Over the 2008-10 period New York will pay $16 million to $18 million a year plus incentive bonuses. A-Rod has an unrestricted opt out this year that he must exercise within 10 days of the end of the World Series. He also has conditional opt outs in 2008 and 2009 unless the Yankees fork out an additional $5 million on his demand—you can see where Boras earned his bucks.

The equation is straightforward. The Yankees are getting a $25 million ballplayer at the peak of his powers for $16 million a year. Heck, Carlos Lee commands more lucre than that. Why wouldn’t A-Rod opt out?

In a nutshell he believes he can earn more money and with Scott Boras as your agent then why not have a punt?

So how much is A-Rod likely to be worth over the next three years, and is the opt out a sure thing?

2008 to 2010

To answer this question we need to establish a baseline performance. Here are A-Rod’s stats since donning the hallowed pinstripes:

Year    AB      HR      BA      OBP     SLG     OPS+
2004    601     36      0.286   0.375   0.512   133
2005    605     48      0.321   0.421   0.61    167
2006    572     35      0.29    0.392   0.523   140
2007    523     52      0.319   0.425   0.671   190

Whichever way you cut the cake his performance has been impressive. Since becoming a Yankee in 2004 his batting line has been a handy .303/.403/.579 and he has punched 171 balls deep into the seats. Even his widely derided 2006 saw him post a healthy OPS of .915—many players would be proud of that.

2007 has been a remarkable season for A-Rod, and barring a spectacular and wholly unexpected collapse it will be his best season in the Big Apple. He has 54 home runs to his name next to a lofty OPS+ of 190. If you tot it all up that equates to about six wins above average, or eight above replacement. Add in a bit extra for glove work (though that is debatable as you’ll see later) and you can start to see how, at $4.5 million per free agent win, he is justifying the zeros on his bank balance.

To work out whether his current deal is a bargain we need to consult some projections. Here are THT’s and PECOTA’s forecasts:

THT          AVG     OBP     SLG     Fielding runs
2007         0.292   0.385   0.538   13
2008         0.285   0.377   0.517   13
2009         0.279   0.371   0.498   12

2007         0.288   0.385   0.531
2008         0.288   0.388   0.518
2009         0.279   0.373   0.499
2010         0.275   0.368   0.493
2011         0.276   0.367   0.495

To cut a long story short Rodriguez is batting well above expectations this year. Part of that is a result of his annus horriblis in 2006 which bears the most weight in the 2007 projections. This year has definitely seen a bump up to (and possibly beyond) his long-term talent level. So how do we think his performance will evolve?

We turn to our trusty weightings for the answer. As per the Andruw Jones column last week, what I’ve done is create three fairly plausible scenarios and then weight them by a probability estimate. The three scenarios are outperform, average and decline.

Outperform assumes a continuation of his current performance. Technically that would be an upgrade since it doesn’t assume an age adjustment. Average is the combination of the THT and PECOTA 2008 numbers. Of course, the updated projections that will be released in the New Year will be more bullish because 2007 will drive estimates up—more recent years of data carry a higher weight for obvious reasons. Decline anticipates that A-Rod will falter badly. To make life easier I’ve taken his 2010 PECOTA, the lowest of any forecast in the next five years, which I’d suggest is the bottom end of 2008 expectations barring injury.

A quick look at MGL’s UZR numbers suggests that A-Rod is mediocre with the glove and may actually be a tad below average. Given that he may need to compensate for Jeter’s lack of range we’ll call him an average third baseman, which jives with the fans’ scouting report (hence the zeros under fielding in the table below).

A Hardball Times Update
Goodbye for now.

Here is a summary of the three scenarios :

            AVG     OBP     SLG     WAA     Fielding  Total
Outperform  0.319   0.425   0.671   5.9     0         5.9
Average     0.287   0.383   0.518   2.7     0         2.7
Decline     0.275   0.368   0.493   1.8     0         1.8

What about the weightings? As you might imagine it is here we start to enter the realm of speculation. A slump as severe as the decline scenario suggests is very unlikely. Let’s call it 10% and split the rest between the other two scenarios. That gives us an overall weighted line of .301/.402/.584.

