Robinson Cano’s Fair Market Value

Four players in MLB history have signed contracts in excess of $200mil. In 2001 and 2008, Alex Rodriguez signed two $200mil+ contracts, becoming the first player to sign a contract worth $200mil or more. 2011 saw two players top the $200mil mark with the Angels signing of Albert Pujols and Tigers signing of Prince Fielder. This past year saw Joey Votto signed an extension that will pay him north of $200mil. The fifth player to join this club will be Robinson Cano.

During the past season the Yankees offered Robinson Cano an extension worth $165mil over seven years. Cano rejected the offer and his agency instead told the team that Cano could be signed for roughly $300mil over ten years. Such a contract would make Cano the highest paid player in sports- by far.

So the question being asked by everyone is: what is Robinson Cano worth? $300mil, $165mil, or somewhere in between? Well, let’s answer that question. First, I will look at his past few seasons as well as his projections for 2014. Then I will project that going forward over the life of a hypothetical contract. After coming up with an estimated figure, I will compare him to similar players and assess other factors that come into play.

Robinson Cano has established himself as the best Yankee on a team that features Derek Jeter, Mark Teixeira, Alex Rodriguez, and CC Sabathia. In doing so he earned five All-Star selections, five Silver Slugger Awards, two Gold Gloves, a World Series Championship, a World Baseball Classic Championship, and a World Baseball Classic MVP Award. According to FanGraphs, Cano has been worth $162.7mil throughout his career while earning about $56mil, for a value of $106.7mil. So after years outperforming his contract, Robinson wants to finally cash in- and then some.

A lot of times people make the mistake of thinking a player should get paid based of their career. While it’s true a contract is based on how a player has performed, forecasting the future is equally important. So basing a contract off his whole career can have problems- Robinson Cano is a much different player than he was a rookie back in 2005.  However, there is merit in looking at recent history. Here are his numbers from 2010-2013 (Total/Season Average):

Games: 640/160

Hits: 774/193.5

Home runs: 117/29.25

BA: .312

OBP: .373

SLG: .533

wOBA: .386

wRC+: 142

UZR: 8.9/2.225

DRS: 38/9.5

fWAR: 25.4

fWAR/650PA: 6.03

So over the past four years Robinson Cano has been an MVP level player. His offensive numbers are all excellent, his defense is above average, and his WAR value represents that. From 2010-2013 Cano is second to Miguel Cabrera in WAR as well as hits- by one single hit. Moreover, he is second in games played to Prince Fielder. So Cano is an all-around player who can be relied upon to take the field every single game. That is an aspect of player that is often overlooked and something which will help Cano’s free agency case.

Based on the average of his past four seasons Robinson Cano figures to be about a 5.5-6.5 WAR player in 2014. Both CAIRO and Steamer project Robinson to have a 5.6 WAR in 2014. So what does a $/WAR cost? Of late there has been some debate. FanGraphs likes to forecast this value whereas Lewie Pollis has recommended looking at it retrospectively. FanGraphs has $/WAR around $5mil whereas Lewie Pollis has it at $7mil. Personally, I like the way FanGraphs does it, so I will start my analysis with a $/WAR of $5mil and will adjust for inflation each season at 5%. I will also decrease his projected WAR by 0.5 each season.

Year

Age

$/WAR

xWAR

xSalary

Average Salary

2014

31

5.00

5.6

28

28

2015

32

5.25

5.1

26.775

27.388

2016

33

5.51

4.6

25.346

26.707

2017

34

5.79

4.1

23.739

25.965

2018

35

6.08

3.6

21.888

25.150

2019

36

6.38

3.1

19.778

24.254

2020

37

6.70

2.6

17.42

23.278

2021

38

7.04

2.1

14.784

22.216

2022

39

7.39

1.6

11.824

21.062

2023

40

7.76

1.1

8.536

19.809

Total

33.5

198.09

19.809

On face value it appears that over the next ten years the estimated worth of Robinson Cano is about $200mil or $20mil per season. That is a far cry from the $300mil his agency is asking for. Moreover, if you stop at year seven you get a 7/$162.95mil contract. As mentioned earlier, the Yankees offered Cano $165mil for seven years of service. It looks like the Yankees were a lot closer to Cano’s estimated value than CAA.

