Contract Analysis: How Much Would David Wright Be Worth To A Contending Mets’ team?

With the heart of the current offseason fast approaching — Winter Meetings beginning on December 3rd in Nashville, Tennessee — Sandy Alderson and company have to answer the most crucial questions that will steer the Mets’ organization in the questionable direction fans are impatiently waiting to see that will directly impact this team’s future. Along with trying to figure out if the 2012 Cy Young award winner R.A. Dickey will be a key part of the team’s identity in the years to come, New York needs to figure out if the face of the franchise, David Wright, will be around long enough to play a vital role in the team’s hopeful success in the future.

With that in mind, I decided to take a stab at analyzing Wright’s contract value using a formula I learned during my time as a Graduate student. During my first semester, I had the opportunity to enroll in a course entitled “The Business of Baseball” taught by Vince Gennaro. Mr. Gennaro is currently the President of the Society for American Baseball Research and is the author of “Diamond Dollars: The Economics of Winning in Baseball”. Throughout his career, he has served as a consultant to Major league teams and is a regular guest on MLB Network.

In his book, he proposes a method/formula entitled the Win-Curve concept, which shows the direct correlation between winning impacting revenue. The Win-Curve is estimated by using regression analysis, showing the mathematical relationship between attendance and wins.

Under this concept, revenues and winning are affected by:

1. Brand Strength
2. Fan loyalty
3. Market size

This concept is used to determine the value a player has to their respective team.

Oct. 3, 2012; Miami, FL, USA; New York Mets third baseman David Wright (5) during a game against the Miami Marlins at Marlins Park. The Mets won 4-2. Mandatory Credit: Steve Mitchell-US PRESSWIRE

This concept reveals that winning matters between 70 to 98 wins, meaning that a significant amount of revenue is earned per each additional win between that win bracket. Now how much money is earned for each additional win depends on the those three factors listed above.

MY FINDINGS 

Before I begin, let me just state the following: My numbers are my assumptions, and were placed only for the purpose of this article. I am not saying that my numbers are the actual numbers in terms of franchise value, marquee value, etc.

Because of the fact that this concept is best used for teams that are competitive and have a significant amount of wins, because the more wins a team has, the more revenue is earned for that organization, it is nearly impossible for me to tell you that from a competitive standpoint, signing David Wright to a long-term contract does not sense. Coming off a season in which Wright compiled a WAR of 6.7, the Mets were still only a 74-win team. On a year-by-year basis winning around 70-75 games isn’t enough to make a 100+ million contract worth it to a organization, from a performance standpoint.

That is why, for the purpose of this article — and for the Win-curve concept— I changed the scenario around to how much David Wright is worth to the Mets if they were a competitive team.

This being said, it is my opinion that signing Wright to a significant long-term contract is more a Public Relations move to keep the fan base happy. Do I think a deal will eventually get signed by both parties? Yes, I do. Now will it happen? That remains to be seen.

For the purpose of this evaluation, let’s just say the Mets were coming off a season in which they won 89 games. If this were true, it can be said that the Mets are an 82-win team without Wright. What I did was round out the 6.7 WAR to 7.0 WAR and subtracted it from the team’s total wins (89-7=82).

In order to come up with the following values, I assumed the following:

• David Wright is projected to have a WAR of 6.0 in 2014 and his WAR will decline by 1/2 or .5 every year moving forward.

• The Mets organization will generate approximately $2.5 million for each additional win Wright contributes to.

• The Mets franchise value is worth approximately $1.5 billion dollars. Prior to the 2012 season, Forbes valued the Mets organization to be worth approximately $719 million. However, after the news of the Dodgers being sold for $2 billion dollars, experts suggested the Mets’ franchise could be worth $1.5 billion, with their Regional Sports Network, SNY, accounting as the difference maker.

Wright’s annual marquee value equals 0.5% of the value of the Mets’ franchise and 0.5% of the Mets equity stake in the SportsNet New York Network.

Fred Wilpon will not invest to the point where he will be hit a luxury tax in the years to come.

($ in Millions)

*Note: 2013 was not factor into my contract because his 2013 option worth $16 million was exercised on October 30th, 2012*

Contract extension: six-year, $108 million  

Wright’s value:

• Six years at $18 million per year – Wright is respected with high annual value.

• Wright will be 37 years old by the time this deal is completed.

• Total Profit Margin reveals that the Mets will still have $8.1 million to cover their risks, if Wright gets injured, underperforms, etc.

After completing this chart, I can understand why the Mets would be willing to offer anything around $110 million. To be fair, a contract around $110 million will be beneficial to both parties. However, after hearing that David Wright’s camp is pushing for something along seven-years at $130 million, I find it very hard for such a deal to make sense from a business stand point from the Mets perspective. If Wright truly wants to be a key part of this team’s success,  he would be willing to take a deal that pays him at most $115 million. If he wants more, then I think it is in everyone’s best interest to go elsewhere, which will make Alderson look for a team to trade him to.

However, I do expect and I’m hopeful that a deal gets done sooner rather than later to keep Wright in New York.