Fogg Warning in Cincinnati

Today, the Reds signed Josh Fogg to a one year contract worth $1M and tossed him into the mix for a spot in the starting rotation. It's an odd move, as it doesn't improve the Reds in any way, shape, or form.

I'm a big believer in risk/reward acquisitions, but while Fogg at $1M certainly comes with low risk, he also has essentially zero upside. Fogg is as good as he going to get, which isn't good at all. All this move really accomplishes is to clog up the 25 man roster and delay the arrival of impact pitching prospects.

The acquisition of a veteran replacement level pitcher for the backend of the rotation only makes logical sense for three reasons:

1) The veteran lacks the upside of the prospect, but will provide better production in the short run.
2) The veteran will work more innings and deeper into games than the prospect.
3) The veteran serves as a stop gap to give the younger pitchers more time in the minors to develop.

To me, those seem like the only logical reasons to bring in a stop gap veteran pitcher like Fogg. However, in this case, none of those reasons seem to be applicable to the Reds.

1) Improved Production in 2008

Unfortunately, Fogg not only lacks the upside of the Reds pitching prospects (Bailey, Cueto, Volquez, Maloney, etc), but his current baseline production isn't any better than what those prospects would provide in 2008. So, not only does Fogg lack the upside of the prospects, but he doesn't even provide better short run production. So, where's the benefit of bringing him in?

In 2007, Fogg pitched 165.2 innings, posting a 4.94 ERA and a 1.53 WHIP. On his career, he hasn't been much better, posting a 4.90 ERA and a 1.46 WHIP. In addition, Fogg has a career strikeout rate of 4.83 K/9, which is too low for him to be successful. In the modern era, it's difficult to find many pitchers who have maintained consistent success with a strikeout rate below 5.0 K/9. Fogg's low strikeout rate means that he allows a tremendous amount of contact, leaving him at the mercy of the Reds defense, which is never a good thing.

Fogg's career performance isn't a result of Coors Field or bad luck, rather he's earned every last ounce of his career stats. He's not a good pitcher and he's not a good option for the Reds.

2) Logging More Innings than the Prospect

Given the way the modern game treats its young pitchers, it's sometimes advantageous to bring in a veteran pitcher who can handle a heavier workload. There is a school of thought that the risk of injury to young pitchers increases as they tire. As a pitcher tires, his mechanics can break down, which leads increases the susceptibility injury. Veteran pitchers can handle heavier workloads, which can take the strain off of a team's bullpen.

If you have a staff with a lot of young starting pitchers, then they likely won't work deep into the game very often, which leads to more appearances and innings pitched by the bullpen. So, there are times when it makes sense to add a stopgap veteran pitcher.

However, that really doesn't seem to be the case with Fogg. In 2007 for the Rockies, Fogg pitched 163.2 innings in 29 starts, which works out to only 5.2 innings per start. He went 7.0 or more innings only 7 times and his longest start of the year was 7.1 innings.

While a rookie pitcher will be limited by strict pitch counts, Josh Fogg rarely works any deeper in the game than they would, so the veteran benefit is negligible at best.

3) Allowing for Additional Development Time

It also doesn't make sense that Fogg is in the mix in order to give the prospects more development time. Bailey doesn't have anything left to prove in the minors. Cueto dominated three levels of the minors in 2007. Volquez is 24 years old and has pitched part of three seasons in the majors, so he his development time is in the past and he isn't going to benefit from going back down on the farm. In addition, Matt Maloney is essentially ready for the majors. In essence, our four best pitching prospects are already major league ready, so Fogg is an unnecessary acquisition.

2008 Implications

Overall, there is no logical reason for the Reds to have acquired Josh Fogg. He is a poor bet for the 2008 season and he would likely be outperformed by each of our top 4 pitching prospects. It has taken years for the Reds to develop homegrown pitching, but now is the time to embrace it. All offseason the Reds have been rumored to be acquiring a veteran starting pitcher, while seemingly having no confidence in their pitching prospects.

The future of the Reds will largely be determined by the young pitching prospects, but the Reds need to realize that the future starts now!

