I’ve been avoiding the topic for a while, but it’s time we talked about Kyle Lohse.
The right-hander remains unemployed as we head into the meat of spring training. Most of this revolves around the first-round draft pick most teams, including the Brewers, would be forced to sacrifice if they opt to sign him. Teams now treat draft picks as valuable commodities and have become increasingly reluctant to part with them via free agency.
It’s been well-documented this winter that Milwaukee needs another number-two starter in their rotation, which is why the media continues to connect him with the Brewers. Lohse has been worth +6.1 wins over the last two seasons. Normally, the price tag placed on that level of production via the free agent market would keep the Brewers from entering the picture. The reticence of the league to part with draft picks, however, has flipped that paradigm. Lohse’s price tag continues to fall, and some believe he could be had on a two- or three-year deal.
At what price, if any, does it make sense for the Brewers to seriously consider surrendering their first-round draft pick in the upcoming draft to sign Kyle Lohse?
Milwaukee owns the 17th selection of the 2013 Draft. It’s difficult to quantify the value of a draft pick, but there has been some work in the past on the subject. Victor Wang wrote an article for The Hardball Times back in 2009 that estimated a draft pick in the 16-30 range was on average worth $5.23M in surplus value. Thus, for any potential signing of Kyle Lohse to make sense for the organization, it must provide more surplus value than their draft pick.
(Side note: Victor Wang is now working for the Cleveland Indians’ organization as their Assistant Director of Professional Scouting.)
We must first deal with the fact that we’re working with values from 2009. A win roughly cost $4.5M on the open market at that time, so the 17th draft pick in 2009 would have roughly correlated to +1.15 wins, according to Wang’s methodology. Thinking of the surplus value in wins rather than monetary value makes the concept much more simple.
Assuming the Brewers believe Lohse to be a three-win pitcher, they would essentially have to sign the right-hander for less than the equivalent of +1.75 wins (rounding for ease) per year to gain more surplus value than what they would otherwise obtain with their draft pick. Using Dave Cameron’s assumption that teams are paying $5.5M per win in 2013, the Brewers would have to sign Lohse for less than $9.63M per year.
So, let’s say Lohse calls general manager Doug Melvin and says he’ll sign a one-year deal worth $9M to pitch for Milwaukee with the agreement that the Brewers cannot offer a qualifying offer after the season, allowing him to re-enter free agency without the draft pick compensation hanging over his head. The Brewers should do that, right?
It’s not quite that simple for two very different reasons.
First, the draft has changed. Not only would the Brewers surrender their 17th pick, but they would also forfeit the money associated with that pick within their draft budget. That means the Brewers would not be able to spend overslot later in the draft to still acquire impact talent. Instead, the Brewers would enter the draft with a lesser budget and a lesser ability to draft and sign better players, and the Brewers’ farm system needs that impact talent. It has accumulated and developed depth throughout the system, especially on the mound, but the impact talent remains absent. Stripping the organization of the ability to acquire that talent would obviously be a large negative.
Secondly, the addition of Kyle Lohse to the 2013 Brewers may not improve the team enough to propel them to a postseason berth. As I mentioned last week, I currently believe the Brewers are roughly a .500 ballclub. Adding a three-win pitcher such as Lohse would perhaps push them to a projected 85-86 wins, and though that may push them to the cusp of contention, a projected 85-86 wins may not be enough to reach the postseason — as the Dodgers won 86 games and didn’t make the playoffs last year.
Milwaukee projects to be better primed for a postseason run in 2014. The pitching prospects will have another year to mature, and the core of the offense will remain intact. Thus, if the Brewers were to sign Kyle Lohse, it would make more sense to secure him on a two-year deal to best maximize the organization’s chances the next couple years. The organization has refused to offer three years to anyone on the free agent market — likely aside from Zack Greinke — so the idea of offering a three-year deal to Lohse doesn’t make sense. Not to mention this will be his age-34 season. A two-year deal appears to be the sweet spot.
Now, let’s amend the hypothetical scenario and say Lohse is willing to sign for two-years, $18M. The Brewers would be looking at netting roughly $10-15M in surplus value over the two years, compared to the $5.23M in surplus value from this year’s first-round draft pick. This would be a hypothetical situation in which it could make sense for the organization to sacrifice a first-round pick to sign a free agent pitcher.
With that said, I’m not certain the Brewers should pull the trigger in that scenario. Lohse is a nice piece who would upgrade the rotation, but the Brewers continue to be a small-market franchise operating in a world of increasing television revenues and inflated free-agent contracts. Remaining competitive in such a market will be a delicate dance for Doug Melvin and Mark Attanasio, and success will always begin with acquiring and developing impact homegrown talent. A first-round draft pick means more to a small-market organization like the Brewers than it does to the majority of the league. Add in the fact that sacrificing the first-round pick would also mean sacrificing the draft pick’s budget allotment, and I’m not sure I can justify the Brewers making such a move — especially with a down farm system.
Kyle Lohse has value, though, and it’s completely understandable that a team would sacrifice a first-round pick to acquire the right-hander. The money and contract length just have to be right. The team must acquire more projected surplus value from Lohse than they otherwise expect to gain from their first-round pick. If the Brewers can eventually sign Lohse on the hypothetical two-year contract discussed above, I would completely understand the move, and if the organization made the playoffs in either (or both) of the next two seasons, such a decision would probably be justified. The farm system is just so important to a franchise like the Brewers that I would likely err on the side of caution and of acquiring potential impact talent in the minors.
But I don’t think the decision would be as easy for Doug Melvin as many are making it out to be.