Monday, January 17, 2011

Arbitration Clarification

The arbitration process has started in MLB and the mere mention of the word and the process has Indians’ fans bracing themselves for the worst as it relates to Shin-Soo Choo...but why?

Is “arbitration” really the dirty word that it has been made out to be on the North Coast this off-season?

Not at all and perhaps because nearly everyone knows that the Indians haven’t gone to arbitration with a player since The Guv’nor (that’s Jerry Browne for the uninformed) did in 1991...a full twenty years ago, there is a level of uncertainty and trepidation around the whole process when it is largely undeserved. Given that Jerry Browne bit of trivia and because of the way that the Indians have avoided it by inking young players to long-term deals buying out their arbitration years as an incentive to buy out FA years, most people who follow the Indians aren’t all that familiar with arbitration or the process that leads up to it.

Don’t take that to mean that I’m going to wax poetic on how the whole process works, but with players who are arbitration-eligible beginning to sign deals around the league (thus avoiding arbitration), I thought it would be instructive to re-visit how all of this works and how it relates to the most famous arbitration eligible players in the history of MLB...or at least on the North Coast – The BLC.

Trust me, I’m not anxious to tread once again over this well-worn ground as I’ve been over this too many times already this off-season, going back to linking the MLBTR piece on legitimate comparables for Choo, proposing the even-loaded extension in an attempt to buy out some FA years by guaranteeing more money up front, to finally attempting to contextualize the arbitration process with some pertinent links to B-Pro and ending up with the idea that perhaps the best thing for all parties is to simply go year to year on contracts in these three arbitration years.

You can re-read all of those if you’d like as it certainly has been a long, strange trip...

However, the Choo situation becomes relevant once again (unfortunately) as this is the week that teams and agents will exchange numbers as a prelude to arbitration. Again, I’ve gone through those potential numbers more times that I’d like to count, but the interesting development over the weekend of Joey Votto signing a 3-year deal with the Reds worth $39M brings some renewed focus to the situation because most Clevelanders will see the Reds making this kind of signing and wonder, why aren’t the Indians doing something like this with Choo?

Actually, the better question is – frankly, why would they?

Joey Votto, prior to the signing of this “long-term extension” was scheduled to become a FA after the 2013 season.

Joey Votto, after signing this “long-term extension” is now scheduled to become a FA after the...say it with me...2013 season.

Despite all of the good press that Cincinnati has garnered for this “signing”, the only benefit that the Reds gained in this deal was cost certainty and insurance that the next two years of Votto’s arbitration eligibility would have put that 3-year cumulative contract at a higher number than $39M. In guaranteeing $39M to Votto, they did not gain any more control over him than they held prior to the “extension”, which was really just a 3-year deal instead of the three consecutive one-year deals that the majority of MLB players deal with.

So really, what was the point?
As I said, they didn’t buy out any of his FA years (the way that the Indians famously did in the early-1990s or even as they did with CC, Cliff, Grady, Victor and many more in the early-to-mid-2000’s), they just bought out his arbitration years with fixed salary numbers. Despite the fact that they gained no more control over him, the move is seen as a “commitment” by the Reds’ ownership to “keep a homegrown player” when said player was staying put for the next three seasons anyway.

He’ll still be a FA after the 2013 season, same as he would have before this deal was inked and the real story here is that by assigning fixed salary numbers to 2011, 2012, and 2013, the Reds now assume nearly all of the risk associated with any kind of injury or regression that could befall Votto in the next three years.

The Reds are not completely devoid of rationale as Votto’s comparables (notably Ryan Howard) have commanded big numbers in their arbitration-eligible years and attempting to gain control of those numbers by this deal means that the Reds know what Votto will cost them for the next three years.

What’s interesting though is that’s not how the piece gets reported as the fact that the Reds just locked in numbers isn’t what gets the most run. Rather most people will go along with this idea that this is “another big expenditure to retain talent” as it was first reported for the Reds and not realize that it actually represents a puzzling move for the Reds, as John Fay asked after the news had marinated, wondering “why would the Reds be willing to give Votto market value for three years with no guarantee that he’ll stay beyond three years?”

In the context of the Choo situation, the Votto “extension” is instructive as it points out how little people know about the way that MLB service time, arbitration, and contracts are structured.

With that in mind, watch how the news that Choo has been signed to a one-year deal or a two-year deal (and remember that Boras agent Prince Fielder signed away his first two years of arbitration in a contract) or however this shakes out is presented and received by the usual suspects. When he’s “signed”, people will see it as a positive sign in that the Indians are keeping if that has ever come into question, given his service time status.

Any news that announces that the Indians have signed Choo to a contract is not cause for celebration, nor should any deal that doesn’t buy out FA years because they can go through this number exchange, an attempt to find middle ground, and (lastly) leave it up to an arbiter not only this year, but in 2012 and in 2013 as well.

Really, that’s how it works and while the Indians haven’t gone to arbitration since Jerry Browne, they have dealt with arbitration-eligible players throughout the last decade, as recently as last year with Rafael Perez and earlier this week with Asdrubal’s just that the team and Perez found middle ground after exchanging numbers with the team last year as Cabrera did this week and never took the final step of sitting in front of an arbitration panel.

This may be news to you or it may not be, but regardless of how the Choo arbitration process goes forward, given what we just saw with Votto and given that fewer and fewer arbitration-eligible players are going to be willing to sign away FA years (unless it comes in the form of an 8-year contract), let’s see Boras and Choo attempt to somehow turn the first year of Choo’s arbitration eligibility into something it is not.

