The news out of Major League Baseball over the past few weeks has been...expensive. $300 million over 10 years for Manny Machado, $330 million over 13 years for Bryce Harper, $137 million over 5 years to Jacob DeGrom...It's almost unreal. But the most eye-popping number of all was a staggering $430 million over 12 years for Mike Trout.

I'm a baseball guy, but that's a little rich for my taste - or so I thought. When I began writing this column, I didn't expect to come out in favor of such an exorbitant contract, even though all the advanced analytic nerds keep screaming about what a steal it is. As an owner, I would need to feel confident that I could recoup my financial investment, and still field a team capable of a World Series ring.

Here's a simpler way to consider Trout's massive contract, and why this looks like smart spending by the Angels:

1.     The going market rate  

Analytics people say that a player is worth about $8-10 million per WAR (wins above replacement, or how many wins that player gets you as compared to an average player). There's a ton of debate over the finer points of WAR, from how to calculate it to how to apply it over time, but the larger point remains. In 2018, Trout had a WAR of nearly 10, and he projects to average about that over the next couple years of his prime. This isn't to say that any player is going to get paid $80 million per year any time soon, but it does give you an idea of what the market is willing to bear to get this guy. And ultimately, a player's value is what the market will pay for it. Mike Trout is so good the statistics can hardly account for him. If you don't pay him a bunch of money, someone else will. Better to fight with him than against him!

2.     Game Day Revenue

Admittedly, the Angels aren't going to sell that many more tickets after this contract. They already sell over 3 million tickets per year, which puts them solidly in the top 10 of MLB teams. But they could increase ticket prices, particularly on prime seats and luxury suites. In fact, if you assume 81 regular season home sellouts per year over 12 years (not totally unrealistic considering their attendance), you could hypothetically cover the cost of Trout's contract with a $9.73 increase across the board for the stadium's 45,477 seats. But there are lots of other ways to make more money on game day, too, even though the owner has promised Trout's new contract won't end the $4.50 beer at the stadium. As of 2016, the Angels boasted the single least expensive game day experience in the league, so there's clearly some room to increase prices (not that I'm in favor of that!) on things like concessions and parking.

3.     More Games

Of course, the bottom line of why you sign Mike Trout is because he makes your team better. Better teams make deeper runs into October, and it pays to be in the playoffs. In 2012, the San Francisco Giants earned nearly $10 million for hosting 2 early round playoff games - and that was from ticket revenue alone. When you consider a team could host as many as 11 games in a playoff run, the much higher ticket prices along with more opportunities for concessions and parking makes the cash registers ring.

4.     Other Revenue

MLB teams have a variety of revenue streams beyond game day. Here again, the Angels have limited growth potential in some areas. They already have a good broadcasting deal, and already sell tons of Trout jerseys (actually, Trout doesn't have the best selling jersey on his team!). But there's plenty of room to grow. Thus far in his career, the Angels have sadly wasted Trout, making the playoffs only once. But they're actually in a great position to start competing now and for the duration of Trout's contract. Beyond an increase in home games, good teams make more money on memorabilia, sponsorship, spring training visitors...the list goes on.

5.     Mike Trout Is Amazing

Don't get lost in all the complicated math and dollar signs - this guy is GREAT. Mike Trout is better than any of the other guys who got big contracts this offseason. He's well on pace for the Hall of Fame, and might just become the greatest player of all time, without raising so much as an eyebrow of controversy. A player like Trout can make a franchise legendary. With West Coast first pitch times, a lot of the country misses the opportunity to see him play. Do yourself a favor and get tickets to see this guy in action when he comes to your town.

Published on: Mar 27, 2019
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