Padres Hit Home Run With Machado
BY ADAM GROSSMAN
Multiple sources have reported that Manny Machado has agreed to a 10-year, $300 million deal with the San Diego Padres. The four time All-Star and two-time Gold Glove winner is now one of the highest paid players in MLB (and American sports more generally) both in terms of total amount and average annual value of a contract with a team.
A deal of this size and time length may make it difficult to think that the Padres could have obtained a good “deal” with this deal. However, the Block Six Analytics (B6A) Revenue Above Replacement (RAR) model projects that the Padres are very likely to have a significant positive return on investment (ROI) by signing Machado. In the first half (or 50%) of Machado’s deal alone, the Padres will have “recouped” 83.4% of the cost.
RAR examines how a player’s on-field and off-field performance contributes to a team’s top-line revenue growth. From an on-field perspective, we examine how winning impacts revenue generation and how each player contributes to winning using a metric we developed called B6AWins. From an off-field perspective, we examine how a player’s star power impacts revenue generation.
We have identified five factors that best describe how an MLB team wins games. Those are derivations of advance analytics for hitting, pitching, fielding, baserunning, and age (for more information about B6AWins contact B6A). We found that a three-year rolling average that accounted for these factors was the best way to project future performance.
For baseball, we have identified three factors that best enable us to determine an individual player’s star power. Those are apparel sales, social media value, and earned media value. We leverage B6A’s machine learning platforms and data partners to analyze the social media and earned media of hundreds of MLB players. We found that examining the past year’s results was the best way to project future star power.
There are two key elements to RAR that differentiate this approach from more traditional valuation approaches. The first is that it is player and team specific. This means that different players will have different values to different teams. In particular, a player’s overall impact on winning is dependent on how the other players on that team perform. In addition, winning does not have the same economic impact for each team.
The second is that off-field performance can have an equally important impact on a team’s ability to generate revenue. In addition, we often find that off-field performance is a more consistent variable than on-field performance when projecting a player’s future value. From a purely economic perspective, this means that teams should rely more heavily on a player’s star power in determining value.
Both of these elements play a critical role in determining that Machado’s contract should be a good deal for the Padres. From an on-field perspective, winning is very important to the team’s ability to generate revenue. One B6AWin is worth $8.0 million dollars to the Padres in 2019, the highest for any team in MLB. While the Padres won fewer games (64) than B6AWins would predict (77) in 2018, the team’s hitting and defensive statistics (two areas where Machado has excelled in the past) were among the lowest in MLB. This makes Machado particularly valuable to the Padres from an on-field perspective.
From an off-field perspective, Machado should be far and away the biggest star on the Padres roster. The next biggest star on the roster should be Eric Hosmer and his projected 2019 off-field value is $11.8 million. Machado’s projected off-field value is $30.2 million for the Padres in 2019. This includes a bump in value in his first year on the Padres as RAR finds that players typically see increases in star power when changing teams.
The Padres are not the only team that would have likely generated a positive ROI from this type of deal. Other teams linked to Machado in free agency including the Chicago White Sox and Philadelphia Phillies would have received a similar (but slightly lower) value while the Toronto Blue Jays would have received a similar (but slightly higher) value as the Padres.
However, Machado would not likely be as valuable to other teams for similar reasons that make him valuable to the Padres. For context, we will examine Machado’s projected value to the Yankees.
From an on-field perspective, the Yankees are the least dependent on winning of any team in MLB. One B6AWin is worth $2.7 million to the Yankees in 2019. In addition, the Yankees roster outperformed the Padres roster by substantial margins in hitting and defensive statistics in 2018 where Machado excels making his contributions relatively less important to projected team performance in 2019. Finally, the Yankees do not lack for star power with both Aaron Judge and Giancarlo Stanton exceeding and Gary Sanchez slightly below Machado’s value.
The RAR model does have limitations when it comes to projecting future value. It is currently only constructed to examine performance through the 2023 season. It is also virtually impossible to account for all future player movements particularly in seasons beyond 2019.
Even with these constraints, Machado’s new deal demonstrates the importance of using RAR to understand a player’s on-field and off-field value to a specific team. While Machado’s contract would not necessarily be a good deal for every team, B6A found that multiple teams would likely generate a positive ROI from Machado’s deal given his overall ability to generate revenue.