The Evil Empire Strikes Gold

Projecting Giancarlo Stanton’s Future Performance Suggests there is Significant Value in His Contract

It’s been a few days since the Yankees acquired Giancarlo Stanton, the reigning National League MVP, from the Miami Marlins in exchange for second baseman Starlin Castro, minor league right-handed pitcher Jorge Guzman, and minor league infielder Jose Devers. The consensus around baseball is that the blockbuster trade vaulted the Yanks as the early winter favorites to win the American League East, as the Red Sox gear up to counter back with imminent roster moves.

Despite principal owner Hal Steinbrenner's goal to get the team below the $197 million luxury-tax threshold for the first time in the twenty one year existence of the tax, the Yankees reportedly will also absorb nearly $265 million of Stanton’s $295 million remaining on his contract, which is guaranteed through 2027[1]. The Yankees will save $3 million per year on Stanton's contract as a result of the $30 million the Marlins have agreed to pay the Yankees (if Stanton does not opt out of his contract after the 2020 season).

So how does this move coincide with Steinbrenner's frugal aspirations?

When looking at a player’s value, it’s worth considering, “If he were a free agent this offseason, what would he get on the open market?” A 28-year-old Giancarlo Stanton, fresh off a monster 2017 year, owning a .281/.376/.611 slash line while compiling 59 home runs, as odd as it may seem, 10 years at $295 million, actually sounds like a bargain—especially with the prices Bryce Harper and Manny Machado are sure to acquire after the 2018 season. For the Yankees, it's my belief that the odds favor the contract being well worth the cost.

Is Stanton’s Contract an Albatross or Bargain?

In 2015, the Marlins reached the 13 year, $325 million contract with Stanton. “[I]t smashed the total $275 million set by the 2008-17 contract that Alex Rodriguez reached with the Yankees by $50 million. Yet, when spread out over the 13-year length, the Average Annual Value (AAV) of $25 million, the contract looked more favorable.” Also of note, Stanton’s deal is backloaded. Thus far, he’s earned about 10% ($30 million) of the entire deal, despite serving nearly 23% of the term.

At first glance, the contract appears to be an albatross. In the final four years, Stanton will be 35 and older with more than $96 million owed to him. Although he missed just three games in 2017, he has a somewhat checkered injury history[2]—he went on the disabled list in mid-August 2016 with a season-ending groin injury, leading some to consider the injury prone potential in the slugger's near future. His missed time could hinder his value, despite Stanton's status as an elite hitter when healthy.

Notwithstanding these considerations, I initially thought Stanton is capable of living up to this contract. Theories on players’ worth have been floated around the baseball community, specifically Bryce Harper, who is expected to seek a $500 million dollar deal following the 2018 season, may not seem that outrageous. When looked at a bit closer, perhaps he’s the type of player worth such an investment.[3] With this in mind, Stanton, himself a superstar, has accumulated 34.1 WAR, or Wins Above Replacement (more on that in a bit), through his first 8 years on the Senior Circuit—so perhaps his value may surpass the the remaining amount on his contract.

Wins Above Replacement (WAR)

Before I was able to properly crunch the numbers and test my hypothesis, I wanted to figure out Stanton’s worth, which I'll refer to as “Marginal Win Value.” To do this, I needed to project his Wins Above Replacement, or WAR over the remaining term of his contract. “WAR is an attempt by the sabermetric baseball community to summarize a player’s total contributions to their team in one statistic.”[4] In order to calculate WAR for position players, you want to take their Batting Runs, Base Running Runs, and Fielding Runs Above Average and then add in a positional adjustment, a small adjustment for the player’s league, and then add in replacement runs so that you're comparing their performance to replacement level rather than the average player. After that, you take that sum and divide it by the runs per win value of that season to find WAR. The “simple” equation[5] looks something like this:

WAR = (Batting Runs + Base Running Runs +Fielding Runs + Positional Adjustment + League Adjustment +Replacement Runs) / (Runs Per Win)

It’s common to also use more than one metric at a time when evaluating players, but since WAR is all-inclusive and provides a useful reference point for comparing players,[6] I chose to focus my analysis within this metric.

