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Great News! Mauer Signs.

The Twins have agreed to terms with starting catcher Joe Mauer. The deal is reportedly 8 years, $184 million with a full no trade clause.   A press conference is scheduled for Monday night at the Twins complex in Ft. Myers. This is great news people.  The average annual value is $23 million, a hair more than Texiera is making in New York.  If there was a hometown discount, there wasn’t much of one.  I would imagine he would be getting $25ish from the New York/Boston team. 8 years is a long time, but it will cover Mauer’s age 28-35 seasons which are his prime years.

What does everyone else think?  We will break it down further once more details come out at the press conference tomorrow.

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Twins take a lead in exploiting a new trend in baseball economics

Jack Moore over at FanGraphs took a look at Span’s contract this morning, and came to a similar conclusion that I did: it makes some sense for Span to take the security of the long term deal, but the Twins are getting themselves a real bargain.

He notes that the Twins are paying for a 2.5 win player and Span seems to be better than that; he notes that Span has skills that could pay him well in arbitration (high batting average and stolen bases); he notes that Span’s switch to CF could drive his value further; he notes that Span is only 26 and could still see his performance improve.

But his take on the timing of the deal with regards to the economy is what I find perhaps most interesting, and is something I feel I didn’t articulate well enough in my own post:

What particularly makes this deal great from a team perspective for me is the timing of the deal. Many economists say that we are starting to move out of the recession, and that suggests that the marginal value of a win will likely start climbing in 2012 if not before that. By the time 2014 rolls around, $6.5 million may only buy one win instead nearly two. Even more than that, the likely inflation of the win market could make the non-guaranteed 2015 team option look fantastic if Span is still a productive player at the time.

Precisely. These contracts for Blackburn and (especially) Span may be most valuable in that they’re effectively locking in not only the players’ apparently undervalued status, but also the deflated cost of a win on the market. That $9M option for a 2.5-3.3 WAR player in 2015 would be an absolute no-brainer if the market rebounds and a win costs $5M or more by then.

Moore predicts we’ll see teams follow the Twins’ lead and lock in the currently deflated market rates for their pre-arbitration players. I think he’s right, and I think it’s mighty interesting that the Twins seem to be on the forefront of exploiting a new trend in baseball economics.

And as you may have guessed, I remain extremely interested in how this trend effects Mauer’s contract; ie, whether the Twins can lock in a mega-deal at today’s deeply discounted rates.

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Let’s take a look at Span’s new contract!

This weekend, the Twins signed Denard Span to a five year extension for $16.5M guaranteed — it covers two pre-arbitration years and all three of his arbitration years, plus an extension for his first year of free agency in 2015.

The terms of his deal are as follows:

  1. $0.75M (second pre-arbitration year, age 26)
  2. $1M (final pre-arbitration year, age 27)
  3. 3M (first arbitration year, age 28)
  4. $4.75M (second arbitration year, age 29)
  5. $6.5M (third arbitration year, age 30)
  6. $9M (team option for first free agent year, age 31)

I’ve always read on Fangraphs that the arbitration years are typically set at 40%/60%/80% of a player’s market value; but that doesn’t seem to be the case here. If the option is his full market value, this contract gives him 33%/52%/72% … but if the option represents a 10% discount (which would not be unusual at all), his arbitration years are paying him just 30%/47%/65%. At first blush, this contract seems like a highly team-friendly deal even before considering how Span is being valued.

But that raises the interesting question: How is Span being valued? We’re all familiar with his story by now: a minor league track record that looked a lot like a first-round bust, a fourth-outfielder; shows up in the majors and has a breakout rookie campaign, compiling 2.6 WAR in a partial season; establishes himself as a star-caliber player with 3.9 WAR in his first full season. It’s possible that 2009 was a career year, and he can’t keep up that pace … but he was 25 years old and it’s also possible that he hasn’t even reaching his peak yet.

