Over the weekend, the Giants made the first big signing of the off-season, even though it wasn’t technically the off-season yet. Rather than let Hunter Pence get to free agency and potentially start a bidding war for his services, the Giants chose to sign him to a five year, $90 million contract before he got to test the market. I did a very short post in the aftermath of the deal, noting that Pence has pretty similar numbers over the last three years to what Nick Swisher did in his run up to free agency, but that the price to sign the two was pretty different. However, no decision on contract pricing is ever that simple, so let’s take a closer look at what the Giants are paying for in Hunter Pence.

To set some expectations, I looked at every qualified outfielder between ages 28 and 30, and then narrowed the list down to those who had posted a wRC+ between 120 and 130 during that time in their careers. Pence is at 125 over the last three years, so it basically gives us 12 outfielders who were fairly similar in offensive contributions, at least on a rate basis. Swisher shows up here, as do guys like Ryan Ludwick, Nelson Cruz, Jayson Werth, Andre Ethier, and Carlos Beltran. Overall, this feels like a pretty good set of recent comparisons for Pence, at least offensively.

How did those 12 players do from ages 31-35, which are the years that the Giants have signed up for in this new contract? Actually pretty good, as the group posted a 119 wRC+ overall. Except there’s a problem, and it’s called survivorship bias. As the players have gotten older, the worst players in the original group have fallen out of the dataset because they stopped being good enough to continue on in Major League Baseball. Jack Cust, Jason Bay, and Brad Hawpe make up a significantly smaller part of the second sample than they do the first, which becomes dominated by the guys who were good enough to keep playing into their mid-30s.

So, then, instead of saying that the data suggests Pence is going to retain most of his offensive abilities going forward, it’s more like the data suggests that Pence is likely to keep hitting well if he’s one of the players who hits well enough to keep playing regularly. Which, well, yeah. If you set as one of your parameters that a player has to have a minimum performance to show up in your dataset, we shouldn’t be surprised that every player meets or exceeds that minimum.

This is one of the major problems with these kinds of comparative studies, and if you just focus on how players of a certain age do in the big leagues, you’ll tend to overestimate the performance of players as they get older. So, why even bother with those comparisons, if I was just going to point out that the data is somewhat flawed? Because, realistically, their overall performance represent something of a reasonable ceiling, so they do give us an idea of what the best case scenario for Pence might be over the next few years.

If Pence stays healthy and doesn’t see his skills decline dramatically, a 115 to 120 wRC+ over the next five seasons seems within the realm of possibility. That makes him a decent hitter, fitting in somewhere between the 2013 versions of Ben Zobrist and Andre Ethier. He’s more athletic than Ethier, providing more value both as a baserunner and a defender, but the total package still looks like it would project out to around +2 and +3 WAR per season, depending on health and playing time. He’ll probably be on the high side early and the low side late, so maybe you’d expect something along these lines:

2014: +3.5 WAR

2015: +3.0 WAR

2016: +2.5 WAR

2017: +2.0 WAR

2018: +1.5 WAR

Maybe you want to start him a little higher or a little lower, or be a little more aggressive with aging. These aren’t precise estimates, and an injury could throw this whole thing off the tracks at any time. But, something in this realm seems pretty reasonable, meaning that the Giants signed up for something like +12.5 WAR. If you hate Pence and thinks he’s going to age terribly, maybe you think it’s more like +10 WAR. If you love him and think he’s only getting better, maybe you push it to +15 WAR. Let’s go with +12.5 WAR for now.

At $90 million in total, that’s a price $7.2 million per WAR, definitely higher than what we’ve seen teams pay in previous off-seasons. Even if you bump up the projected WAR to an optimistic +15 projection, this grades out to about $6 million per win, still above the norms of the last few winters. So, from that perspective, it’s not that difficult to call this deal an overpay. In terms of production and cost, Pence is unlikely to earn his salary for the entirety of the contract, unless inflation in free agency really takes off again.

But, after an analysis like this, the question often asked is “so what?” If you’re a Giants fan, should you really care that the team “overpaid” to keep a good player? It’s better for the fans to have a bunch of good overpaid players than a roster of terrible players and a huge profit margin for the owners, right? Who wouldn’t prefer to root for the Giants instead of the Marlins? After all, the Giants won two World Series titles with Barry Zito, probably the most overpaid player of the last decade. One overpaid free agent doesn’t cripple a franchise, clearly.

And it’s true. The Giants are better off, as a franchise, investing that $90 million into a $60-$70 million player like Hunter Pence than they are in turning that $90 million into a private plane for team ownership, or stuffing it under the pillows, or however else you want to imagine the money being used on something besides player acquisition. We’re not going to argue the point that a team is better off investing in talent than boosting their profits, at least from a winning baseball perspective.

But, if both sides are willing to stipulate that the Giants could have spent $90 million on other baseball players this winter if they hadn’t signed Hunter Pence, then I think there’s a pretty strong case to be made that they could have done better going in another direction. And that’s why teams should care about the going rate of a win.

Players are, at the end of day, couriers of wins. They deliver packages of different size and shape, but in the end, it all translates into the same currency. There are some gains to be had by diversifying skills and making sure that the roster isn’t too heavily loaded with one particular type of player, but these are gains on the margins, and should be minor concerns rather than major ones. Instead of paying for “right-handed power”, the Giants are paying for an above average corner outfielder, probably worth somewhere around three wins for the next couple of years before some decline makes him average, or worse.

Recent history suggests that a team with $90 million to spend should be able to buy more than a three win player this winter. It’s certainly possible that the Giants know that MLB teams are flush with cash again, and the prices we saw paid last winter are going to pale in comparison to the prices we see this winter, but it’s hard not to look at this contract and see the Ethier deal.

They’re similar players, and it’s a similar sized contract, both of which were negotiated before the players hit free agency following their age-30 season. And the Dodgers just ran away with the NL West in year one of the deal, so again, an overpaid right fielder does not portend certain doom. But, realistically, the Dodgers are in the playoffs because they offset overpaid guys like Ethier with cheap young stars like Yasiel Puig and got a where-on-earth-did-that-come-from performance from Juan Uribe.

Pence’s new deal won’t stop the Giants from winning, so long as they surround him with quality players on undervalue deals, either from their farm system or by finding nifty pieces for cheap in trades or free agency. That’s not the easiest thing in the world to do, though, and now that they’re committed to paying Pence $18 million per year for the next five years, their margin of error just got a little smaller. This isn’t the Ryan Howard contract, or even the Barry Zito contract, but for a team without unlimited resources, spending too many of them on a good-not-great player on the wrong side of 30 could end up looking like a mistake.