The Washington Nationals are building what could be the best rotation in Major League Baseball by signing Max Scherzer to a seven-year contract worth $210 million.
He is worth the money.
The 30-year-old right-hander went 18-5 last season with 252 strikeouts in 220.1 innings, giving him the seventh-highest wins above replacement (5.6) among all pitchers last season. In 2015, Steamer projections have him producing 3.8 WAR, and I would guess Dan Szymborski would have his ZiPS Projection slightly higher. Let’s go with an average of last season’s reality and Steamer projections and say that Scherzer will produce 4.7 WAR in 2015. Then, we can decrease that each year by half a win for aging effects, giving us the aging curve below.
It has been calculated that one marginal win is worth $7 million and we can increase that by five percent each year to figure out the value the Nationals can expect to receive from Scherzer. As you can see, the value of the contract comes close to $180 million in present-day value (which I will address shortly) by the end of the deal. In fact, the Nats should get positive value for Scherzer at least until the last few years, and that’s after factoring in inflation and a steady decline in production.
The risk, of course, is injury and deviation from the projected production. However, Scherzer’s comparables should allay these concerns.
Consider that estimated 21 wins over seven years. Scherzer just wrapped up his age-29 season, and between 27-29, he exceeded 600 innings, and he averaged 5.3 WAR per 200 frames. Now, between 1978-2007, 10 starters exceeded 600 innings from 27-29, and averaged at least 4.5 WAR/200. The list:
As a group, they matched Scherzer’s 5.3 WAR/200. So, how did they do between 30-36? Obviously, there was much variation, but overall they averaged just more than 22 wins. So, that’s right there with our simple Scherzer estimate. Rijo and Higuera struggled with injuries and didn’t do much of anything. Maddux and Clemens, meantime, cleared 40 wins. Five of the 10 pitchers exceeded 23. You’ll never find a group of pitchers that safely avoids injury and under-performance from top to bottom, but Scherzer is starting from an incredibly high position.
Yes, $180 million is less than the $210 million they are paying him, but some of the money is deferred, which means that the present-day value still makes this contract a win for the Nats. For example, because of inflation, a dollar in 2007 would buy the same amount of goods that $1.14 would buy today. Just as $184 million seven years ago would be worth $210 million today. And once you account for the annuity value of Scherzer’s deal, the contract is worth closer to 170.4 million.
If Scherzer had signed for 7/$170 with an equal payout in each season that he actually played for the Nationals, that contract would be roughly equivalent in value to the $210 million deferred compensation contract he actually signed.
Pitchers who receive contracts in excess of $100 million are risky propositions, but the stats suggest Scherzer could be more the exception than the rule.