CHONE projects him at 3.3 WAR, which would peg the market value of a win in this contract at $3M/win. If CHONE is being optimistic and he’s actually, say, a 3 WAR player, the Twins are paying $3.3M/win. If CHONE is being way too conservative and Span’s true talent level is actually 4 WAR, then the Twins are paying just $2.5M/win (which is way too low, I think, implying that Span is being paid as a 3.3 WAR player at most).

I’ve seen mixed reactions to this contract since it first hit Twitter yesterday. Many people are thrilled that the Twins have “locked up” Span for the next 5 years, ignoring that he was already under team control for all five of those years. I saw one opinion, from Thrylos98, claiming that the Twins are paying him too much (I can’t understand how he could back that claim up, though). And I’ve seen others who seem to think this deal is pointless except for the option year covering his first free agent year, giving the Twins none extra year of control over Span’s career.

But let’s take a look at it from the perspective of risk — risk is the reason players sign extensions like these, and it’s also what teams have to worry about when offering them. Span could have simply declined to sign this extension and go year-to-year through his arbitration years, trying to maximize the amount he gets paid,* though by doing so he’d risk a career-ending injury or a collapse of his skills. So he gives up some money in return for the security of the long-term contract — but typically not that much.

* And given the low percentages of his value he’s being paid, it’s a good assumption that he’d make quite a bit more year-to-year even if you don’t think that either he’s going to continue producing star-level 4 WAR seasons OR the economy will recover even a little bit over the next five years.

From the team’s perspective, there are more risks involved. If they didn’t offer the extension and were going to go year-to-year, they’d still have Span on the team for the next five years, but would be risking the following:

  • 2009 was not Span’s peak, and he continues to improve in his age 26 and 27 years
  • The economic environment in baseball improves, driving up the cost of wins so they’d have to pay him more even if he stops playing as well
  • He successfully adapts to CF, driving up his value (a CF is a lot more valuable than a corner OF)

On the other hand, by offering this contract they open themselves up to these risks:

  • 2009 was Span’s peak, and his 4+ WAR upside is an illusion
  • He gets injured and can’t play (or can’t play at his normal level)
  • He can’t handle CF and has to move back to a corner, causing personnel problems or at least reducing his actual value

Obviously the downside here is bad — you don’t want to be stuck paying a guy millions of dollars not to produce. But I think it’s fair to say that the Twins determined that the upside outweighs the downside. The Twins get cost certainty, they ensure that Span will be affordable for the next six years, through his age 31 season. If they want to cut payroll in the future, it’s very likely that this contract will be extremely tradeable — teams would love to snap up a CF in-or-near his prime on a team-friendly contract.

Instead of looking at this as the Twins having locked Span up, it’s better to see it as having him locked in. But how much money did they just save, over what would have happened if they’d gone year to year?

Assuming Span is a 3.3 WAR player and standard 40%/60%/80% arbitration and $3.5M/win, his arbitration years and first year of free agency would have looked like this:

  • $4.6M
  • $6.9M
  • $9.2M
  • $11.5M

Or, if he keeps putting up 4 WAR seasons:

  • $5.6M
  • $8.4M
  • $11.2M
  • $14M

So the Twins saved themselves somewhere between $9M and $16M over 2012-2015, not taking economic recovery or salary inflation into account. Whether you think that amount of money is worth taking on the risk of the longterm contract is a judgement call, and obviously the Twins’ front office thought it was worth it.

Me? I think this is an even better deal than the Blackburn contract, and I’m glad to see the Twins locking in their players at affordable salaries for years to come. This is yet another sign that the team expects to contend for the foreseeable future; they’re using their assurance of steadier revenue for good rather than simply lining their pockets; they’re taking advantage of the economic climate to get good deals and lock in a lower cost per win than normal.

But perhaps most of all, Denard Span will be a Twin for at least 5 more years. I think it’s time to make my “Span Fan” t-shirts that I’ve been thinking about for a while.

