Tuesday, January 19, 2010

Lincecum and Giants exchange arbitration figures: $13M and $8M

As reported by various sources - Mercury, Chronicle - the Giants and Lincecum submitted their arbitration figures. The Giants offered $8M and Lincecum's camp asked for $13M.

Giants Thoughts

The $8M is very low compared to the figures that has been bandied about as possibilities (somebody seriously suggested $23M), but people have to remember that this number is also partly a negotiation ploy. Once the numbers are submitted, then the mid-way point becomes the area where the negotiation starts. Still, I find it to be a bit low. Ryan Howard had the highest first year away with $10M, so $9M would have been more reasonable I think, given the general impression that hitters are worth more because they play every day.

The $13M also seems low to observers as well. It is speculated on the Merc that this relatively low figure could be influenced by the possibility that Lincecum's agent believes that the Giants would not be willing to give them what they want, resulting in no settlement before the meeting, and thus they have to present a figure that they can win in arbitration.

Historically, Sabean has tried to avoid arbitration. They have already done that with Medders and Jonathan Sanchez, who is reported to have received a $2.1M contract for 2010. And Brian Wilson looks like a done deal, he asked for $4.875M while the Giants offered $4M, so they will probably agree on a deal around $4.5M, maybe a smidge less if they take the halfway point.

Lincecum, however, is another matter. With the wide difference of $5M, it is not a situation where you simply split the middle and agree on a contract for $10.5M. Clearly, both sides feel that they are about right with their figures, and with such a chasm between the two figures, it might have to go into arbitration. Particularly since the $13M is not that onerous a figure, the Giants might be OK with that as the losing amount, viewing the arbitrator's selection as a win-win scenario. Lincecum's side might view it the same too, as with inflation and two Cy Youngs versus the Ryan Howard comparision case, $8M seems too low, and thus their $13M seems like a lock, as it is high but not that high.

The Giants have traditionally avoided arbitration because they don't want to get into any negative attacks plus settling beforehand gives you control whereas putting your fate in the arbitrator's hands has been something most teams should have avoided as they lost badly.

However, they don't really have to be negative, they can just quote what I wrote above and say that he's great, yes, unprecedented, yes, but pitchers are traditionally not worth as much as a hitter on the free agency market, and Ryan Howard is the comparison case at $10M, as he was a super-two and won both the Rookie of the Year award and MVP award plus was 5th in MVP that season, and in addition the market has dropped in price this off-season, so they had 10% sliced off for a starting pitcher, and 10% sliced off for the poor market this off-season.

I think it behooves the Lincecum camp to sign an extension much like the King Felix Hernandez deal for 5 years and $78M. The only problem is that he would probably want more than Felix got since he has won two Cy Young awards, making the final contract more like 5 years at $90-100M. I don't think the Giants want to take on that much risk in a contract (and I certainly wouldn't want them to), particularly in light of Lincecum's slight falter at the end of the season plus there were talks that his velocity went down some late in the season.

However, they might be willing to go for a 4 year contract plus an option year for the 5th year that vests based on IP by Lincecum. That probably would be in the $70M range, which would be more palatable a risk, though still a huge risk.

It will be interesting what happens, but I expect the Giants to try to sign him in the $11-12M range with no extension.

5 comments:

  1. Lincecum is in the driver's seat here. Sabean's ridiculously low arb figure almost guarantees a win for Timmy. I agree that if they settle, it will be close to $11M -$12M. However, that is a big IF. Lincecum can go to arb and win this one. Sabean screwed the pooch again.

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  2. In the words of Teddy KGB, "Pay that man his money" 13m for timmy is a bargain. We can find ways to justify paying edgar renteria 9m a season, we can't seriously show up in arbitration and say timmy's worth 1m less a year than edgar. Show Timmy good faith and pay what he wants. Creating any animosity with a player of his caliber would be foolish

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  3. My initial response to the $8 mil offer was more along the lines of Boof's comments - a huge mistake. But I didn't factor in that salaries are lower now than they were when Howard won his arb case (wasn't that prior to the '08 season?)
    I still think Sabean should have come in at $8.7 - $9 mil. That number would have given him many more options, more of a liklihood of winning if the case went to arb. I just think it is too risky to think that $8 mil will win the day at arb. Why gamble with such a low number? Yes, $9 mil is a million more, but it greatly reduces the liklihood you lose and end up paying a much higher number.

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  4. Check my blog out at paapfly.com.

    Lincecum should easily win this case if it goes to a hearing. $8 M is about right (considering most 1st yr eligible players recieve 40% of their free agent marktet value). That being said, Lincecum is worth more than $20 M. Additionally, because he has 2 Cy Youngs in his first two seasons he should easily command greater than the 40%. To not at least file $10 M (Howard's record) is completely and utterly indefensible. Sabean continues to baffle.

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  5. The key point is if the case goes to arbitration.

    The thing people forget is that this is all a negotiation. The higher the number you offer, the greater you are going to have to pay, whether you negotiate or you go into arbitration. It has less to do with the value you see in the player, or what you think he would win in arbitration, you have to try to cover all angles, whether it be that Lincecum files high or he files a more reasonable amount.

    Rory, what you are missing is that his higher value is already captured in his higher comp. He's not getting 40% of, say, $10M that Wilson is getting, he's gettting 40% of $20-25M (don't recall what Santana or CC is getting) under that rule. So he should not get more than 40%, his talents are already represented in his comp salary figure.

    Still, I agree that the Giants went too low with their offer. And looking over it again, per your comments, I think you can make the case that $10M was the minimum that they should have filed, or even $10.1M to make it a record.

    However, this is not about what the final amount is. This is about a negotiation. If you offer $10M, that plus $13M asked by Lincecum means at least $11.5M you have to offer him to avoid the arbitration meeting. There is still some chance the arbitration could pull another bonehead judgement (in the Giants eyes) and give Lincecum the $13M.

    Under game theory, you have to try to take into account the moves that the other side might make and select the position that best benefits you.

    I still think $9M was a better figure, but the Giant's bid has to account for both a fair asking price by Lincecum as well as a high asking price, because most settlements - and I believe the Giants are hoping for either a settlement or a longer term contract - start around the mid-point of the two figures. If Lincecum had gone high, the lower $8M figure would counter that a bit, though really, what's $0.5M when the contract is going to be so big?

    I still think $9M is better, but I think the cases can be made for $8M, $10M, or even $11M, depending on what you are trying to achieve with your bid.

    And just because you bid fairly or even high, it does not mean the team will win the arbitration hearing. The arbitrator might decide that the fair or high price might represent salary inflation and still award the player his asking salary because you bidding high might influence the arbitrator to go even higher.

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