Monday, November 1, 2010

Ortiz: To Sign or Not to Sign? That's the Question.

If you bring up the idea of the Red Sox re-signing David Ortiz, you’ll likely get quite a polarizing array of responses.  On one hand, you have the loyalists.  These people are often die hard Red Sox fans that are willing to give Big Papi the world.  They remember the great moments of the past (big time clutch hits, two World Series rings, and Ruthian power numbers), and feel he should be rewarded for them.  On the other hand, you have the analytical crowd.  This group is often cold and data driven.  While they might be grateful for Papi’s past heroics, they’re much more concerned with what will Ortiz do for the Red Sox in the future.  Then on the…um…well…third hand (in this theoretical world where every human has three hands), you have the masses, the largest of the three groups.  The masses tend to feed off of emotions rather than rational thought.  This is not to say they’re incapable of thinking rationally, but they tend impacted by trends and short term performance more than the other two groups.  One minute they’re ready to push a player off of the Woodrow Wilson Bridge, and the next they shower him with love. 

Going into the offseason, the Red Sox have a very interesting decision.  They hold a $12.5M option to bring back Ortiz for the 2011 season.  Do they pick up the option in hopes that his 2010 resurgence wasn’t just a mirage?  Do they decline option, and then try to negotiate a multi-year deal for a lower average annual salary?  Do they decline the option, and let him walk?  The problem is that all three have obvious benefits, but they all carry substantial risk.  Let’s take a look at each of the scenarios.

Scenario 1 – Picking up the $12.5M Option

This scenario carries a moderate level of risk.  Picking up his option allows the Red Sox to not only maintain long-term payroll flexibility, but also focus on filling other holes (catcher, third base, relief pitching) for the 2011 team and beyond.  Additionally, the Red Sox can be comfortable knowing that they’ll have a player that put up a .380 wOBA (+28.9 wRAA) just a season ago hitting in the middle of their lineup.  Assuming that a win on the free agent market is worth approximately $4.1M in 2011, a repeat Papi’s 2010 performance would result in $13.5M in performance based value (or +$1.0M in marginal value). 

That said what if his 2010 resurgence was a mirage?  What if he reverts back to his 2009 form where he put up a .340 wOBA (his worst since 2002) and 0.8 Wins Above Replacement?  Obviously, this is a worst case scenario situation for the Red Sox, but we have to include this as a possibility.  Using the same criteria for the value of a 2011 win, a repeat Ortiz’s 2009 performance would result in a $3.3M return in performance based value, or a net marginal value of -$9.2M.  This would essentially make him a sunk cost.  Luckily, if this occurred, he’d only be under contract until the end of the season, which would make it easy (in the business sense only) to release him outright. 

Scenario 2 – Declining the Option, but Signing Him Long-Term

This scenario carries the most risk.  For starters, by declining his option, you’re giving Ortiz the right to negotiate with other teams.  As a result, Ortiz may feel betrayed by the organization, and become motivated to move on to a team that wants his services.  Furthermore, allowing Ortiz to auction himself on the open market to the highest bidder will likely attract additional bidders, thereby increasing pushing his maximum salary threshold higher.  If that happens, the Red Sox could end up pricing themselves out of the bidding, and force themselves to look elsewhere for similar production out of the DH spot. 

If the Red Sox were to re-sign Ortiz to a theoretical 2 year $16M contract with a third year $9M option, they would accomplish two things.  One, they will have signed Ortiz to a contract that is probably closer in line to his true value.  Two, they will have signed a declining player with “old player” skills (that don’t age well) to a multi-year deal.  Yes, it’s only a two year deal.  I know.  But it opens up the Red Sox to an even more uncomfortable situation if Ortiz struggles in 2011.  Then the question becomes:  Was 2010 the mirage season?  Should we cut our losses now, or should we hope for the best in 2012?  All things considered, this option actually creates more questions than it answers.

Scenario 3 – Declining the Option, and Letting Ortiz Walk

Former Dodger GM (and baseball innovator) Branch Rickey once commented that it’s better to trade a player a year too early, rather than hold onto him a year too long.  There’s a lot of truth to that statement.  Many Red Sox fans have been wondering if the Sox should’ve let Ortiz ever since watching him struggle throughout 2008 in the aftermath of a wrist injury.  Letting Ortiz walk now minimizes a significant amount of risk for the Red Sox. 

While the risk of Ortiz going elsewhere and thriving exists, it’s at best 50/50 that Ortiz will outperform the $12.5M option.  Plus, there are several DH options available in this year’s free agent market like Adam Dunn, Victor Martinez, Lance Berkman, Paul Konerko, and Carlos Pena.  These options in some cases provide higher rewards, and in others, cheaper, more efficient options.  Additionally, the Red Sox have the option of using the DH spot in a rotating fashion to help rest older or more injury prone players.  Especially in a baseball world where speed, athleticism, defense, and versatility have become increasingly important, this might be the way to go.


Over the past three years, Ortiz registered just 6.1 Wins Above Replacement (an average of 2.0 WAR per season).  After removing the 2009 outlier season, that reeadjusts his average WAR to 2.65 WAR, which is just above my projection (2.6 WAR) for him in 2011 (his age-35 season).  Assuming that a win on the free agent market is worth approximately $4.1M in 2011, Ortiz would provide $10.9M of performance based value (or -$1.6M in marginal value).  While I’m predicting that Ortiz will not provide sufficient value to cover the cost of his contract, you should not view this as me saying that Ortiz should be allowed to walk.  What I am saying is that it might be advantageous for the Red Sox to decline the option.  This would allow them to either sign Ortiz at a rate that’s more in line with his current production, or find a more suitable option that is more productive and/or efficient.  If they decide re-signing Ortiz is the best option, they'll need to go at least two years to give Ortiz the security he's seeking.  Looking forward to 2012, I project he will be worth approximately 2.1 WAR (using the standard 0.5 WAR rate of regression).  Assuming a win on the free agent market increases at a rate of 5% between 2011 and 2012, Ortiz would provide $9M in value in 2012.  This would make the theoretical 2 year $16M contract I discussed in Scenario 1 to be a steal for the Red Sox.  Plus, it would fulfill Ortiz's need for longer term security.  It's the best of both worlds for both parties.

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