The Jeremy Affeldt Signing and Player Turnover

One of the most important strategies for a low/mid-market team GM to embrace is the idea of player turnover. The A's first discovered how to effectively churn players to generate the most value from their assets. Subsequently, the Red Sox stole the A's playbook, supplemented it with a massive revenue stream, and ultimately won two World Series titles. All of which speaks to the fact that embracing a degree of player turnover is an essential strategy in the modern game and Reds may be doing just that with the Jeremy Affeldt signing.

ON THE FIELD

The Reds signed Jeremy Affeldt, who may be best known for getting body slammed during a baseball brawl by the ridiculous Kyle Farnsworth, to a one year deal worth $3M. However, Affeldt is actually a very intriguing left-handed pitcher who has yet to live up to his considerable potential.

Affeldt doesn't have the most impressive statistics, but he does have rather impressive stuff, which is why the Royals had such difficulty in giving up on him. Affeldt is a rare power lefty with very good stuff, which SHOULD translate into much better production than Affeldt has provided in his career. Affeldt features a mid-90s fastball and a very impressive power curveball. It's not the loopy, lollipop variety curveball like Barry Zito throws, but rather a hard, sharp breaking pitch.

For his career, Affeldt sports a 4.74 ERA, 1.50 WHIP, 4.2 BB/9, and a 6.4 K/9. In 2007, he was much better for the Rockies, posting a 3.51 ERA, 1.36 WHIP, 5.0 BB/9, and a 7.0 K/9. In addition, Affeldt has what the Reds need, as he gets a substantial number of groundballs. For his career, Affeldt has a 1.45 GB/FB ratio and in 2007 it was an even more impressive 1.80.

Of course, Affeldt will likely see his performance in Cincinnati suffer from the shoddy Reds defense. The Rockies had a DER of .702 in 2007, while the Reds were a lackluster .679. The Reds well below average team defense is never going to help out newly acquired pitchers.

However, this signing certainly addresses a need for the Reds, as they need a lefthander in the rotation (though Affeldt may ultimately end up in the bullpen) and they could always use more quality groundball pitchers.

OFF THE FIELD

While this move makes sense from an on-the-field perspective, it also makes tremendous sense from an off-the-field perspective.

Jeremy Affeldt did not qualify as either a type A or B free agent, so the Reds do not have to surrender a compensatory pick for signing him. He is currently only ranked as the 70th best relief pitcher in the NL and only the top 57 relievers warranted competition in 2007.

In order to calculate player compensation, the Elias Sports Bureau considers the player's two previous seasons. So, for Affeldt, his lackluster 2006 and solid 2007 seasons were considered in arriving at his current Elias ranking.

Here's what the his last two seasons have looked like:



So, when Affeldt's one year Reds contract runs out at the end of 2008, Elias will consider Affeldt's 2007 and 2008 seasons to determine his compensation rating. So, given that Affeldt was poor in 2006 and fairly solid in 2007, it's the 2006 season that dragged down his current Elias Ranking. Accordingly, the Reds could be in line for compensatory picks if Affeldt manages to repeat his 2007 production during the 2008 season. If the Reds get decent production out of Affeldt and let him walk for a compensatory draft pick or two, then it'll be a great value generating acquisition for the Reds.

Embracing player turnover is important to maximizing the value of an organization's assets and Affeldt may ultimately generate quite a bit of value for the Reds. In addition, the price is right, as it only cost the Reds only a 1 year commitment and $3M in salary. It has yet to be determined what role Affeldt will fill in 2008, but it's hard not to like this deal for the Reds.

After a couple of years of complete inaction under former GM Dan O'Brien, it's refreshing to see a GM embrace a bit of player turnover, which can have substantial positive impact on the future of the organization.

"The Signing": Francisco Cordero

I've been avoiding writing about the Francisco Cordero signing, but clearly it's the 800 lb elephant in the room, so it's time to tackle it. I've been avoiding it because I am of two minds on the signing.

The Reds signed Cordero to a four year contract worth $46M. Cordero gets $8.5M in 2008, $12M in 2009, $12M in 2010, and $12M in 2011. In addition, the Reds negotiated for a team option for the 2012 season at $12M, which also comes with a $1M buyout.