How to Project Stanton’s Production For the Next 10 Seasons

So how can we evaluate Stanton’s projected career WAR from 2018 through 2028? I started by researching which players have had careers most similar to Stanton’s by closely following Bill James’ Similarity Score analysis, as seen in his book The Politics of Glory.[7] Similarity scores can be used to determine career paths and projected statistics for players. The logic behind this line of thought is that players often follow similar career trajectories to their most similar players. So a given historical similar player's performance in years after the active player's current age can be a good predictor of that active player's future production. Simply put, his method was designed to compare players’ careers to one another up until that point in each of their careers[8].

To compare one player to another, for batters, you start at 1000 points and then subtract points based on the statistical differences of each player, as seen here. I compiled Stanton’s statistics from his age 20 through 27 season and then filtered it against other corner outfielders in order to find players who had similar offensive production through that point of each of their respective careers. I now had a sample size of about 650 players to examine.

From there, I narrowed down the data set to all players with a similarity score higher than 840, which was 21 players,[9] and located what each of those players’ WAR figure was in their age 28 through 38 season, in order to best project what Stanton’s career arc could be through the remaining term of his contract. I removed active players who have yet to play through their age 38 season (Jay Bruce and Justin Upton).

Through this process, I was able to project Stanton’s WAR over the course of the 10 years (2018-2028) based on similar players to him leading up to the point where the Yankees acquired Stanton from the Marlins.

Some notes on this group: 10 of the 21 players did not play following their age 35 season. Those who did play into their late 30s (i.e. Jose Canseco, Manny Ramirez, Barry Bonds, and Gary Sheffield) have been tied to reports of using performing enhancing drugs. Stanton's projection pretty much hugged the best-fit trendline throughout all ten projected seasons, resulting in a linear, relatively strong r-squared of 95.16%.

Can Stanton be a Profitable Asset for the Yankees?

Now that we have a framework for projecting Stanton’s production for the next 11 seasons, I wanted to apply Stanton’s projected WAR to estimate the Marginal Win Value, which is essentially the economic value of a given player, of his salary during the remainder of the contract term.

I did this by factoring in the Marginal Win Value, or the cost of a win on the free agent market. I've come to learn that there are many different methods to estimate this figure. Sports Illustrated's, “What’s He Really Worth” series[10], estimated for the 2017 offseason that a win was worth about $7.22 million.[11] This value typically increases every year, represented by an annual inflation rate of 5.4%.

Applying the SI’s projected Marginal Win Value per year for the full term of Stanton’s contract, I projected his Total Marginal Win Value could produce about $333 million. This was interesting to me, given the fact that Stanton’s Surplus Value is negative in each of his last 5 seasons. Despite this, he still created nearly $53 million in Total Surplus Value. The Yankees also have the ability to buyout of the last year of Stanton's deal, whereby, if they choose this option, under this analysis, they can actually save an additional $836,303.

Final Thoughts

I believe by projecting Giancarlo Stanton’s projected WAR from 2018 to 2028 using Bill James’ Similarity Score method, I have more accurately predicted his future performance based on players similar to him thus far through his career, providing a strong prediction that his contract will be profitable for the Yankees over the remaining term of the contract.

This doesn't necessarily mean the Marlins were better off keeping him in South Florida. Stanton does have an opt-out clause in his contract following the 2020 season, where he can likely command a contract worth more than the $218 million that he would have remaining on the current deal. Perhaps the Marlins saw this and realized getting him off the book sooner, rather than waiting for 2020, is what is best for the rebuilding their franchise and receiving young, cheap, controllable assets in order to rebuild their farm system, which entered this offseason ranked 28th in MLB[12]. As Benjamin Morris of FiveThirtyEight appropriately states: “When a team’s competing for the playoffs, winning now is much more valuable, and when a team’s out of contention, money is more valuable.”

