Wednesday, November 28, 2012

Rumors And Repercussions.

Stop me if you’ve heard me say this before: the more I try to give Dayton Moore and the Royals the benefit of the doubt, the more they try to make me look like an idiot for doing so.

There are valid reasons to be skeptical about the additions of Ervin Santana and Jeremy Guthrie – while both have a track record of success, they both have red flags as well. They’re both coming off poor seasons, albeit with excuses. But I decided not to be critical of either addition, in large part because neither pitcher cost the Royals to dip into their farm system (Brandon Sisk notwithstanding). If adding Santana and Guthrie kept Moore from being tempted to trade a part of his core lineup to improve his rotation, that was a significant fringe benefit.

And now we read this.

There’s a season’s worth of epic fail just in the first paragraph. “Is outfield prospect Wil Myers worth a veteran pitcher who would instantly go to the front of the Royals’ rotation, such as Tampa Bay’s James Shields or Boston’s Jon Lester? If so, how will the club clear sufficient payroll space to stay within its soft $70 million ceiling?”

The answers to those two questions are “HELL NO!” and “wait, soft WHAT?!”

Later in the column, Bob Dutton writes, “is either worth considering from the Royals’ perspective. In effect, are two years of Shields or Lester worth six of Myers?”

No. No. No.

(I want to make something clear: I’m not shooting the messenger here, just the message. Dutton does the job of beat writer so well that it can be hard to tell where the Royals’ opinions stop and where his starts.)

First off, you’re not trading six years of Wil Myers – if you’re smart, you’re trading about 6.9 years. Having made it this far without promoting him to the majors, you have every incentive to start him in Omaha, bring him up in late April, and then delay his free agency until after the 2019 season. Believe me, if he gets traded to Tampa Bay, that’s exactly how they’ll play it out. (Actually, if he gets traded to Tampa Bay, the odds are at least 50/50 that they’ll take my advice and sign him to an Evan Longoria deal. After all, they’re the ones who signed Evan Longoria to an Evan Longoria deal.)

So you trade 6.9 years of Wil Myers for two years of Jon Lester. Two expensive years of Jon Lester. Lester makes $11.625 million next year, with a club option for 2014 at $13 million. In 2014, that would make Lester the most expensive player in Royals history.

That’s fine if you’re getting a quality starter, and for most of his career, he’s been exactly that. Lester became a full-time starter for the Red Sox in 2008, threw a no-hitter against the Royals early in the season, and finished with a 3.21 ERA in 210 innings. His ERAs from 2008 through 2011 read 3.21, 3.41, 3.25, and 3.47, making at least 31 starts each year, pitching in the AL East. He wasn’t an ace, but he was the next-best thing, a top-of-the-line #2 starter. And if the Royals could acquire last year’s Lester, with three years of club control, I wouldn’t be losing my mind about the possibility of trading Myers for him.

But in 2012 he not only used up a year of club control, he had his worst season in the majors, with his ERA jumping to 4.82, and his strikeout rate dropping to 18.9%, from 22.8% the year before and 26.4% from 2009-2010. He might well rebound – the Red Sox were Dysfunction Central in 2012, and Lester was at the center of that. He still took the ball every fifth day. But his velocity has slowly crept downwards, from 93.5 mph in 2009 and 2010 to 92.0 in 2012.

I think Lester is a good candidate to bounce back, and in fact think he would be a fine buy-low candidate. But this isn’t buying low. This is paying steak prices for mystery meat, and hoping it turns out to be filet mignon.

It’s not even clear that trading Myers for Lester would help the Royals in 2013. If Myers goes, then you can expect Jeff Francoeur to get 600 plate appearances come hell or high OBP. The upgrade from Francoeur to even a league-average performance from Myers would be at least four wins. If Lester only bounces back halfway to his previous form, giving the Royals 200 innings but an ERA around 4, that’s only worth about four wins. That’s a wash, while adding $11 million to the payroll.

Oh, and if by some chance Lester has the best season of his career, puts up an ERA in the mid-2s and wins 18 games and finishes first or second in the Cy Young vote? Per a clause in his contract, his 2014 option would be voided, and he’d be a free agent after just one season.

(I feel compelled to suggest a deeply Machiavellian counter-response. If Lester is tearing up the league at mid-season, and the Royals – or Red Sox, if he’s not traded – are not in contention, there’s a simple way to ensure that he won’t be able to opt out of his 2014 contract: trade him to an NL team. His split-league performance will keep him from doing well in either Cy Young vote – look at C.C. Sabathia’s 2008 performance as an example – and keep him under contract for another season with his new team, which will therefore be willing to pay in prospects accordingly.)

