The consensus as I read stories on Tuesday about the Cardinals signing Mike Leake ran in the direction of the Cardinals overpaying. From Ken Rosenthal:

The average fan might regard $80 million as too high a price for free-agent right-hander Mike Leake, whose career performance rates as barely above-average when his ERA is adjusted to his league and ballpark.

However, the Cardinals’ agreeing to sign Leake to a five-year contract Tuesday included a hidden benefit – the team will retain its first-round draft pick, No. 30 overall.

While the draft choice helped, I think we are missing a bigger point. First, Leake is a two WAR pitcher. Now, that may be close to major league average, but teams pay for performance above replacement level. Leake’s two WAR should be worth about $14 to 15 million a year. Instead of $75 million for five years, he received $80 million. In addition to the draft pick, remember that the Cardinals are contenders in a tough division. That makes wins more valuable to them, than to say a team that just trying to reach .500. They need that two WAR if they are going to hope to compete for another playoff spot, and that appeared to be worth another one or two million dollars a year.