Part 1 of 2
The principle topic of discussion in Yankeeland for the past week has been, how much should Derek Jeter make on his next contract? The debate has raged on since Sunday, when details began leaking of the Yankees $45 million, 3 year offer and Casey Close’s “bafflement.” Yesterday, I saw a bunch of tweets about Jeter asking for 6 years and $150 million. I don’t know where those rumors started, but I also saw a bunch from Close stating those figures were “rubbish.” I’m also hearing that the $15 million average salary offered to Jeter represents a number perhaps twice his true market value, which sounds like so much rubbish to me. But before I start tossing around opinions, I thought I would do a little research into the matter.
The central questions to all of this tug-and-pull remains what, exactly, is Jeter’s worth to the open market and what is his worth to the Yankees? I think pretty much everyone with a little common sense understands that Jeter is for more valuable to the Yankees than to any other team and for the Yankees to pay him based strictly on what he is worth to, say, the Giants is ridiculous. And Jeter would be just as ridiculous to expect the same type of money from the Giants as he would from the Yankees. Harvey Araton of the NY Times has a good article today in which none other than Brian Cashman compares Jeter to Lou Gehrig. Like Gehrig, Jeter is a for more valuable commodity to the Yankees than to any other team.
So what is Jeter’s worth?
To start, I looked at what a typical major league team pays for players of Jeter’s caliber. By using WAR, we can determine how much a player is paid based on how many wins he is better than a typical replacement:
|$ 16,000,000.00||$ 1,877,934.27|
|$ 23,000,000.00||$ 3,402,366.86|
|$ 15,000,000.00||$ 2,435,064.94|
|$ 11,000,000.00||$ 1,890,034.36|
|$ 31,000,000.00||$ 5,893,536.12|
|$ 22,500,000.00||$ 4,293,893.13|
|$ 20,000,000.00||$ 4,016,064.26|
|$ 14,000,000.00||$ 2,822,580.65|
|$ 13,000,000.00||$ 2,697,095.44|
|$ 12,000,000.00||$ 2,586,206.90|
|$ 5,500,000.00||$ 1,200,873.36|
|$ 10,000,000.00||$ 2,262,443.44|
|$ 14,000,000.00||$ 3,535,353.54|
|$ 11,000,000.00||$ 2,835,051.55|
|ML Average –>||$ 2,945,945.95|
First up, Derek Jeter is the 13th most productive player in all of MLB since 2006. I think that lost in all of the acrimony and discussion of how bad Jeter was last year is that simple fact – only 12 players in MLB have been more productive than Derek Jeter. That’s pretty amazing, if you consider that more than 600 individuals have donned a major league uniform over that time. (I went back 5 seasons, so as to get a representative sample). You’ll also notice that even with some horrendously underpaid performers (Hanley Ramirez and Adrian Gonzalez) in the top 15, the average compensation per win in 2011 is nearly $3 million. Using that figure as a yardstick, fair compensation for Jeter – based solely on performance – would be his WAR dollar value of $12,608,648.65. If you were to pay him based on WAR dollar value of players at similar ages/careers, then the number drops slightly to $12,096,338.26 – or, to put it another way, teams realize players of Jeter’s age probably won’t continue to produce like they did when they were 30 and the average “age discount” is roughly $510,000. Also, you can see that there are four Yankees in the top fifteen: besides Jeter, Alex Rodriguez, Mark Teixeira and Robinson Cano. Their average compensation per win in 2011 is $4,149,976.76 – if Jeter were paid on the Yankee scale, then his value would be $17,761,818.37.
All of a sudden, that $15 million figure offered by Cashman doesn’t represent a number that far from Jeter’s value based on performance. Best case for Cashman, they’re offering Jeter a $3 million bonus. Worst case, the offer represents shortchanging Jeter by about $2.5 million. Based strictly on performance, the two sides probably could come to a pretty quick accommodation. But the principle sticking point in this negotiation is that Jeter is worth far more to the Yankees than to any of the other 31 teams in baseball. Jeter knows it. Cashman knows it. The obvious problem is coming to an agreement on just how much value Jeter represents to the Yankees vs. other teams. Or, to put it in Cashman’s own words, how much this century’s Gehrig is worth to the Yankees.
There really isn’t any way to statistically analyze that number. Since the Yankees are not a public corporation, we don’t have access to their financials, nor do we have access for their revenue projections for the next 5 years. But we can make an educated guess.
And I’ll discuss that tomorrow.