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Adam Jones is a bargain for the Orioles, even with the franchise's biggest contract to date

No matter how you look at it, the Adam Jones extension is a win for the Orioles.

In May 2012, one year before he was set to be a free agent, Adam Jones signed a six-year, $85.5 million extension with the Orioles. Since then he’s made Dan Duquette look like a genius. Jones has helped lead the team to two playoff berths while developing off the field as a fan and media favorite.

Because the extension is now halfway complete, I thought it’d be fun to quantify its terms. I gathered all players who signed a multi-year extension between January 2012 and December 2013. This gives all signees at least two years of play under their extension, which somewhat allows regression to the mean to smooth out any unsustainable performance.

This sample covers 96 such extensions for 94 players. Clayton Kershaw and Glen Perkins appear twice, each negotiating extensions prior to the 2012 and 2014 seasons. Each extension was considered separately.

There are a couple ways to look at this dataset, but the Jones contract comes out looking good for the Orioles in all of them. Recall that the first year of the extension was 2013.

WAR per season

Jones has averaged 4.4 fWAR per season under his extension. This ties him for 14th place (85th percentile) with Anthony Rizzo of the Cubs. He ranks just ahead of Cole Hamels, Madison Bumgarner and Chris Archer and just behind Jose Altuve, Matt Carpenter, and Alex Gordon. Good players, all.

The top 10:

Name WAR per season
Clayton Kershaw (2014) 8.2
Andrew McCutchen 7.0
Clayton Kershaw (2012) 6.5
Paul Goldschmidt 6.0
Chris Sale 5.4
Buster Posey 5.4
Jose Quintana 5.0
Michael Brantley 5.0
Felix Hernandez 4.8
Evan Longoria 4.7

Team expense per WAR

All WAR are not created equal. Some teams pay a lot for their players' wins; others, not so much. I calculated each team's expense per win (so far) by assessing the fraction of the contract that’s elapsed, multiplying it by the total value of the contract, and dividing by the WAR during that time period.

The Orioles look good here. Not counting the contracts with negative or zero value (I’m looking at you, Jose Arredondo), the the average cost per WAR in this group is $7.54 million. But the Orioles have paid Jones just $3.21 million per WAR.

Jones has effectively given the Orioles a 58% discount for his services, which is pretty steep. But, many players who sign extensions do so at a discount. They gain job security and a huge payday relative to their minor league earnings (and relative to the rest of the world's population). But they sometimes are still unproven. They need to give up some money so the team will take on risk that the deal will go bad. Judged by the number of extensions given out, players often feel the security is worth the discount.

Look at the large number of team-friendly extensions:

team-friendly extensions 2012-2014

The chart show how in 71% of cases the team paid a below-average rate for the player's performance. Jones is merely the 39th-cheapest of the bunch. The 10 least-expensive players are:

Name Millions of dollars per WAR
Salvador Perez $0.52
Jonathan Lucroy $0.62
Jose Altuve $0.69
Jose Quintana $0.85
Chris Archer $1.00
Chris Denorfia $1.04
Paul Goldschmidt $1.07
Chris Sale $1.20
Andrew McCutchen $1.23
Michael Brantley $1.26

Notice how Clayton Kershaw's name disappears from the list once you factor the cost of his extensions in. Same with Buster Posey and Felix Hernandez. These guys are very good but also very expensive compared to the other extensions in this data set.

Surplus value

We can quantify the team-friendliness of Jones’ contract by looking at how much surplus value he’s provided so far. Surplus value is a player's production above and beyond salary. It can be thought of like profit, and all business owners like profit. The Orioles are a business; therefore, the Orioles like surplus value.

However, in baseball surplus value just means a team is getting more on-field production than it paid for. It isn't literal profit in the sense of dollars. Peter Angelos can't sell Adam Jones' surplus WAR for money and buy a yacht; the closest he could come is seeking more value in a trade than what money is actually owed to Jones.

I calculated the surplus value of each extension by looking at the elapsed average annual earnings of each player and subtracting that from the player’s WAR multiplied by 7.5. This formula assumes a win is worth $7.5 million which, as we saw above with the average cost of a win for these extensions, is a fair representation.

By this method Jones has produced a surplus of $57 million on his extension. He’s earned $42.75 million by AAV while producing $99.75 million in value. Because he’s produced more than his entire contract value in half its length, the contract is a success even if Jones never steps on the field again. In order to make the contract a failure, Jones would have to average below -2.5 WAR/season for the next three seasons. That seems ... unlikely.

When taking into account the number of seasons played under their extensions, Jones’ average annual surplus of $19 million ranks 21st out of 96 (78th percentile). The top 10:

Name Average surplus value per season (millions)
Andrew McCutchen $43.73
Clayton Kershaw (2012) $39.25
Paul Goldschmidt $38.60
Chris Sale $34.25
Jose Quintana $32.93
Jose Altuve $31.00
Michael Brantley $30.88
Clayton Kershaw (2014) $30.41
Chris Archer $27.63
Anthony Rizzo $26.89

How 'bout that Andrew McCutchen, folks?

Surplus value is a double-edged sword. From a team perspective, gaining surplus value is the heart of a GM’s job. (Or in the case of the Orioles, the job of the Executive Vice President of Baseball Operations.) But from a player's perspective, as I discussed above, it's money they left on the table. It's value they are generating that they aren't being compensated for. No wonder that Karl Marx and Friedrich Engels were the ones to develop the concept of surplus value.

Jones may not think about his performance in terms of surplus value or how much he's getting paid per WAR, but the front office and fans should. And they should think of it fondly. It’s clear that history will remember Jones’ extension as not only one of the best ever signed by the Orioles, but also one of the best signed by any team in the 2012-2014 timeframe.

Sources: Extension information from MLB Trade Rumors, some contract information from Cot’s, and WAR from FanGraphs.