Yes, you read that correctly. Four-hundred-thirty million dollars over the course of a 12-year contract for the baseball-playing services of one Mike Trout, Los Angeles Angels outfielder. That is an absolute bargain.

“But, there’s no way one baseball player is worth that much money.” “Getting paid $430 million to play baseball?!” “These guys are overpaid!” And the comments go on and on. Surely, they will continue, but one thing is clear. The Angels made out big time in this deal.

Understanding WAR

Wins Above Replacement, or WAR, is a baseball metric used to measure the value of a player, a player’s total contributions to his team. Think of it as the value of a player in terms of a replacement player at the same position.

Trout’s WAR last season was 10.2. If another outfielder would have played in place of Trout, the Angels would have had 10 fewer wins. Trout playing centerfield in Los Angeles was good for 10 wins above that replacement player.

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In a typical MVP season, the player that wins the award has a WAR of right around 7.5. Using the WAR metric, Trout is the best-ever baseball player through his age-26 season. Better than every great you can think of – Mickey Mantle, Joe DiMaggio, Ted Williams, etc.

The Free Agent Market

In the free agent market, players are hired by franchises to help them win games. What statistic do you think personnel people in MLB look at when determining whether or not to sign a player? Kudos to all of you that said WAR.

Players with higher WAR values are more sought after and these days one extra win goes for about $10 million.  Factoring in inflation, by the time Trout’s new deal expires that one extra win might go for about $15 million.

And now, you have just about everything you need to understand why Mike Trout and his new $430 million contract is a bargain for the Los Angeles Angels.

The Math

Trout’s career WAR is 64.2, which would average out to 9.17 over his seven full seasons in the majors. Projecting his WAR over the next 10 years – PECOTA uses a player’s past stats and aging curves of comparable players – we find that Trout’s WAR will be 76.3. If we extend it for the life of the contract, Trout’s WAR for the next 12 years projects at about 85.

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Remember, it’s about $10 million per win on the free agent market. So, if Trout’s WAR is 85 and each win above replacement is worth $10 million … I think you get the picture. You are looking at $850 million for a player of Trout’s caliber. Factor in the usual salary inflation and it is highly possible you are looking at $1 billion.

The Angels could have doubled their deal of $430 million and that would have been just about right for a player of Trout’s caliber. The problem, of course, is there has never been a contract so large in any professional sport. Owners are not going to appear reckless when attempting to stick to the laws of economics. There are plenty of MLB players with WARs of 6.0, but there aren’t any $60 million players. Maybe someday.

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