By that I mean, it should be noted that Adam Jones just avoided arbitration with the Orioles, signing a 1-year deal worth $3.25M...but, so what?

While I know that there are vast differences between Adam (Not Pacman) Jones and The BLC, consider this:
Jones 2010 - .284 BA, 25 2B, 19 HR, 69 RBI in 149 games
Choo 2010 - .300 BA, 31 2B, 22 HR, 90 RBI in 144 games

Could I invoke OPS and OPS+ and WAR and all sorts of metrics that show that Choo is a VASTLY superior player than Jones?

Of course, but as was pointed out by Maury Brown at “The Biz of Baseball” when he examined the case of Tim Lincecum last year, those aren’t used in the arbitration process:
(Arbitration) is the last bastion in MLB where advanced statistics are not used. The reason is simple: a player’s “case” if it goes to hearing is heard by a 3 member arbitration panel from the American Arbitration Association; they are not “baseball people”. While the panel members are familiar with baseball statistics, the “old reliables” are still the focus. No WHIP. No VORP. No WAR. Instead, ERA, AVG, IP, Ks, BBs, etc. are the focus.

You’ll see that the example uses pitching stats (ERA, IP, K over WHIP, WAR) and while that is not cleanly identical to the Choo situation, realize that the fact that the front page of Baseball Reference shows everyday at the bottom that Choo posted the 2nd highest WAR in MLB in 2010...that doesn’t matter here. Boras could come guns blazing and with enough portfolios to fill a dump truck extolling the worth of The BLC, but the career numbers (and not just the 2010 numbers) for the pair is extraordinarily relevant here as it means that they’re a closer comparison when you “dumb” the discussion down and exclude the advanced statistics and metrics would so obviously point out that Choo is the more valuable player:
Adam Jones (Career) - .274 BA, 50 HR, 208 RBI in his 473 career games
SS Choo (Career) - .297 BA, 59 HR, 270 RBI in his 459 career games

Does Choo look better there...sure, but by how much if those are the numbers you’re looking at?

Remember when I inexplicably brought up that Adam (not Pacman) Jones just settled on a 1-year deal worth $3.25M with the Orioles?

Well, his agent and the Orioles didn’t go through the arbitration process to come up with that number as they likely exchanged numbers (both familiar with how arbitration works) and found middle ground for a one-year deal which, in this case, was $3.25M. Doesn’t that go back to that MLBTR piece that stated that “a $3.5MM payday in 2011 seems within reach” for Choo?

The Indians and Boras will exchange numbers, look for a middle point and, if they are unable to find out, will proceed to arbitration where a panel of arbiters will look at comparable players with comparable traditional stats with comparable service time and choose between the Indians and Boras. Those presentations before arbiters have been known to get nasty and are something the Indians should avoid, if only to not be forced to present a case AGAINST Choo...with Choo in the room.

If it gets to that point, it gets to that point...but if Boras and Choo are willing to eschew the guaranteed money of long-term deal that would buy out FA years – and if you want the real debate that should be existing, it involves whether the Indians SHOULD be looking to buy up FA years from Choo, given that he’ll be 31 when he’s scheduled to hit FA and given that the contract given out to Jayson Werth (age 31) has established a baseline that would give any team (and particularly one) still carrying Travis Hafner’s contract (signed when he was 30 years old) reason for pause – then the Indians should prepare their number, attempt to avoid the actual arbitration process, and accept the bleats of adulation when they agree to terms with Choo, for whatever the life of the contract will be.

Cleveland fans may not be used to the arbitration process but, in this case, the fear of the unknown doesn’t portend awful things happening...perhaps for a change.


Halifax said...

Call me crazy, but if the Indians have any intentions of ponying up beyond 2013 for Choo, they should work diligently on that process right now.

If sidestepping the arbitration process and locking him down at an expensive rate (by their standards) allows them to gain even one extra year beyond 2013, it could be huge for this team. Over the next three seasons this team is going to gel into a really talented, young team, and having Choo around will only make them better.

Say Choo will make $5/7/9 million over each of the next three years (he's good, but he's not Votto). If I'm the Tribe I start at 4 years/$32M and go from there, with a limit of 4/$44 in mind. Now if you are Choo, that's something to consider, because if he can get $33M over the next three seasons versus $21 it has to at least be something, with an $11M payday guaranteed in 2014, after which he will still be only 32.

For the Indians, you're hardly paying anyone else so it's actually a good time to lock in on Choo. Hafner is done after 2012 and you don't have to pick up Grady's option, but if he bounces back it's good money spent. You can always pick it up and trade him mid-season.

And if the rebuild doesn't pan out, just trade Choo, someone will want him. But if it does, Choo anchoring RF and the middle of the order makes sense, a lot of sense.

Go win something!

Halifax said...

Hey, they got him cheap -- $3.9 million for 2011. It looks like Choo (and Boras) will play out the string here, so would suggest the Tribe gets what they can get from Choo, go one year at a time, and hope the youngsters develop quickly. I would hold onto him (unless they crash and burn in 2013) and hope he helps them to a World Series. Just take what you can get, offer him arb when he becomes a FA (he'll never accept) and chose wisely with the draft pick you receive.

Halifax said...

I would suggest I CHOOSE how to spell wisely and read my offerings before I post them...