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The Twins and International Talent

There’s an interview with Howard Norsetter, the Twins’ International Scouting coordinator, available right now, and I recommend that everyone read it. There are some really interesting things in there, though you’ll have to take what Norsetter says with a grain of salt — clearly he’s more on the “scouting” side than the “analysis” side of the game, which isn’t a problem in and of itself. The thing I’d be wary about is that he seems extremely optimistic about every player he’s asked about. Still, it’s a good read.

But beyond individual players, the things that stood out for me were his ideas on the international version of the business of baseball, and the Twins’ approach to it.

There is also another dynamic at work; the teams that spend the most get the most attention from the agents. I know a few teams that spent a lot of money in Latin America the last couple of years essentially just to broadcast to Buscones that they are in the market and will spend money like the big boys. The hope is that the Buscones start delivering the better prospects to team’s doorstep.

It seems to me that those teams run the risk of sending a different signal: “we’re willing to spend money, and it doesn’t have to be the best players.” So sure, the buscones will bring you someone, but they’re still bringing their best players to the big teams who’ve shown they’re at least trying to only spend money on talent. They’re bringing middling guys to you and calling them good so you’ll waste your money.

There are agents in Asia who feel like the Twins aren’t worthy of their attention because we haven’t signed the most expensive players. They don’t even bother trying to sell their players to us. Which is a bit short sighted because we have shown that if we think a player is worth the money, we will spend the money to get the player. Sometimes an agent will get offended if you don’t think a player is worth the money they are looking for. If they know that you are willing to spend money in general, they don’t get as offended-they will still come back to you with their next guy. If they don’t think you are ever going to be a player in the market, they won’t waste their time.

Stories like this one are another big reason the system seems so broken. The buscones and amateur agents hold too much power over the young players and over the teams. I’m against an international draft, but something needs to change. Maybe there should be an open combine where all the players can show what they’ve got, followed by an auction where all the teams bid on all the players. In order to level the playing field, perhaps each team is allowed to spend only a certain amount of money in total,* so if you sign a Strasburg-level talent you won’t be able to afford much else that year, or something.

* I don’t know if I really like that, but at least it would protect the new system from the inevitable cries of “well the Yankees would just overbid us and buy all the good players!” which, of course, is what’s happening with the current system. Wait, no, the opposite of that. Not happening.

After trying to defend the Twins from an accusation that they haven’t shown interest in Cuban players (and getting the interviewer to admit that by “interest” he actually meant “successfully signing Cuban amateurs to mega-deals”), Norsetter explains the Twins’ fundamental interest in European players:

You mentioned earlier that you thought that the Twins didn’t have much interest in Cuba: If there were to be pitcher throwing 94-96 with an 87 slider who defects from the Cuban team, we would not be able to sign him. That is why we are in the developing markets like Europe. You hope that you can get a player like Loek [Van Mil] when there isn’t much interest in him, and develop him into somebody who demands a lot of interest.

As you could probably guess, I think that’s brilliant. There are, at the base of things, a few ways to compete on the international markets:

  1. Have enough money to sign the players you think are the best, after letting everyone agree on who’s the best
  2. Work harder than everyone else to find the best players in known markets, and hope to sign them before the bigger teams learn of them
  3. Work even harder than that, to find bargain players that you think will be good but that the big-money teams wouldn’t be interested in
  4. Find an entirely new market where nobody else is scouting, and take the top talent without competition

Option #4 takes a lot of guts (what if there aren’t any good players in Europe or Australia this year?), and you’ll only have a temporary advantage in each region. If Loek Van Mil and Max Kepler quickly become good players, other teams are going to flood Europe with scouts and essentially drive the Twins out. Which presumably means they’re going to have to find another untapped source of talent without competition, which will again be a gutsy move (who knows how good the baseball players are in Africa, or Iraq?). But it very well may be the right move.

The current major league roster offers plenty of reason to hope for 2010, but more and more, it seems like the Twins are setting themselves up with a strong pipeline of high-octane talent for the future. The development of a strong international scouting and development program is instrumental, and right now the Twins are the biggest players in under-developed markets like Europe and Australia.

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