Valuing the LaPorta trade
Given my desire to explain things in terms I can comprehend, I would like to present the explanation for my view of the Sabathia trade in terms of a common denominator: money. I used BaseballProspectus’ approximated dollar values for three players with relatively similar AA numbers to LaPorta’s, each of whom will be ‘best case’, ‘base case’, and ‘worst case’ players. All three have made it to the major leagues, so more is known about their careers at this time, and more can be projected about their future values. I used the information starting in 2009, but for LaPorta’s numbers, I inverted the other three sets of numbers (his 09 value projection matches the others’ 14 projections). Each of the players is at or near his peak, whereas LaPorta is a few years away. This smoothed out some possible errors. The three players are Ryan Braun, Jeremy Hermida, and Nelson Cruz. My intentions are not to pinpoint LaPorta’s value going forward, rather to approximate (even with an error term of 20%) the value of a player like LaPorta for the next six years.
In addition to finding LaPorta’s marginal value for the next six years, I also considered Sabathia’s for the duration of this year, as well as the incremental difference a playoff berth would make to the Brewers bottom line.
-Baseballprospectus knows what they’re talking about
-Green/Bryson/Jackson will wash with upcoming draft picks, or become close enough to be insignificant
-The value slope to the right and left of a player’s peak is identical.
-150000/game parking and concessions
-All playoff revenue goes to the bottom line
-Laporta will receive roughly $400,000 a year for his first three years, and sign arbitration deals of 5 mil, 6 mil, and 90% of market value
-Salaries inflate at 10%/year
-Making the playoffs by more than 2 games and failing to make the World Series, or missing the playoffs entirely nullifies any value Sabathia brings to the Brewers.
-Laporta has a 10% chance of a best case MORP, 50% chance of base case MORP, and a 40% chance of worst case MORP. These numbers become more conservative over time due to injury concerns and general variability.
Here's the math:
Given my assumptions about LaPorta’s pay listed above, as well as the probability weighting of LaPorta reaching each level above, we get the incremental dollar benefit (savings) to the Indians versus signing an equivalent free agent. Immediately we notice the tremendous benefit of having a player three years from his peak playing for $400,000 a year. More than 80% of the total savings LaPorta provides happens in the first three years. It appears as though the Brewers have a $22.75MM differential to overcome with 3 months of Sabathia. To work through that differential, I’m going to move from low hanging fruit to less obvious explanations
1. Sabathia’s MORP for the second half of the year is $9.5MM and his contract is $4MM, so the Brewers are down to $17.25MM
2. Assume that Sabathia will add another 200,000 fans for the rest of the season. At $20 a ticket and roughly four games worth of parking and concessions, that’s $2.75MM, so we’re down to $14.75MM
3. Merchandise increases from Sabathia deal - $1MM, ballpark. $13.75MM to go
**If the Brewers don’t make the playoffs, in all likelihood, the marginal benefits from the trade stop here, a $13.75MM loss in value
4. Each playoff home game will generate roughly $1MM in ticketing revenue, and $150,000 in parking/concessions. Being swept as the road team in the NLDS will result in $1.15MM, going the max in each of three seri as the home team nets $11.25MM. I assume neither are particularly likely, so I’ll arbitrarily pick a number halfway between at $6.25MM. $7.5MM to go
5. I assume that, should the Brewers make or win the world series, that the increased merchandise sales, TV contract, and future ticket sales will cover the remaining $7.5MM, and then some.
As you can see, and as I stated earlier, unless the Brewers make the playoffs because of the marginal benefit added by Sabathia, or make it to the World Series, the deal was likely a losing one for Milwaukee.