Moore wants to add at least one more impact arm and would prefer to do so by trading prospects from the club’s farm system rather than deal someone off the major-league roster.

What really puts the folly of trading for Lester into focus is this: if Moore really wants to add one more impact arm, and has the ability to add Lester’s contract to the payroll, HE DOESN’T HAVE TO TRADE FOR A PITCHER. He can simply sign another one as a free agent.

Jon Lester is owed $24.625 million over the next two years. I’m going on record now as predicting that Shaun Marcum, when he signs in the next few weeks, will not be paid as much over the next two years. I’m confident about this because the Brewers declined to make Marcum a qualifying offer. They could have offered Marcum a 1-year, $13.3 million contract, knowing that if he turned it down, they would have received a supplemental draft pick in compensation. That they did not do so strongly suggests that they were concerned Marcum would accept their offer – and they weren’t willing to commit that much money, even for one year.

I expect Marcum to sign for something like $20 million for two years. Maybe he’ll get a three-year deal for less money, for similar to what Jeremy Guthrie got. But basically, if the Royals can afford to take on Jon Lester’s contract, they can afford to make the best offer to Marcum.

Gun to my head, I’d rather have Lester over Marcum over the next two years, simply because Lester has shown more durability. But it’s awfully close. The difference between Lester and Marcum might be, what, one win a season? And for that one win, you’d trade one of the five best prospects in all of baseball? Are you insane?

James Shields is a more valuable commodity than Lester. He’s thrown 477 innings over the last two years with a 3.15 ERA. (Although keep in mind that he had a 5.18 ERA in 2010.) His strikeout rate continues to tick up, this past year reaching 23.6%, and his command has always been excellent. Like Lester, he’s signed for 2013 with a  2014 option, but there’s no voiding option, and he’s cheaper - $9 million in 2013, $12 million in 2014.

But he pitches for the Rays, in one of the best pitchers’ parks in the game, in front of one of the defenses in the game, for one of the best managers in the game. If you take him out of that organization, he doesn’t bring all of those advantages with him. He would give the Royals a ton of innings and a solid ERA in the mid-3s. But he’s not an ace, and it would be crazy to trade Wil Myers for two years of a #2 starter.

My God, has everyone forgotten what happened last winter? The New York Yankees traded Jesus Montero for Michael Pineda. Pineda, like Lester and Shields, was an established #2 starter in the majors. He had a 3.74 ERA as a rookie, struck out over a man an inning, and made the All-Star team. For Montero, they didn’t get two years of Pineda – they got FIVE years of Pineda.

The similarities between Montero last year and Myers today are almost frightening. Montero was the #6 prospect in the game by Baseball America; Myers will, I predict, rank #4 on their list, behind only Jurickson Profar, Dylan Bundy, and Oscar Taveras. Both Montero and Myers were bat-first prospects who started their careers at catcher. Myers is more athletic, and is expected to have more defensive value in the long run as an outfielder; Montero still catches occasionally, but is expected to give that up eventually and wind up as a 1B/DH.

Myers’ career line in the minors is .303/.395/.522. Montero’s career line in the minors is .308/.366/.501.

As a 21-year-old in Triple-A, Montero hit .288/.348/.467 – but hit .328/.406/.590 in an 18-game callup in September. As a 21-year-old in Triple-A, Myers hit .304/.378/.554 (and hit .343/.414/.731 in Double-A for a month first). You can make a case for either player, but basically, Wil Myers today has almost exactly the same value as Jesus Montero had a year ago.

For Jesus Montero, the Yankees got five years of an established major-league starter, who was still two years away from being arbitration-eligible. And they also got a promising second prospect, Jose Campos, who allowed less than a baserunner an inning as an 18-year-old pitching in the Northwest League. (The Yankees tossed Hector Noesi into the deal; Noesi had a 5.82 ERA for the Mariners this year, and is a non-entity at this point.)

The people arguing that the Royals should trade Wil Myers for a starting pitcher make the case that even the best prospects aren’t a sure thing, and that Myers might wind up being a big disappointment in 2013. They’re right. He could end up doing what Jesus Montero did this year – Montero hit .260/.298/.386 while playing every day for the Mariners.