Now, this is a general fair market value assessment. But each team is not created equal. Robinson Cano will be worth more to a team in the playoff hunt than a bottom of the barrel team. So realistically, we can rule out any non-contenders from signing Cano. If they did want to sign him it would be in their best interests to offer him less money because he isn’t worth as much to them. And doing so would take them out of the market.

One way we can see if a team would have interest in Robinson Cano is by looking at Win Curves, which is explained below by Vince Gennaro:

In order to sort out these effects for each team, we can turn to the regression analyses to estimate the win-curve for each team (discussed in more detail in an earlier chapter). By analyzing historical data that captures fan behavior, we can ultimately assign an estimate of a dollar value for each win. More specifically, the model estimates the change in a team’s revenues at various levels of team regular season wins. For example, the Houston Astros are expected to generate $1.2 million more revenue as an 81-win team versus an 80-win team. That’s equivalent to saying the value of the Houston Astros’ 81st win is $1.2 million. At the extremes, the Pittsburgh Pirates 71st win generates about $300,000 in incremental revenue, versus the $4.2 million that accrues to the Yankees for their 90th win.

Figure 3  $ Value of five wins

TEAM     78-83    86-91

CHC      4.8      15.9

NYM      7.1      18.0

LAD      3.8      15.1

BOS      5.8      13.3

LAA      5.2      11.8

CLE      5.0      12.5

TOR      4.3      12.5

CWS      5.2      14.9

SF       6.2      15.2

ATL      6.1      9.6

 

OAK      3.0      7.7

STL      5.1      13.9

PHI      4.5      14.5

HOU      5.9      12.5

SEA      5.8      16.1

MIL      3.8      8.5

TEX      2.7      11.4

MIN      3.0      6.8

DET      3.4      10.4

AVERAGE: 4.2      11.7

 

SD       3.3      10.8

ARI      3.6      11.3

BAL      3.1      12.3

NYY      5.6      18.4

CIN      2.6      7.5

PIT      2.3      7.3

TB       3.9      9.1

FLA      3.5      9.0

KC       3.6      7.4

The teams that most likely will be in the Robinson Cano sweepstakes are the Yankees, Orioles, and Tigers. Teams that could be in that I ruled out include the Blue Jays, Royals, Nationals, Cubs, Dodgers, and Giants. Although the Blue Jays could use a second baseman, I don’t see Cano being in their plans. While they have money, the team has finished below .500 the past two seasons. Despite a roster that might compete on paper, I think the team is too well-run to throw nine figures at Cano for a long term contract to get them over the hump. The Royals are an emerging contender but do not have the financial capability to spend on Cano. The Nationals are a playoff contender with money. But they recently filled second base with top prospect Anthony Rendon. Moreover, it appears that Washington would want to save their pocketbook for Bryce Harper and Stephen Strasburg while still dealing with Jayson Werth’s contract. The Cubs could upgrade at second base but are too far away from competing and any upgrade Cano brings will be minimal. He may make the team a .500 team which will bring in less revenue for the club then going from good to great. The Giants are a team that could compete in the NL West, but already have Marco Scutaro at second base. Could they throw him aside for Cano? Sure, but I don’t think that will happen. Finally, the Dodgers were seemingly the favorites to land Cano all season, but signed a Cuban second baseman earlier in the off-season.

So that leaves us with the Yankees, Tigers, and Orioles. Although there are no 2014 forecasts available (that I could find) each of these teams figures to have a shot at the playoffs, in staggered odds. The Tigers should project around 90 wins, the Orioles should project around 85 wins, and the Yankees should project at 80-81 wins. So each team is in the most influential part of the win curve for revenue, but at different stages.