PROS

1) It's obvious that the Reds could not afford to have another season ruined by an inept bullpen. The fans would not tolerate it and Krivsky's career might not survive it. Accordingly, Krivsky once again identified the problem, targeted the solution, and moved quickly to sign Cordero. It's the same M.O. that he demonstrated with the Alex Gonzalez signing.

In 2006, The Reds were undone by the bullpen, as the lack of a reliable closer cost them countless games. That problem was only resolved by the arrival of Eddie Guardado, who provided a stabilizing influence in the 9th inning.

In 2007, the Reds were once again undone by the bullpen, but this time the problem wasn't the closer, but rather the 8th inning. The Reds had no reliable option to get the ball to David Weathers, who performed admirably as the closer. The emergence of Jared Burton late in the season helped offset the problem, but countless games were once again lost by the flawed bullpen.

In 2008, the arrival of Francisco Cordero will bump everyone up a role. Cordero will work the 9th, Weathers/Burton will move up to handle the 8th, and everyone else will be relegated to 7th inning work.

2) Francisco Cordero was tremendous in 2007. It's hard to see it any other way, as Cordero posted an impressive 2.98 ERA, 1.11 WHIP, 2.6 BB/9, and 12.22 K/9. In addition, Cordero's peripherals support his level of performance, as he posted a FIP of 2.19 and a BABIP of .324. Cordero was actually that good in 2007.

3) The Reds signing Cordero weakens the Brewers. By signing away their dominant closer, the Reds weakened the Brewers and forced them to sign Eric Gagne for $10M. The allegations of Gagne's steroid use only increase the risk for the Brewers.

CONS

The "only" true con to the contract is that it completely flies in the face of every sound small-market organization principles.

General Rules for Smaller Market Organizations

1) In order to compete with organizations with larger revenue streams, a smaller market organization must get more production per dollar spent than the larger revenue organizations. If the Reds get the same amount of production per dollar spent as larger market organizations, then the Reds will lose due to the larger resources available to their competitor. The Reds must maximize the amount of production they receive for every dollar they spend, as that's the only way to compete in the current Major League Baseball marketplace.

2) Given the volatility of relief pitching, it's unwise to offer much more than two year contracts to relief pitchers at free agent prices. The inherent volatility of performance means that it is unwise to hand out big money to most relievers, as those relievers aren't likely to be able to earn their money in each year of the deal, which means the team is drastically overpaying for the production they receive.

3) Given the limited playing time of relievers, the impact that they can impart on the game is substantially less than that of starting pitchers or position players. Accordingly, it's wise to focus limited resources where they will have the most impact.

4) Small market organizations should only pay for players who provide unique production. If a player provides production that is easily replaceable at a lower cost, then that's not the most efficient use of resources.

WIN SHARES ABOVE BENCH ON THE REDS

Bill James' Win Shares is the quickest way to look at the unique of the player's production. Win Shares Above Bench (WSAB) compares a player's win shares to what an average bench player would have received given the same playing time. An average bench player is not a scarce commodity, so paying huge coin for production that is not unique, but rather easily obtainable, is unwise. The money should be spent on those players whose contribution creates the the most wins for the team and accordingly those players who possess the most unique value on the marketplace.

In 2007, Francisco Cordero pitched only 63.1 innings and posted a WSAB of 5. For comparison, David Weathers had a WSAB of 5, Jared Burton was at 4, Aaron Harang was at 12, Adam Dunn was at 9, Edwin Encarnacion was at 7, Josh Hamilton was at 6, and Brandon Phillips was at 5.

Team WSAB per Dollar Spent

Again, to be successful, smaller market teams must get more production per dollar spent than the competition or else they will lose just by being outspent. Accordingly, I took a quick and dirty look at the cost (using estimated team payroll) paid per each WSAB for a select number of organizations.

Here's how it panned out:



So, in 2007, the Reds paid more for each WSAB ($1,299,347) than the World Champion Boston Red Sox ($1,178,690). Not surprisingly, the D-Backs and Rockies paid substantially less, as they rely on young, impact prospects who provide great production and don't cost an arm and a leg. That, in large part, is how they were able to compete with the big money teams.

Are the Reds gaining any ground on the big boys by paying $46M over 4 years to a pitcher who was only had 5 WSAB? There seem to be more efficient and effective ways to spend such a massive amount of money than on a relief pitcher.

