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Guest post: Free Agent Signings

As we continue our transition into the hot stove season, we have a guest post today regarding the Yankees and free agents:

Hidden Cost of Free Agency Signings

For the first time since the ’94 strike, the Yanks won’t be playing October ball.  Let’s not forget though, despite a number of significant injuries, this team still won 89 games in the historically competitive AL East.  This was not a bad squad, and with some off-season moves, and some improved health, the ’09 Yanks should be right back in contention.

Every one knows the Yankees immense financial resources. This season, the Yanks will have even more cash than usual to toss around, since over $70 million in payroll is shifting off the books, and of course, the new stadium is opening.  It just so happens that there are a number of highly enticing free agents. If it comes to a bidding war for any player,no team can compete with the Yankees this off season.

However, there are non-financial costs to consider. ESPN’s Buster Olney wrote up a good piece on this issue here.

Here’s the gist of it: Elias sports bureau rates players at each position. Those in the top 20% are rated “Type A”. Those in the next 20% are rated “Type B”. If a Type A or B player leaves in free agency, that   team acquires a compensatory pick from the team that signs the player. If its an “A” the former team acquires the other team’s TOP PICK (other than a top 15 pick), as well as an additional compensatory pick. If it’s a “B”, the former team acquires only a supplemental round pick. There are some further technicalities I won’t bore you with…

So long story short, signing high end free agents costs more than cash, it costs draft picks.   

Given that the 96-2000 dynasty was built around home grown talent, the loss of high end draft picks is something to consider in deciding how aggressive to be this off-season. CC Sabathia and Mark Teixeira will cost more than just money.

I say, screw it. As long as they go for the cash, sign Sabathia, and sign Tex. Why? So long as the Brewers don’t hack CC’s arm off, we’d be getting a top shelf pitcher, still under 30. That would give us a rotation of Sabathia, Wang, Joba, Hughes and (Kennedy/Mussina/Pettitte/Sheets/Burnett). That’s at least 4 quality power arms, all under 30 years of age.

Plus, we’ve already got young building block players in Wang, Joba, Hughes and Cano. We only have a few more big years from A-Rod, so we might as well strike now. With CC and Tex, we could be World Series favorites in ’09.

High draft choices in baseball aren’t what they are in the NBA or NFL. Most picks, even first rounders, never even make it to the majors, let alone become impact players. Of course, this could be cognitive bias, favoring known benefits over unknown costs (what if that first round compensatory pick is the next Barry Bonds?)

Let’s look at the picks the Yankees lost due to FA signings since 1997:

Jason Ramano
Darnell McDonald
Mike Fontenot (for signing Moose)
Chadd Blasko
James Green
Dan Myer
Joe Blanton
Jeremy Brown
Gio Gonzalez
Jacob Marceaux
Sean West
Daniel Bard
Kristofer Johnson
Cory Rasmus
Robert Fontaine
Daniel Bard
Kristopher Johnson

Who??? Blanton’s a decent starter, Fontenot finally made it to the bigs at age 28, and granted had a really good year, but we’ll see what his future holds. Overall, you can’t say our farm system would’ve been more productive without our free agent pick ups.

It’s also important to consider how the Yanks’ financial resources impact acquisition of prospects. Many talented prospects demand fat signing bonuses, which turn teams off, causing them to fall in draft order. Also, prospects from Latin America are not signed via the draft. Rather, it’s almost like one huge free agent market. The Yankees can afford to give up some high end draft picks, because top talent often slips down, and because of the Latin American market.

With CC, we’d have a young, deep, highly talented starting rotation. Isn’t THAT what the last Yankee dynasty was truly built around?