And guess what? THEY’D STILL MAKE THE TRADE AGAIN. They traded a 22-year-old starter with five years of service time, and a quality second arm, for Montero, watched as Montero stunk up the joint, and at least right now, they’ve clearly won the trade. Because Pineda, of course, tore up his rotator cuff in spring training, missed the entire season, and no one knows what his stuff will be like when he returns.

And now you’re telling me the Royals are even thinking of trading Wil Myers for two expensive seasons from a #2 starting pitcher? Are you insane?

Or just look at what the Royals got for Zack Greinke. They got Alcides Escobar, the #12 prospect in baseball a year before, but whose stock had dropped considerably after hitting .235 as a rookie. They got Jake Odorizzi, who was ranked the #69 prospect in baseball after the trade. They got Lorenzo Cain and Jeremy Jeffress, neither of whom were Top 100 prospects. I’ll take liberties here and call Cain and Escobar “prospects” even though they had exhausted their rookie status, and say that the Royals traded Greinke into a Top 50 prospect, a 51-100 prospect, a 101-150 prospect, and a 151-200 prospect.

Any retrospective analysis of prospect lists will lead you to the conclusion that you’d rather have a single Top 10 prospect – particularly a hitting prospect – than the four guys above. Wil Myers alone is worth more than the four guys that they got for Zack Greinke.

And by the way, Jon Lester and James Shields are not Zack Greinke. Greinke was a year removed from the most dominant season by any starting pitcher since Pedro Martinez in 2000. In his down year in 2010, he had just a 4.17 ERA – better than Lester this season – and 181 Ks against just 55 walks, while pitching the second half of the season like he’d rather be digging ditches than on the mound at Kauffman Stadium. He was still worth 3.2 Wins Above Replacement. By comparison, in 2012, Shields was only worth 2.2 WAR, and Lester was at 0.4.

If anything, the Brewers were willing to overpay for Greinke, because the way their roster was set up – with Prince Fielder set to be a free agent in two years – they felt that their best chance to win was immediately. That’s one of the reasons I was so optimistic about the trade initially – because the Brewers seemed to have an incentive to overpay in future talent in order to acquire talent in the here and now.

So to recap: two years ago, the Brewers – who were pushing to win right away – overpaid to acquire Zack Greinke. They still gave up less talent to acquire a better pitcher than the Royals would give up to acquire Jon Lester or James Shields.

Are the Royals insane?

Maybe there’s nothing to this. As a friend pointed out, virtually every significant move the Royals have made under Dayton Moore was not leaked beforehand. If you’re an optimist, you might even convince yourself that the fact we’re talking about Lester and Shields means the Royals won’t trade for either player. But it’s clear they want to add another starter, and it’s clear that they’re willing to do so by any means necessary.

And it worries me that for the first time, we have a case of moral hazard on our hands. Moral hazard refers to what happens when an individual takes risks knowing that they won’t suffer the downside if their gamble goes sour. (c.f. Every bank in America during the housing bubble.) In this case, Dayton Moore knows that if the Royals don’t start winning in 2013, he’s probably out of a job. So the risk that Wil Myers becomes a superstar in 2015 is, to him, less concerning than the risk that the Royals will win 79 games in 2013 instead of 83.

This isn’t something unique to Moore – every GM or manager approaching the end of their contract will have their interests focused on the short term more than the organization as a whole should. And until now, Moore has done a good job – maybe too good a job – of focusing on the long term, by concentrating on high school talent in the draft, spending millions on 16-year-olds in Latin America, etc.

But if he trades Wil Myers for a two-year pitcher, he’s sacrificing the organization’s ability to contend from 2015 through 2019 for a short-term gain. That would be fine if the Royals are where the Brewers were two years ago – but they’re not. This is a team that should continue to improve for the next 3-4 years, at least until Alex Gordon and Billy Butler are eligible for free agency, if not until Eric Hosmer and Mike Moustakas do the same.

I have advocated that the Royals make a play for 2013, because I think they have a chance to contend next year if they play their cards right. But not at the expensive of sacrificing their long-term future. Trading Jorge Bonifacio or Jason Adam is one thing. Trading Wil Myers is quite another. If you can’t get an ace (David Price), or at least a cost-controlled pitcher with years of service time (Jeremy Hellickson, although even he’s not enough), then you don’t do it. It’s as simple as that.

And after all that, it’s time to talk about the really depressing part of Dutton’s column, the part about the “soft $70 million ceiling”. There have been signs that the Royals’ payroll has been capped at that point for over a year, but I’ve tried my best to ignore it, because I’ve stubbornly believed that ownership could not possibly be so dumb as to claim that they can’t afford to spend more than $70 million in payroll. They couldn’t possibly be so dumb as to think that the fans would buy it.