CONCLUSION

In a vacuum, the move is terrible and violates most sound mid-market baseball principles. However, baseball moves aren't made in a vacuum, rather they are made under a particular set of circumstances. Given the Reds futility in the late innings, it's understandable that the Reds made the move they did. However, despite the logic behind the move, the Reds aren't likely to beat the odds, which are stacked against such a deal.

If the Reds rely on cost effective young talent in the future, then they likely won't be hurt by having so much money tied up in a closer. If the Reds rely on Hamilton, Bruce, and Votto, then Cordero's contract is less damaging. If that's the case AND Cordero remains healthy AND consistent, then this deal will likely workout just fine.

However, there are quite a few "ifs" in that statement and given that likely relievers Sean Watson, Carlos Fisher, Pedro Viola and Josh Roenicke are on the horizon, this deal may ultimately prove to be unwise expenditure of resources, which is about the worst thing a mid-market team can do.

Krivsky moved fast to correct a flaw, but it may have been the equivalent of swatting a fly with a bazooka. We'll have to wait and see what the collateral damage is on this signing.

Player Salary Trends in MLB

Well, it's that time of year again. When MLB sanity goes out the window in the search of the perfect new toy. It seems now, more than ever, player salaries are skyrocketing. Personally, I don't generally mind players getting paid large salaries, because the alternative is the money goes into the owner's pocket. Given the choice between paying the hard working player a substantial wage or placing the increased revenue in the pocket of an owner who did little more than turn a profit with a business that's a legal monopoly, I tend to favor paying the players.

That said, it really does seem like salaries are getting out of control. Professional athletes aren't just getting rich, but are now joining the super rich. At the end of his career, Alex Rodriguez could likely buy a baseball franchise, or at least the majority share of one. All of this got me to thinking about salaries and trends, so I took a look at MLB salaries over the past couple of decades to identify the real trends.

Here's the average player salary from 1985 through 2006 and the annual percentage increase or decrease:



Over the past ~21 years, on average player salaries in MLB rose ~10.0% on an annual basis. Of course, it's never quite that simple in baseball, because there was so much happening behind the numbers. There were a number of forces driving the players salaries up and down over the past 21 years.

1985-1988 THE COLLUSION YEARS

After the emergence of the players' Union, the balance of labor relations began to shift in MLB. After years of essentially indentured servitude, the newly unified players gradually began to gain concessions from the owners. Two of the most important gains they achieved were the establishment of an independent arbitration process for the hearing of grievances and the requirement that all labor agreements must be negotiated through a collective bargaining process. These two less heralded gains paved the way for significant advances for the players, including free agency.

These gains can be seen in a variety of ways, one of which is that the Players' Union has gradually increased the percentage of the pie that the players receive. In 1950, MLB teams paid out an average of 17.6% of their revenue to player salaries. By 2001, player salaries had increased to 54.1% of team revenues.

In the early 1980s, the owners grew tired of continually losing ground to the players in collective bargaining, so they came together under the direction of then commissioner Peter Uberroth (pictured) and developed a collaborative plan of action. Simply put, the plan was that no owner would bid on any other owner's free agents. In 1985 and 1986, only four free agents changed teams each year and none of the eight was wanted by his previous team. This tactic of course undercut free agency by eliminating the demand for that player's services, which resulted in lower salaries. This plan constituted collusion, which was a violation of the terms of the Collective Bargaining Agreement (CBA).

Eventually, the owners paid the price for the collusion in the form of fines totaling over $280M, but over that four year period, collusion was very effective in holding salaries in place. In 1985, the average MLB salary was $476,142. In 1986, the average MLB salary actually dropped 12.4% to $417,192. In each of 1987 and 1988, there was meager salary growth of 4.2%, which still didn't bring the salaries back up to where they were in 1985.

1989-1991 REVENUE BOOST FROM NEW TELEVISION BROADCAST CONTRACTS

The owners were fined for collusion when the Union won three separate cases for collusion. While the law helped eliminate collusion, it took a massive influx of revenue to get the player salaries back on track.

On December 14, 1988, CBS paid approximately $1.8 billion for the rights to broadcast the Saturday game of the week, the All-Star game, the postseason, and the World Series.

