Former Indians general manager and current team president Mark Shapiro said in a recent interview that the cost of a free agent "win" is approximately $9 million. In essence, for every additional win over replacement (WAR) in the free agent market costs a team $9 million in salary. He stated that for a team below .500, adding one win via a $9 million free agent is not necessarily prudent allocation of resources. However, for an 89 win team, the 90th win may be extremely important (such as winning a division and avoiding a wild card play off game).
The $9 million seems to be a perplexing value. Is it really true? It is hard to say. It may be one team's budgeting criteria for 2013.
If you look at all of major league player salaries at the start of 2012, $2.903 billion, and divide them by the number of season "wins" you get a value of $1.2 million per win. That is the base line value of a major league win by any team.
The Indians' $9 million free agent per win value is 6.5 times more than the base line win value.
Which begs this question: are free agents worth 6.5 times more than a normal position player?
Given most free agents being paid $9 million or more per season are "above average" or "quality" starters, one would expect they would have a greater winning impact on a team than the average AAAA replacement player.
Let us analyze a random but important free agent position: first base.
There were 48 first basemen in the leagues with total salary of $411.912 million. The average first baseman salary would be $8.58 million. However, the mean 24th paid first baseman was only at $1.0 million.
Albert Pujols left the Cardinals in 2012. In 2011, he made $14.58 million. With his Angels deal, the 10 year $240 million contract prorates to $24 million per year. That is an approximate $9.5 million increase in free agent "value." Under the Indians' reasoning, the Angels should receive at least +1.0 WAR from Pujols signing.
In 2011, Pujols season WAR was 5.1.
In 2012, Pujols season WAR was 4.6. That is a minus .5 WAR.
So under one interpretation, Pujols failed the Indians free agent value test.
But if you look to the Angels team, Pujols replaced Mark Trumbo at first base. Trumbo had a very good rookie season, finishing second in the AL Rookie of the Year honors. Trumbo's 2011 WAR was 2.5. His rookie salary was a mere $414,000.
Pujols increased the Angels first base WAR by 2.1. Under the Indians valuation, that would equate to $18.9 million in free agent win value. Pujols was paid $24 million, so some could say he was overpaid by $5.1 million, but which is substantially less than the average first base salary of $8.58 million.
What the figures really show is the inflation vs. efficiency of home grown talent.
Trumbo's 2011 season equals $165,000/1.0 WAR.
Pujols' 2012 season equals $5,200,000/1.0 WAR.
The final question is whether Pujols' 2.1 additional wins over Trumbo's 2011 season give the Angels two more wins in the standings - - - or a play-off berth? No.
The 2012 Angels did improve by 3 games, but finished 3rd in the division.
And ironically, the best Angel of 2012 was another rookie, Mike Trout, who had an amazing 10.7 WAR.
