There was enormous news today as Miguel Cabrera was extended for 10 years and $292 million. As most of you know, it's not really a 10 year extension, but an 8 year extension on his previous deal. It is the largest baseball contract on a total and per year basis and will carry him through his age 40 season. However, it has been panned by essentially every major sporting outlet in the country, including ESPN and YAHOO!.
I, like most sane people, also agree that it is too much and especially too soon. Seeing what happened with the A-Rod and Pujols deals is surely scary. BUT, let's look at a glass that is half full.
People like to point out that only Babe Ruth and Barry Bonds could live up to the price tag of this contract, but I have to disagree. They also point out to the injury history of Cabrera, which does exist, but he is hardly injury prone. I mean, the man has missed 47 games over the last TEN YEARS. Pessimists also argue that his body type will be prone to breakdown and that no other player with his habitus could hold up over the length of the contract. I'd look no further than David Ortiz. Ortiz, who turns 39 this year and measures up at 6'4" and 250 is a (slightly) lesser hitter, worse base runner, and worse defender than Cabrera. Regardless, Ortiz has put up WAR of 2.4, 3.9, 2.9, and 3.8 over his age 34-37 seasons. This has come almost exclusively playing DH (he has played 130 innings of 1B over that time period). Furthermore, despite his body and more checkered injury past than Cabrera, he has still played in 518 of 648 games over that time period (80% or average of 130 per year).
For additional examples, an overweight Tony Gwynn averaged 2.6 WAR over his age 36-39 seasons. AND, perennial DH Edgar Martinez amassed an amazing 44.6 WAR over his age 32-40 seasons. The bottom line, professional hitters have shown that they can continue to hit, even if they're older, and even if they're out of shape.
However, there are a number of additional things to consider. A brilliant piece written by Joel Reuter points to the finances of the team. They are currently receiving $110 million per year for their local deal with Fox Sports Detroit and national revenue. That local deal, of which returns $40 million annually (see chart in this article for local TV deals for all teams), runs until the 2017 season. There is a premium on local TV contracts due to the age of the DVR and the impact of LIVE television (where people are forced to watch the advertisements). Perhaps, they won't receive the $7 billion payday (over 25 years) that the Los Angeles Dodgers received, but a substantial raise is likely.
Although, there are dissenters and Wendy Thurm wrote a very nice piece on Fangraphs illustrating the potential "burst" of the MLB television bubble. In addition, just three months ago, the Phillies signed a $2.5 billion deal over 25 years in the 4th largest market in the country. Now, there are also some perks in that deal that might sweeten the pot, (a 25% stake in the network, for example), but these TV "mega-deals" may be a thing of the past. Regardless, it is reasonable to expect more than $40 million per year on the next local TV contract.
Looking at $292 million in 2014 dollars is difficult to swallow. But, the time value of money is the most powerful force in the universe. Interest and inflation mean a lot, even in baseball. When Dave Cameron initially explained the monetary value of a win in 2008-2009, he posted the historical values of a win from 2002-2008 which I've posted below:
2002 – $2.6m / win
2003 – $2.8m / win
2004– $3.1m / win
2005 – $3.4m / win
2006 – $3.7m / win
2007 – $4.1m / win
2008 – $4.5m / win
So far, the cost of a win in 2014 has been estimated between $5-7 million with most experts reaching a consensus at $6 million. When graphed in microsoft excel, the slope of the line created on such a scatter plot is 0.292. Thus, we can expect the average cost of a win to increase by $300,000 per year. So, over the course of the contract, the estimated cost of a win could theoretically be:
2014 – $6.0m / win
2015 – $6.3m / win
2016 – $6.6m / win
2017 – $6.9m / win
2018 – $7.2m / win
2019 – $7.5m / win
2020 – $7.8m / win
2021 – $8.1m / win
2022 – $8.4m / win
2023 – $8.7m / win
Now, using Oliver 5 year projections (I apologize, I didn't pony up for the Baseball Prospectus and 10 year PECOTA projection), we can visualize his production over the next five years (6.4, 6.1, 5.8, 5.3, 4.6 WAR over the next 5 season). When you plug in the expected cost of a win over that timeframe, you can estimate Cabrera's yearly value as $38.4, $38.4, $38.3, $36.6, and $33.1 million. This generates a total of $184.8 million of value over the first five years of the contract. Even if he posted WAR of 4, 3, 2, 1, and 0.5 over the last 5 years of the contract, that would make the ultimate value of his contract worth $267 million.
I'm certain that Dombrowski and his team are smarter than me and have done more homework than I have. These decisions are extremely calculated and the man has a long track record to prove that he knows what he's doing. Yes, the Fister trade was suspect and the Scherzer comments were unprofessional. BUT, the man is no Joe Dumars.
That said, $267 million of production for $292 million is still an overpay, and $25 million is a substantial amount. BUT, elite free agents are becoming less and less available as the "smart" teams continue to lock up their young talent to long term contracts. This is what happened with Starling Marte earlier this week, Paul Goldschmidt last year, and Evan Longoria once upon a time.
In addition, elite players don't flock to Detroit like they do to Boston, LA, or New York. Even though there is currently the enticement of "win now," this may not be the case in 5 years, let alone 10. This is why we overpayed so much for Pudge and Magglio in the past.
Lastly, Miguel Cabrera is a Tiger for life. I'm OK with that. He will be a first ballot Hall of Famer and although we've had our fair share of snubs, we haven't had a player inducted since Al Kaline in 1980 (I realize George Kell was elected in 1983 but he retired 17 years before Kaline). This deal may end up going the way of A-Rod and Pujols. But, I'd like to think Miggy has more in the tank than people give him credit for. The team may still end up overpaying in the end, but If that means we get to lock up the best hitter in baseball for a few more elite years, a number of good years, and get to see the curtain call to his career, that's fine by me.