Monday, October 7, 2013

Robinson Cano Might Actually Be Worth $310 Million

It might be worth it for the Yankees to make their second baseman, Robinson Cano, baseball's first $300 million man.
Robinson Cano, relatively newly signed to Jay Z's Roc Nation, is famously seeking a world-record-shattering $310 million contract for the next ten years of his baseball playing life. Most people are brushing this off as incredibly overpriced, and they might be right. Realistically, there is no way he's worth that much. Except he actually might be.

First of all, Robinson Cano is a terrible person and I'm incredibly biased. With that out of the way, we can look at some unbiased statistics.
The first important thing to know is how much a win is worth in baseball. This is not the easiest question to answer, for two reasons. One, larger designated media areas based on metropolitan zones and set by the MLB collective bargaining agreement. As expected, the New York MSA with its absurd number of people also ends up with the largest broadcast territory by population. You can check out this map for a geographic look at the blackout territory for both New York teams, which is a good proxy for the broadcast territory. While the Yankees (and Mets) do not enjoy the largest media area in terms of acreage, they do benefit from one of the most populated areas in the country: the New York MSA is home to just over 19 million people. The YES network broadcasts to 7.5 million households, with the average US household being about 2.61 people, bringing YES's reach to approximately 19,575,000, just slightly larger than the New York MSA. Because New York is a tremendous media market, a win is worth more there than in a place like Baltimore (MSA population of approximately 2.75 million) because a good team has the potential to draw so many more viewers and therefore significantly more eyes to advertisements. More people watching ads means ads are worth more, which means broadcast rights to Yankees games are worth more than most anywhere else. The value of broadcast rights is driven up by expected number of wins because more people watch a good team. An economist (and a guy trying to figure out how much a player is worth) would ask what the marginal value of a win is in New York, and luckily, I know just such a guy or two who both asked and answered that question.

Two Loyola University Maryland professors, Dr. Stephen Walters and Dr. John Burger, teamed up to examine what's known as the winner's curse in the game of baseball, but that's not what we're after here. What we want to see is on page 5 of this PDF (requires JSTOR login): the marginal value of a win to the New York Yankees. In 1998, a single additional win to the New York Yankees was worth $2.53 million. Converted to 2013 dollars and assuming no change in the value of a win, the marginal value of a win in New York comes to $3.63 million. Of course, the real value (not affected by inflation) of a win could have and most likely did increase, as a win in New York was worth just $316,000 in 1982. All this is to say that a win in New York is likely to be worth more than $3.63 million in 2014 and beyond. For the purposes of this argument, let's make a conservative estimate and say that a marginal win in New York is worth $3.8 million.

So knowing that a win is worth about $3.8 million and that Robinson Cano would be asking for an average of $31 million every year for 10 years, what would his minimum contribution need to be to justify that monster contract? Well, that's just easy math: $31 million divided by $3.8 million/win comes to 8.15 wins. Coincidentally, Robinson Cano has two seasons under his belt of already producing 8.2 wins or more, in 2012 and 2010. If Robinson Cano can simply reproduce, for ten consecutive years, the two seasons in which he was a legitimate MVP candidate, All-Star, Gold Glove winner, and Silver Slugger winner, he's worth more than $310 million to the Yankees! Easy enough.

This is to say nothing of the fact that he's over 30 and nearing the end of what will most likely be his most productive years, that the Yankees claim to want to skirt the luxury tax, and that the Yankees are currently seeing firsthand how drastically two players fall off in their late 30s. Keeping all of this in mind, is it likely that the Yankees will be willing to pay $310 million over 10 years, or that Robinson Cano will turn in 10 stellar years even as he reaches and passes 40 years old? No. But I'm only here to talk about possibility, and is it possible that Robinson Cano is worth $31 million every year for a decade? Yes. Robinson Cano might actually be worth $310 million.

No comments:

Post a Comment