Analyzing the Quentin Addition, Part II: The Extension
Yesterday we examined the trade for OF Carlos Quentin and whether or not the Friars received good value. After determining the trade was a good one for the Padres, it’s time to analyze the extension and try to project if the Padres will end up with surplus value for their investment.
The simplest way to look at that question is through the prism of WAR and the calculated value of Quentin’s value based on the dollars needed to replace his production on the open market. According to FanGraphs.com, Quentin has been worth 3.9 WAR to this point in his Friars career. To buy that level of production on the open market would cost $18.5MM, again per FanGraphs.com. Even if Quentin doesn’t appear in another game this season or accrue any more WAR the Padres have received surplus value on their $16.525MM investment in the OF for 2012 and 2013. But, let’s remember that he does have two more years left on his deal and it’s at least conceivable Quentin’s production will regress in the years ahead.
Let’s assume two things: One, that Quentin will regress to the tune of 10% WAR in each of the next two seasons and second, that the rate of inflation will remain static; meaning the cost to replace 1 WAR won’t increase. Even using Quentin’s 2.1 WAR for this incomplete season we can deduce that he will be worth at least 3.4 – 3.5 WAR total over the following two campaigns based on a 10% regression rate. At a price of approximately $5MM per 1 WAR, the Padres can expect to receive $17MM – $17.5MM in performance from Quentin over that span.
Quentin’s contract calls for a total of $20.5MM in total guaranteed compensation for 2014 and 2015 ($9.5MM in 2014, $8MM in 2015 and a $3MM buyout of a $10MM mutual option for 2015). If we put the 2012 and 2013 seasons into the equation the Padres will have spent just north of $37MM in actual money (if they or Quentin decline their half of the mutual option) while receiving approximately $36MM in value representing a slight loss overall.
However, we are assuming that Quentin won’t return this season and/or accrue any additional WAR. While he won’t return from the DL as soon as he is eligible, he will be back at some point this season and likely will produce more value for the Padres.
Again, let’s make the assumption instead that Quentin does come back and appears in the same rate of contests that he has through the first 119 games. To date Quentin has made 82 appearances in 119 games. If we assume he returns in time for game 123, leaving 40 remaining on the season, Quentin would in theory get into 27 or 28 more contests. Without getting into the entire math in detail, Quentin would then accrue another 0.7 WAR based on his rate to this date (2.1 WAR divided by 82 games times 27.5 games).
That would give Quentin 2.8 WAR by season’s end. If we plug that number into the original equation Quentin would earn 2.5 and 2.2 WAR in each of the two subsequent seasons (factoring in a 10% regression rate) giving him a projected four-year total of 8.4. That adds up to about $42MM in performance value against an actual financial outlay of $36MM creating a surplus value of $6MM.
So the Padres have a reasonable expectation that they will see a positive ROI on Quentin. That’s all well and good but each club must consider other factors when looking at potentially signing a player aside from projected value versus financial commitment. First, a small-market club like San Diego can’t afford to pay the going rate for players too often. They need to receive more than 16% to 17% of surplus value from their investments in order to challenge for the postseason.
A replacement team consisting of all 0 WAR players would win approximately 48 games according to Baseball-Reference.com (0.294 Winning % times 162 games). If we assume that 92 victories is good enough to get you into the playoffs, or at least close to it, then a team would need to win 44 more contests, or receive 44 more WAR than a replacement team in order to contend. As we’ve discussed, if a team used free agency to acquire 44 WAR it can expect to spend $220MM above the combined minimum salaries committed to a 25-man roster.
A team like the Padres can’t come close to spending that type of coin. That’s why they need to rely on young, cost-controlled talent to push them into playoff contention. Let’s assume the Padres have 20 players still in their arbitration or pre-arb seasons and receive a total of 30 WAR in contributions from those players while shelling out an average of $2MM per ($40MM in total payroll allocations). That’s actually close to reality as the Friars have just five players (Quentin, Huston Street, Mark Kotsay, Jason Marquis and Ronny Cedeno) currently on their 25-man roster who are not team controlled in the regard that they have arbitration eligibility remaining. Plus the Friars have eleven team-controlled players (or perhaps a better way to put it is players who were still in their arbitration years or pre-arb seasons when they signed their existing contract) as of today that account for nearly $40MM in actual salary for 2013 (Luebke, Cabrera, Denorfia, Venable, Hundley, Maybin, Gregerson, Kennedy, Richard, Volquez and Headley). Those players have accounted for a combined 13.3 WAR through today. So my estimates of 20 players earing $40MM and contributing 30 WAR are conservative; particularly on the combined WAR side.
Even if my estimates were dead on the Padres would need to add another 14 WAR in performance in order to put themselves into contention for the postseason with 92 wins. On the open market that could cost $70MM putting the hypothetical Friars payroll at $110MM; a figure this team is unlikely to see for a while. That means the Padres have to do better than the average team at extracting value from their investments. The slight surplus value Quentin yields the Friars might be alright for one player but the team would need to do better in its other investments in order to close the gap between contender and non-contender.
Earlier I mentioned that clubs must consider other things than potential ROI when procuring players. The first was market size and payroll. Another is a team’s ability to lure a certain type of player. If a team needs a specific type of baseball player in order to compete they may need to overpay to get their man.
Let’s look at the Padres specifically. Hitter-unfriendly Petco Park makes San Diego an unattractive destination for free agent bats. Even in the midst of negotiating a rich multiyear deal a vast majority of players are already giving consideration to their next contract. Knowing that, players good enough to warrant hefty contractual investments aren’t going to want to adversely affect their future markets by playing in a park likely to stifle their production.
In order for the Padres to attract free agent bats, they either need to focus their attention on bounce back players coming off poor seasons or they have to overpay for a quality hitter.Look at it this way; if a hitter has a choice between playing for a contender in a park that favors offense versus coming to San Diego and playing at Petco and assuming both offers are the same chances are the hitter is going elsewhere. As such, the Padres would need to increase their offer in order to secure the player they want.
Market-value is a relative term. It’s usually assumed to mean what an entity is willing to pay for your services on the open market but in baseball it’s more than that. Teams like the Padres who have a particular need for a player of a specific skill-set may have to overpay in order to fill that need assuming the player’s skill-set may not be tailor-made for the Friars home park.
Think of it as supply and demand. In this case the demand is there but the supply of players willing to sign in San Diego, in this case good hitters, is not very high. On the flip side pitchers love pitching in Petco. Therefore the supply is great and the demand is static meaning the Padres can usually leverage reasonable contracts for mid-level starting pitchers.
And that may be the main point of my rambling. The Padres, as a club that will never spend $120MM+ on payroll, will never play with the big boys in free agency. At best they’ll have to troll the waters looking for good players that may be overlooked in the market or that they are willing to overpay. The Padres can succeed fishing those waters but they’ll have to be smart. The Quentin extension looks smart; not Albert Einstein or Stephen Hawking smart but still smart.