Let’s start with the Yankees. Although it’s a bit optimistic, the Yankees probably will forecast to an 80-81 win team. For them, according to Gennaro’s win curve, that is worth an additional $5mil in revenue. Granted this is seven years later and the Yankees play in a new stadium, are valued more, and their YES Network has gone up in value as well. But either way, moving from 80 wins to 85 or 86 wins won’t have much of an impact on their revenue.  This is because Yankee fans expect a winner every season and being above average won’t cut it. With expensive ticket prices and merchandise, fans are more hesitant to spend money on the Bombers when they are not dominant. This past season is great evidence, as the Yankees won “only” 85 games and a decrease in both attendance and TV ratings. Moreover, with two Wild Card spots, teams should focus on getting to 88-90 to qualify for a spot. With Cano estimated to have a 5.6 WAR in 2014, he alone will not get them to the part of the win curve that will a large uptick in revenue.

However, if the Yankees are able acquire a pitcher such as Tanaka from Japan and get positive contributions from Michael Pineda, Derek Jeter, Mark Teixeira, Alex Rodriguez and sign another impact player, the team could then forecast as a 90 win team with Cano. The difference between 85 and 90 wins for the Yankees will be at least $20mil in additional revenues. So depending on certain circumstances, Cano can be worth anywhere from $5-$20mil in additional value for the Bronx Bombers. This means a 10/$220mil contract or 7/$184mil if the team doesn’t want to go as long on years.

After the Yankees I believe the Tigers should be considered the favorites for Robinson Cano. The Tigers have been a 90+ win team for the past couple seasons and 2014 should be no different. They are returning the key pieces of their starting rotation (Max Scherzer, Justin Verlander, Doug Fister, Anibal Sanchez) as well as their starting lineup minus a second baseman. Enter Cano. By adding Cano the Tigers can jump from a 90 win team to a 95 win team that should be among the favorites to win the World Series. For the Tigers this jump in wins should bring in an additional $10-$15mil in revenue. Going further, revenue goes up with a World Series win and Cano would increase their World Series odds. So the Tigers could be in a similar situation to the Yankees, where Cano could bring in, at least, an additional $15 or $20mil in value.

Finally, we arrive at the Baltimore Orioles, who I consider a long shot for the All-Star second baseman. Baltimore is a city that reacts well to winning. In 2007, going from 78-83 wins would have only generated an extra $3.1mil of revenue but going from 85-91 wins would have generated $12mil in additional revenue. Again, the amount of revenue generated would be greater than it was in 2007, but the value would be around $12mil. So the Orioles should want to tack on an extra $12-$15mil for a Cano contract offer.

So far I have been looking at Robinson Cano’s performance value and its impact on a potential bidders win curve. There are two other factors to take into account- risk factor and marquee value. Risk factor has two components according to Vince Gennaro, quality and quantity. Quality is a player’s performance (WAR/650 PA) while quantity is games played. Robinson Cano would be a low risk player because his performance quality does not vary according to his playing time quantity. He consistently plays 160 or more games a year. A low risk player has his value adjusted up 10%. Although it’s tough to project how he will age, I will still apply this 10% to the life of his contract. So we have $198.09mil x 10% equals $217,899,000 for a ten year contract. If a team can sign him for seven years, that would be $179,245,000.

Along with risk factor, Cano’s value can go up or down based on his marquee value. Vince Gennaro writes that marquee value has four factors: personal qualities, performance factor, continuity factor, and team brand value. Robinson Cano meets three of the aspects of personal qualities as he has a positive image; he is recognizable being in the top twenty for jersey sales and a strong presence in the Latin community; he is relatively accessible; however, being a native Spanish speaker, his articulate quality takes a dent. The team brand value is 2.5 x the baseline revenue.

