After barely missing out on their first world championship in 68 years, the Indians have scored a coup, signing Edwin Encarnacion to a three-year, $60 million deal with a club option for a fourth year. The move takes advantage of the team's strong position to contend again 2017 while avoiding a long-term entanglement. The slugger, who turn 34 on Jan. 7, will provide a substantial upgrade to the Indians' first base/DH tandem, replacing free agent Mike Napoli and pairing with Carlos Santana.
Encarnacion spent the past 7 1/2 seasons with the Blue Jays, becoming a fan favorite in Toronto for his prodigious power. In 2016, he matched his career high with 42 homers and led the AL with 127 RBIs while hitting .263/.357/.529 for a 133 OPS+ and 3.7 WAR. He added three more homers in the postseason, including a walk-off three-run shot off the Orioles' Ubaldo Jimenez in the AL wild-card game. Since the start of the 2012 season, he's hit 193 home runs, more than anyone in the majors except for Chris Davis (197). His 146 OPS+ in that span (on .272/.367/.544 hitting) ranks sixth among hitters with at least 2,000 plate appearances.
Encarnacion was viewed as the biggest bat on the free agent market besides Yoenis Cespedes, and was said to be seeking a $100 million deal and expected to draw interest from the Red Sox (who need to replace David Ortiz) and Astros (who were looking for a big DH bat), though it wasn't unreasonable to think that he might remain with the Blue Jays. Even after Toronto signed Kendrys Morales to a three-year, $33 million deal last month, Encarnacion's agent, Paul Kinzer, said that the Jays, who had offered him a four-year, $80 million contract, "are showing Edwin the most love.” The Yankees were interested as well, but just before the Winter Meetings, several dominoes fell: the Astros signed Carlos Beltran to a one-year deal, the Yankees did the same with Matt Holliday, and the Blue Jays signed Steve Pearce to a two-year deal. Meanwhile, the Red Sox maintained that they didn't want to make a long-term commitment at the DH spot, implying that with Hanley Ramirez and Pablo Sandoval under contract through 2019 and '20, respectively (each with a club option), they foresaw parking one of the two players there down the road.
Thus, a new set of suitors for Encarnacion emerged, one that was said to include the A's and Rangers as well as the Indians, with the Astros, Blue Jays and Rockies reportedly keeping tabs as well. Via Fox Sports' Ken Rosenthal, the A's—who would not have lost their top pick for signing a free agent attached to a qualifying offer, as Encarnacion is—and Indians made the strongest offers to Encarnacion, with Oakland offering two years plus an option, and Cleveland three years and an option.
Encarnacion's deal calls for him to get $55 million over the next three years, with a $25 million club option and a $5 million buyout for 2020; if the option is exercised, the total deal will match the reported Toronto offer. There is no opt-out in the deal, though the slugger was said to be seeking one, as Cespedes did last winter. Signing Encarnacion will cost the Indians their first-round pick, the 25th of the draft. From that spot, the Angels chose Mike Trout in 2009, but that was catching lightning in a bottle; Matt Cain (Giants, 2002), Matt Garza (Twins, 2005) and Joe Ross (Padres, 2011) are the other notable 25th picks since the turn of the millennium.
Encarnacion will replace Napoli, who tied with Santana for the team lead with 34 homers, but hit a modest .239/.335/.465 for a 104 OPS+ thanks to slumps at either end of the season. Throw in an uncharacteristic -4 Defensive Runs Saved in 98 games at first base (with another 52 at DH) and Napoli was worth just 1.0 WAR. Encarnacion played 75 games at first base in 2016, and finished with 0 DRS for the second season in a row; once an erratic third baseman, and then a subpar first baseman, he has improved over the years. He may be in for more work afield, given that Santana’s strong rebound in 2016 (121 OPS+, up from 102 the year before) came while spending 92 games at DH and 64 at first base, a dramatic change from in 2015, when he DHed 21 times and played first 132 times.
Aside from the departures of Napoli and free-agent outfielders Coco Crisp and Rajai Davis, the Indians have the potential to retain just about all of the key pieces from their first pennant-winning squad since 1997. Like that one, the current Indians front office has locked in several top players—some of whom were non-factors in the postseason due to injuries, but expected to contribute next year—by buying out their arbitration years, giving a club that began the 2016 season with the eighth-lowest payroll some amount of cost certainty and flexibility. Corey Kluber and Yan Gomes are under club control through 2022, Jason Kipnis and Carlos Carrasco through '20, Michael Brantley through 2018. Meanwhile star shortstop Francisco Lindor has two more seasons before he'll be eligible for arbitration, and pitchers Trevor Bauer, Dan Otero and Danny Salazar are eligible for the first time this winter. Closer Cody Allen (second time), reliever Bryan Shaw (third) and outfielder Lonnie Chisenhall (third, out of four years of eligibility) also have eligibility remaining. Andrew Miller is under contract for two more years as well.
Encarnacion's contract lines up well with that core. Looking at the dollars in the deal in light of our What's He Really Worth model (which takes into account a player's last three years of performance, estimates of the market cost for a win, the rate of inflation and an age-related decline), we can get multiple estimates of his value depending upon how we tweak the parameters. In the model we’ve used for the past year, we began with a 5/4/3 weighted average WAR for the player in question over the last three seasons, a 0.5 win-per-year decline, a 2016 value of $6.85 million per win and an inflation rate of 5.4%. Given Encarnacion's age, a more aggressive decline of 0.7 wins per year is a better place to start:
Via those assumptions, the Indians appear to have gotten a significant bargain; such a deal could withstand even a full one-win-a-year decline, coming in with 9.0 WAR and $67.9 million. But as I've done for Yoenis Cespedes and Justin Turner, I'll also run the numbers through a more conservative model recently introduced by Tom Tango, who invented the weighted-average Marcel projection system (“the most basic forecasting system you can have, that uses as little intelligence as possible”) that I use here. Tango's model places more emphasis on the most recent season by using a 6/3/1 weighting for a player’s past three seasons, a 20% regression in the first year (0.8 times that weighted WAR) and an age-related falloff based on 0.4 WAR per year, adding 0.1 WAR for each year under 30 (so 0.3 for a 29-year-old) and subtracting 0.1 WAR for each year over 30.
For Encarnacion, both weightings produce baseline WARs of 4.0; in this model, that gets knocked down to 3.2 in the first year:
That looks more like the Indians paying a significant premium—on top of losing the draft pick—rather than getting a bargain, though the deal looks more reasonable if I'm underestimating the cost of a win (I've seen calculations that use $8 million, but one stathead who has studied the issue told me that teams and agents don't believe it's that high). But even if the Indians are paying a premium, doing so at this juncture, when they have a championship caliber core, is the right move, because he just may be the missing piece they need.