Last month I finally came down on the Royals for crying poverty, and now, finally, the artillery is coming out everywhere. To recap:

- The Royals had a payroll in excess of $70 million in 2009, and again in 2010.

- Revenue is going up throughout the sport at a breakneck pace.

- National TV revenue goes up by about $26 million starting in 2014.

- The Royals are limited from spending as much on amateur talent acquisition as they used to by the new CBA.

Given those four facts, in what universe are the Royals limited to a $70 million payroll?

Here’s a real quick accounting of revenue:

- Starting in 2014, every team in MLB will earn a total of $50 million from the national TV contract.

- The Royals, even saddled with a long-term local TV deal that was signed before the money explosion, still earn $20 million annually from their deal.

That’s $70 million right there, which would cover payroll. True, the Royals have non-payroll expenses, employees, draft picks, minor leagues, etc. But then consider:

- If we conservatively assume attendance of 1.6 million, and conservatively assume an average of $30 spent per attendee on tickets, concessions, parking, etc – that’s $48 million.

And THEN we have to remember that the Royals are one of the prime beneficiaries of MLB’s revenue sharing, which brings in tens of millions of dollars to the organization. That enormous $250 million a year TV contract the Dodgers are signing? 34% of that goes to a central fund. If that’s distributed evenly to all 30 teams, that means the Royals will earn $3 million just from the Dodgers’ TV deal. And I’m pretty sure it’s not distributed evenly – the lower-revenue teams get more of the central fund money.

Put it together, and Forbes estimates that the Royals had $161 million in revenue in 2011. Throw in the new TV contract and the rise in ticket prices, and we’re talking about over $200 million in revenue in 2014.

And they have a $70 million ceiling. But hey, it’s “soft”, so it’s all good.

It’s time to take the gloves off. Sam Mellinger did a fine job in today’s paper, but honestly, he could have been even harder on the Glass family, and not just because the Star prohibits the use of profanity. Saying the Royals could “extend the payroll to at least $75 million and as much as $80 million” is entirely too kind – based on the publicly available numbers, the Royals can go to $85 million easy. And it’s not because “Glass and the Royals have saved more than enough he last few years” – it’s because even at $85 million, the Glass family should do no worse than break even, and probably still turn a tidy profit.

The game is swimming in cash, and a rising tide lifts all boats, even the little dinghy that the Royals live on. If David Glass thinks he can’t afford to spend more than $70 million in payroll, then he’s incredibly cheap. If he thinks that the fans will believe that he can’t afford to spend more than $70 million in payroll, then he’s incredibly cynical.

I’d like to believe he’s neither, because I’m a charitable sort. But in the coming days, we’re going to find out if he actually cares about winning, or if he’s just Jeffrey Loria without the tacky taste in home run sculptures.

If the Royals extend the payroll to even $80 million, they still have plenty of space to work with. I’ve finally done a complete analysis of their payroll obligations, and right now their 2013 payroll looks to be around $67 million. (There’s some disagreement over exactly how Jeff Francoeur’s contract breaks down, and I can only guess at what Aaron Crow will make, given that he’s not arbitration-eligible but signed a major-league contract out of the draft.)

But comments like these: “The truth of the matter,” Moore said, “is if we add another pitcher…there wouldn’t be room to add that individual unless we got rid of somebody else.” – make it sound like $80 million is out of the question. Which is utterly, completely indefensible.

Even at $70 million, the Royals can add another player, since “somebody else” can easily be Luke Hochevar and his $4.4 million obligation. But the margin for error is tiny, and it leads to desperate ideas like possibly cutting Felipe Paulino and his $2.7 million contract.

Which circles us back to where we started: if you’re really limited to a $70 million payroll, then there is NOTHING more valuable to you than a star prospect who’s ready to step onto your roster, and be paid the major league minimum for the next three years. If, instead, you prefer to commit almost $25 million over the next two years to a starting pitcher coming off a bad season, then you understand nothing about economics, or even basic math.

This could be a tempest in a teapot. But this could also be the prelude to a franchise-altering mistake. The Royals have the resources to add one more starting pitcher using the same method they added their last starting pitcher, through free agency. If, through stinginess or short-sightedness, they trade their best prospect instead, it’s going to be open season on the organization, and I have my shotgun at the ready.