In addition, on January 5, 1989 ESPN contracted with MLB for the right to show over 175 games beginning in 1990. The ESPN contract was worth $400M to MLB.

The overall financial impact of these television contracts is stunning. Looking at the total revenue from national television contracts equalized for inflation by adjusting the values to 2002 dollars, you get a sense of the kind of impact. In 1989, revenue from television contracts was $357,000,000. In 1990, the new contracts saw that number increase all the way to $907,000,000.

Given those figures, it's not difficult to see what caused the 74.3% increase in the average player salary in 1991. The new revenue from the television contracts started rolling in during the 1990 season and the owners immediately plowed that money into signing free agents the following offseason to improve their club for the 1991 season. The owners followed up the 74.3% increase in 1991 with a 17.4% increase in 1992.

Clearly, the owners are willing to let increased revenue flow down through to the players, which is essentially how it should be.

1993-1995 LABOR UNREST

It seems highly likely that the 1994 strike loomed large over player salaries from 1993 through 1995. Owners would not have been willing to hand out large contracts with a work stoppage looming and the lost revenue from 1994 and 1995 resulted in a decrease in salaries in the 1995 season.

To this day, it seems strange that the 1994 work stoppage actually happened, as everyone lost out: owners, players, and fans included.

FROM 2001 TO THE PRESENT

Baseball financial information is always difficult to discuss with any degree of precision, as these are private organizations that do not share their financial information. However, Bud Selig is on record saying that overall revenues have risen from ~$1.2 billion in 1995 to $6.075 billion in 2007.

A substantial percentage of that increase is being driven by the success of MLBAM, which includes MLB.com and related businesses, and satellite radio. Revenues for MLBAM are growing at 40% a year since it was founded in 2001. In 2001, the owners agreed to share all Internet revenue equally, which means that all owners are reaping the benefits from this new revenue stream equally.

For those hoping to see a salary cap in Major League Baseball, I wouldn't count on it any time soon. The game is incredibly healthy from a financial standpoint. Revenue has increased ~6 fold since 2001 and league wide attendance records fall almost on an annual basis. The players and the owners are reaping unprecedented financial rewards, so there is no reason for either side to want to significantly change the terms of the CBA. However, there are also unintended consequences, as this rapid increase in player salaries is also changing the trade market.

That kind of increase is incredible and we've already seen what the owners are willing to do with a substantial increase in revenue: pass a big chunk of it on down to the players. So, I don't think it's a stretch to say that salaries may actually increase at a faster rate in the near future. It won't be too long until the question becomes: who will be the first $1 billion ballplayer?

There goes the neighborhood.....

Well, we are already off to the races in the silly season. Technically, it doesn't open until tomorrow, but the Tigers essentially fired the first shot by re-signing Todd Jones to a one year contract worth $7M, which represents, roughly, a $2.2M raise over his 2007 salary.

The shoulder injury suffered by Joel Zumaya likely provided the impetus for the move, but the Jones contract is the type that can set the market for other available relievers. A few years ago, the Mets set the market by signing Kris Benson to a very high (at the time) contract which subsequently increased the asking price on all starting pitchers.

In 2007, Todd Jones pitched 61.3 innings, posted a 4.26 ERA, a 1.42 WHIP, and a K/BB ratio of 33/23. His performance earned him 6 Total Win Shares. However, in 2007, Todd Jones had a WSAB (Win Shares Above Bench) of only 2.

Here's the definition of WSAB:

Win Shares Above Bench, or Baseline. WSAB is a refined approach to Win Shares, in which each player's total Win Shares are compared to the Win Shares an average bench player would have received, given that player's time at bat, on the mound or in the field.

So, in short, the Tigers just gave Todd Jones a $7M contract for doing something only marginally better than any average bench player would have posted. It hardly seems like a sound business decision to pay so much for production that almost equals that of an average bench player.

Unfortunately, this contract may set the market for all relievers on the free agent market, which is why there are very few good values to be realized on the free agent market.

The Reds need to be wise and not spend their money like the Tigers. The Reds should only pay for production that is unique (i.e. well above bench/replacement level production) and, hence, difficult to obtain anywhere else.