Now it’s time to break out the salary calculator to work out what sort of deal that represents. Remember the calculator works out estimated salary based on wins above replacement, length of deal and estimated year on year age decline (in wins). Assuming that A-Rod is 7.9, 4.7 and 3.8 wins above replacement respectively (including fielding) and will suffer a 0.5 win decline rate we get the following numbers:

Years\WAR      7.9     4.7     3.8
3              108     59      46
4              147     77      60
5              185     94      70
6              224     110     78
7              263     121     84

If we apply the weightings then we get:

Years   $$$
3       79
4       106
5       132
6       158
7       181

What does it mean for the Yankees?

Our analysis says that if A-Rod were to sign a contract right now then based on our assessment he’d sign a 80/3 deal. Hang on a cotton picking minute … that is exactly what he is owed over the final three years of his existing deal. The numbers suggest that signing a new deal is more or less a wash over the next three years.

So why would A-Rod opt out? Okay that is a facetious question (I mean, why wouldn’t he?) as there are a slew of reasons.

First, A-Rod is having a career year. If some skunk-smoking GM decides to take a punt based on 2007 representing true talent then A-Rod could get a much richer deal. If one truly thinks that A-Rod is a 8 WAR player then a 3 year deal is worth about $100m. I don’t think anyone believes that sort of deal is possible but the potential upside is salivating.

Second, as A-Rod is at the peak of his powers he has the opportunity to sign a longer term deal at more money. If he were to see out his contract he’d rake in the $81 million to 2010 but if his form then dips (in, say, 2010) he may have to take fewer years for less money. By signing now he can maximise his long term earnings. Another factor is that the baseball wage market is entering a post-CBA peak. We saw a similar trend back in the early part of the decade when a flood of rich contracts were signed after the last CBA (including A-Rod’s). There is a huge pot of money in the game and Alex wants an even greater share.

Third, although A-Rod is raking in $27 big ones Texas is still stumping up a good chunk of that loot. Scott Boras is canny enough to structure a deal that can leverage the existing contract and tack a few years on the end for extra money (as long as Uncle Bud gives the okay). That way the Yankees are paying market value and Rodriguez is still benefiting from the Rangers’ idiocy when they agreed to the original 10 year deal. If you’re a Texas fan the best thing that can happen is for A-Rod to opt out. If he does then the Rangers have financial facility to add another 2 WAR ball player to the roster and that is nothing to be sniffed at.

Finally, perhaps he is fed up of Gotham life? Last year, especially, he was hounded by a ravenous media for an inability to come through in the clutch—although he answered his critics with a couple of spectacular clutch at-bats in the early months of 2007. Also it didn’t help that the New York Post plastered his tryst with a lady of the night over its front page as well as a picture of his wife in a less than family friendly T-shirt. It isn’t a stretch to imagine he simply wants out.

The likely outcome?

The popular view among the media is that A-Rod will opt out of his contract. The facts seem to bear that out. In the current market Rodriguez will equal or better his current salary over the next three years and should add both years and dollars to that, which means he’ll be in the money.

If he does opt out the Yankees have pledged not try to resign him—under the penny pinching era of Brian Cashman (it is all relative) they are keen not to get into a protracted bidding war. Whether that is just chatter to try to pressure him not to opt out or whether it is fact is at this point unclear. If the Yankees hold to that position then it eliminates a serious bidder from the race and may result in less aggressive offers from other teams, putting a dent in his value.

Another factor is whether Rodriguez and Boras send signals as to which teams he’d be prepared to accept a move to. A-Rod wants to win a ring and that will restrict the teams he’d be prepared to sign for. However, he said the same just before he signed for the Rangers and then he, err … uh … signed for the Rangers. I guess we may find out just how much he wants that World Series (unless he gets one this year).

Common sense will probably prevail in the Big Apple. A-Rod is the star of the team and for the first time since his trade he can walk the street of the city without everyone clamouring for his head. While there was some truth to the story that he was unsettled that was form related—and let’s face it even in his so-called slump he was still one of the finest third basemen in the bigs. The Yankees have the advantage that they will remain a contending team (especially with some of the young arms coming through) and also have Texas covering a huge portion of his salary. My best guess is that the two sides will work something out that will see A-Rod spend the next five to seven years in New York.

If he does sign another long term contract or extension with the Yankees don’t be surprised to see Boras sneak in another opt out in three years time. As one saga ends another will start. And the only winner from all these shenanigans, A-Rod aside, is the media.

Watch this space.

References & Resources
Thanks to Baseball-Reference and Cot’s Baseball Contracts.

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