williams_482 said:
If I am reading that article correctly, the NPV5% and NPV10% columns show the $/WAR value now which makes the contract worthwhile given 5% and 10% inflation.
That's how I read it too. So, for Cano, he projects 25.5 wins over the term of the contract. At $240 million, that's $9.4 million per win. But since it's a 10 year deal, he does a net present value calculation, assuming that today's dollars go further than tomorrow's dollars.
I'm not convinced about the second point. But I think for purposes of the numbers that we typically throw around in here -- that is, the current value of the contract -- Cameron's data seems to show that the $5 million number for wins is long gone, and you only really get to $6 and $7 million numbers by using this methodology.
I think what's most interesting about Cameron's data, at least in a discussion about guys like Sandoval and Headley, is to look at the high end. The effect of the $3 million contracts for 1.3 win players like Kelly Johnson, which brings the average down, really isn't relevant for the discussion. Look at his charts for every position player who got a FA deal or more than one year for more than $10 million AAV. Virutally all of them, with the lone exception of Brian McCann, is costing more than $7 million a win, and often substantially more. Cano (9.4), Ellsbury (8.1), Choo (8.7), Pence (10.1), McCann (6.3), Granderson (10.5), Peralta (7.7), Beltran (8.2), Napoli (8.2).
Like or not, that looks to be the market for the top guys. So, unless there is something crazy that happens to his market, Panda is going to command about 8 to 8.5 million a win. The trick, of course, is projecting wins. I think 12.5 wins for the next 5 years is not crazy and that's $100 to $110 million. If it makes us feel better to say that with a NPV discount of 5%, that's really only 7.4 million per win, or at a NPV discount of 10% that's really only 6.5 million per win, that's fine. It's still a 5/105 contract, so that's what we need to brace ourselves for if we want to sign a top of the market position player.
I don't think the difference between $6 and $7 million (or whatever the spread is) really is where the trick of all this is. The trick, to me, is coming up with a solid methodology for truly forecasting wins. Nailing your projection and overpaying for each win is one way for a contract to bust, but the other is to miss badly on the projection. Cameron has Pence as a bit of an outlier in his chart at $10 million a win, but it turns out he seems to have missed dramatically on correct win forecasting -- maybe the Giants had it all along.