It’s obvious the Marlins wanted to lower payroll, which was no secret since Derek Jeter, the newly installed chief executive officer and leader of the investment group that purchased the team from Jeffrey Loria, took control of the franchise back in September. The Jeter group had concluded that in the present state of the franchise, they cannot afford a high payroll, considering the team was reportedly on pace to lose more than $50 million following the 2017 season.[13]

Marlins fans are probably not feeling too optimistic about the return of prospects packaged for their superstar player, but the team continues to cut payroll and rebuild their farm system. Aside from Stanton, they’ve also traded away other veterans on their roster, including Dee Gordon and Marcell Ozuna. “We wanted to fix the previous regime’s mistakes, and we weren’t going to be able to do that while paying one player $25 million a year for the next decade.”[14]

The Marlins will be pleased to get this deal off their books, but Stanton's performance in the later years of his contract is what will truly determine if the Yankees gamble will pay off.

This article was written by Robert Lo Giudice, who recently completed a companion Masters Degree program at Columbia University, concentrating in International Sports Law and Sports Management, with plans to sit for the February '18 Bar Exam in New York.

Bibliography

[1] Witz, B. (2017, December 11). Giancarlo Stanton Deal Will Test the Yankees’ Newfound Fiscal Discipline. Retrieved December 12, 2017, from https://www.nytimes.com/2017/12/11/sports/baseball/giancarlo-stanton-yankees-luxury-tax.html.

[2] Jackson, B. (2017, September 3). Sherman/Jeter plan to reduce payroll, says contacted investor. Retrieved December 10, 2017, from https://www.miamiherald.com/sports/spt-columns-blogs/barry-jackson/article171093362.html.

[3] Brown, M. (2014, November 24). Inside The Details Of Giancarlo Stanton's Mega-Contract With Marlins. Retrieved December 12, 2017, from https://www.forbes.com/sites/maurybrown/2014/11/24/inside-the-details-of-giancarlo-stantons-mega-contract-with-marlins/#582090e33189.

[4] Greenberg, N. (2017, November 16). Bryce Harper would be a bargain for Nationals at $500 million. Retrieved December 12, 2017, from https://www.washingtonpost.com/news/fancy-stats/wp/2017/11/16/bryce-harper-would-be-a-bargain-for-nats-at-500-million/?utm_term=.6670a5269367.

[5] FanGraphs Sabermetrics Library (Ed.). (n.d.). What is WAR? Retrieved December 9, 2017, from https://www.fangraphs.com/library/misc/war/.

[6] FanGraphs Sabermetrics Library (Ed.). (n.d.). What is WAR? Retrieved December 9, 2017, from https://www.fangraphs.com/library/misc/war/.

[7] FanGraphs Sabermetrics Library (Ed.). (n.d.). What is WAR? Retrieved December 9, 2017, from https://www.fangraphs.com/library/misc/war/.

[8] James, B. (1994). The Politics of Glory: How Baseball's Hall of Fame Really Works. pp 86-106. New York: Macmillan.

[9] Similarity Scores. (n.d.). Retrieved December 8, 2017, from https://www.baseball-reference.com/about/similarity.shtml.

[10] Although Jay Bruce and Justin Upton were part of this group, I removed from the data set, as they are still active players under Age 38

[11] Jaffe, J. (2016, December 13). Numbers show Dodgers get bargain for Justin Turner. Retrieved December 12, 2017, from https://www.si.com/mlb/2016/12/13/justin-turner-los-angeles-dodgers-free-agency-bargain-hot-stove,

[12] Pollis, L. (2013, October 15). How Much Does a Win Really Cost? Retrieved December 12, 2017, from https://www.beyondtheboxscore.com/2013/10/15/4818740/how-much-does-a-win-really-cost. 

[13] Reuter, J. (2017, September 13). Re-Ranking All 30 MLB Farm Systems at the End of 2017's MiLB Season. Retrieved December 14, 2017, from https://bleacherreport.com/articles/2731819-re-ranking-all-30-mlb-farm-systems-at-the-end-of-2017s-milb-season. 

[14] Jackson, B. (2017, September 3). Sherman/Jeter plan to reduce payroll, says contacted investor. Retrieved December 10, 2017, from https://www.miamiherald.com/sports/spt-columns-blogs/barry-jackson/article171093362.html.