Tuesday, November 18, 2014

The Risk of Giancarlo Stanton

The Miami Marlins have signed their star right fielder, Giancarlo Stanton, to the longest and richest contract in baseball history: 13 years, $325 million. The 25-year-old Stanton can opt out of the deal after the 2020 season. We don't know the details of the contract, i.e. how the dollars are spread around over the years, but I'll go out on a limb and say that at an average value of $25 million per year, he's going to be paid a lot of money every season. Stanton, who turned 25 earlier this month, was an All-Star and finished second in MVP balloting in 2014, leading the National League in home runs (37), total bases (299), slugging percentage (.555), and, in a statement both of his talent and that of the Marlins lineup surrounding him, intentional walks (24). He's tied for tenth all time in home runs through age 24:
1 Eddie Mathews 190 1952 1956 732 3141 2634 497 735 119 24 492 471 443 .279 .388 .559 .947
2 Alex Rodriguez 189 1994 2000 790 3515 3126 627 966 194 13 595 310 616 .309 .374 .561 .934
3 Mel Ott 176 1926 1933 983 3978 3367 680 1059 195 31 711 537 258 .315 .412 .548 .959
4 Jimmie Foxx 174 1925 1932 810 3270 2750 612 923 159 57 667 460 377 .336 .432 .625 1.056
5 Mickey Mantle 173 1951 1956 808 3491 2944 642 907 136 43 575 524 578 .308 .412 .560 .972
6 Ken Griffey 172 1989 1994 845 3606 3180 518 972 194 19 543 374 477 .306 .379 .541 .920
7 Frank Robinson 165 1956 1960 735 3155 2741 501 818 145 27 449 321 427 .298 .380 .552 .932
8 Albert Pujols 160 2001 2004 629 2728 2363 500 787 189 9 504 304 279 .333 .413 .624 1.037
9 Orlando Cepeda 157 1958 1962 764 3220 2987 471 922 163 16 553 172 463 .309 .350 .532 .881
10 Giancarlo Stanton 154 2010 2014 634 2640 2288 350 619 138 8 399 318 742 .271 .364 .540 .903
11 Johnny Bench 154 1967 1972 782 3229 2887 421 781 142 12 512 288 470 .271 .334 .488 .822
Generated 11/18/2014.

As you can see, he got there in fewer plate appearances than anyone on the list (among players with 100 or more homers through age 24, only Mathews, Pujols, Bob Horner, and Willie Mays went deep more often than Stanton's 5.8% of plate appearances), and he's also struck out more than the others. 

The contract has resulted in predictable reactions.

  • It's too much money. Yes, it's the biggest contract in baseball history in total dollars, but not in average annual value. Miguel Cabrera, Clayton Kershaw, Alex Rodriguez, and Justin Verlander are in contracts that pay them more than an average of $25 million per year, and the $25 million average equals the current contracts of Ryan Howard, Josh Hamilton, and Felix Hernandez. There are players whom one might view as more valuable than Stanton (Mike Trout and Andrew McCutchen, to name two), but Stanton's contract isn't out of line with those of the players on the $25 million-plus list.
  • No, I mean, it's too much money for a player. Sports Illustrated's Joe Sheehan has pointed out that the share of baseball revenues going to player salaries has steadily declined since the turn of the century. Given that no teams were going bankrupt in 2000, and that fans would probably rather watch Stanton hit than watch his owner, Jeffrey Loria, count money, I can't see a problem with the players getting a bigger slice of the pie.
  • No, seriously, we can pay a baseball player that much and we can't pay schoolteachers and firefighters? This argument will make sense when kids walk around wearing their teachers' replica jerseys and firefighters negotiate with regional sports networks to televise their rescues.
  • Thirteen years is too long. There's no question that's a risk. But Stanton will be 38 when his contract ends. Cabrera's will pay him at least through age 40, possibly a couple years longer, depending on options that vest based on his MVP vote. Rodriguez is under contract through age 41. Same with Albert Pujols. It's a long contract, but not ridiculously long. 
  • He won't age well. Stanton is 6'6", 240. One could easily see him slowing down as he ages, moving from right to left to, eventually, first. He's in the National League, so he can't become a DH. But here's the thing: Historically, players with "old player skills" (home runs, walks, strikeouts) tend to flame out relatively early. Stanton last year was first in the National League in homers, second in walks, and sixth in strikeouts. On the other hand, Stanton is a good athlete. He grades out as an above-average right fielder and was 13-for-14 as a basestealer in 2014. He's not just a slugger.
  • His owner's crazy. Well, that's true. He's "the most hated man in Major League Baseball." The Marlins' payroll last year was $42.4 million, last in the majors. The average annual value of Stanton's contract equals nearly 60% of that total. It doesn't make sense to pay that much to one guy while doing everything else on the cheap. Is this indicative of a willingness to spend? If so, the Marlins, who have a lot of promising young players, could contend. But we've been down this road before with Loria, when he added players after the 2011 season only to unload them after a disappointing 2012. But say this for Loria: His sins have consistently been of being penny-pinching, not profligate.
Rather, there are two things that I worry about with Stanton:
  • Durability. Stanton's first full year in the majors was 2011. He played 150 games that year. He hasn't matched that total since. In 2012, he missed 39 games due to knee pain that required surgery in July. He also had oblique and shoulder injuries that year. He missed 46 games in 2013 due primarily to a strained hamstring but also with shoulder soreness and an ankle sprain. Last year he was healthy until September 12, when he was hit in the face by a Mike Fiers fastball in one of those can't-watch-it injuries, suffering multiple facial fractures. Hard tissue injuries (bones) tend to fully heal and are as much bad luck as anything. Soft tissue injuries (muscles, ligaments, tendons, cartilage) can be recurring. Toronto shortstop Jose Reyes, for example, has been on the disabled list five times, and day-to-day several other times, with hamstring problems. Stanton's been on the DL only twice in is career (the hit-by-pitch last year was in September, when teams don't bother disabling players), and he had a healthy 2014 until the Brewers' Fiers beaned him, but his record isn't scot-free. (All injury data from Baseball Prospectus.)
  • Sustainability of revenues. The reason baseball revenues have grown dramatically in this century is television. With the proliferation of DVRs, consumers can record the programs they like and watch them when they want, fast-fowarding through the commercials. Sports are one of the few events consumers watch live. So they see the ads for beer and trucks and insurance while watching a game that they skip while watching sitcoms. That has made sports programming particularly valuable to advertisers and, therefore, for the networks that carry them. Additionally, TV broadcasting has shifted from national networks to regional sports networks (RSNs), like NESN in New England, YES and SNY in New York, and MASN in Baltimore/Washington. Teams have national contracts with ESPN and FOX, but they also have local contracts with RSNs that can dwarf the national contracts. Cable subscribers pay to have RSNs bundled with other channels. However, there's been a move to "unbundle" cable, letting consumers pick and choose the channels they want rather than the average of 189 that they receive now. Will your great aunt want ESPN, much less the RSNs, if she could pick her channels? And if she doesn't, and many others don't, what will happen to RSN revenues? The prospects for unbundling, as well as the savings it might yield, are unclear. But Stanton's contract assumes a stable economic model in baseball. In my role as a financial analyst, I've often said that Wall Street has a penchant for seeing a point and drawing a line through it. Baseball's doing the same thing with its current revenue mix. What works today may not in 2027, the last year of Stanton's contract.
Overall, I can't get too excited over Stanton's contract. Baseball's rolling in dough; might as well give it to a marquee player. I question what the Marlins have in mind longer term, and I worry about his injury risk, but the focus here's on the field of play anyway.

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