Looking at the Yankees, this means that the brand value is $1.425bil (2.5 x $570mil revenue). Taking the above factors into consideration as well, Cano has a marquee value in New York of $5,343,750. This will be different for Detroit and Baltimore because of different revenues and a lack of continuity factor. In Detroit Cano has a marquee value of 1,837,500. In Baltimore Cano has a marquee value of $1,575,000. My revenue figures are from Bloomberg Sports franchise valuations.

So to backtrack: Robinson Cano, over ten years, has a fair market value of $198.09mil. In New York, his value would shoot up to $243,242,750mil. This is from a risk factor of +10%, $20mil in performance value based on the win curve, and $5.34375mil in marquee value. For the Yankees, a fair contract for Cano is 10/$243,242,750mil (~$24.32mil per). Over seven years a fair contract is $204,588,750 (~$29.23mil per).

In Detroit, a fair ten year contract offer is 10/$239,736,500 ($23.97mil per). In Baltimore a ten year contract offer should be 10/$231,147,000.

If Robinson Cano wants to take the money and run, then staying in the Bronx looks to be his best option. Detroit can offer a near identical contract because they are very good with favorable World Series odds. If Cano is the cog that helps them lift the trophy then they will see even more revenue than I accounted for. Despite that, he is still just as valuable if not more valuable to the Yankees. He will keep them a contender in the near future and if the Yankees can re-load over the next couple seasons, then he will still be an impact player when the team is again competing for a shot at the World Series. Moreover, the Yankees have a very unique win curve because of their market and the Yes Network. Keeping the team competitive will net them more revenue than any other team so the Yankees do have incentive, when looking at their bottom line, to spend big to keep Cano in pinstripes. As for the Orioles, they could spend big on Robinson Cano, but to spend as much as Detroit or New York would be a bit of an overpay, especially for a somewhat small market team that might be looking to save some money for a Manny Machado extension.

To recap (Ten year):

Neutral context fair market value: $198.09mil

Yankees Value: ~$243mil

Tigers Value: ~$240mil

Orioles Value: $231mil

Additional Notes:

*According to FanGraphs the average salary of the top five players for the past few seasons has been $24-$25mil. Based on my estimated ten year contract offers, Robinson Cano would be expected to earn about $24mil a year, which falls in line with how the game’s top players have been paid. So Robinson Cano has two options- take the years for a “discounted” per year price, or take a contract with shorter years but get paid more per year because he will be paid greatly for his prime seasons. By asking for 10/$300mil he wants to have a cake and eat it too (although I’m sure it’s a negotiating tactic).

If I was a team, I would prefer the option of paying more per year if it means a shorter contract. Super long contracts are very risky because anything can happen. Either way the team will still be paying a ton of money so I would tack on a few million more if it means my long term commitment is shortened.

**Remember, a lot of the number crunching in this is based off estimations. I started his WAR values at 5.6 in 2014 and decreased it by 0.5 each season. If you want to start him higher or lower that will make a difference. If you want to increase his decline phase by more than 0.5 WAR each season that will make a difference. If you want to adjust for inflation differently that will make a difference. This is how I see it and one can easily see it a different way.

***According to FanGraphs crowd sourcing, fans think Robinson Cano will sign for 8/$196.2mil at $24.5mil per year.

****Robinson Cano has accumulated 37.1 fWAR from 2005-2013. Based off my estimates, he will accumulate another 33.5 fWAR through the 2013 season. That would give him a career total of 70.6. Every second baseman with a WAR over 70 has been selected to the Baseball Hall of Fame. Most recently, Roberto Alomar was elected with a 63.9 fWAR. If things hold up, Robinson Cano could very well be a Hall of Fame inductee and prime candidate to have his number retired, if he does stay in the Bronx.

*****I would like to analyze his future performance value with comparisons to similar players. At the moment, I do not have the capability to do so. I would compare him to current second baseman as well other past second baseman with similar numbers and body types.

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2 Comments on “Robinson Cano’s Fair Market Value”


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