Tuesday, January 18, 2011

2011 Arbitration Day: Signings and Other Thoughts

There have been various tweets announcing the Giants signings today to avoid arbitration:
  • Cody Ross:  $6.3M (last year of arb)
  • Jonathan Sanchez:  $4.8M (second year)
  • Ramon Ramirez:  $1.65M (last year)
There are also three other to settle:  Andres Torres, Javier Lopez, and Santiago Casilla.  They had already signed Mike Fontenot earlier and released Chris Ray. 

Giants Thoughts

Ross got around what I thought he would, based on most commentary I saw when Giants picked him up.  Most noted that Ross would earn $6M in arbitration and if you tack on salary inflation, that is roughly what he got.  That also fit into arbitration theory, which states that Y1 arbs get 40% of value, Y2 arbs get 60%, and Y3 arbs get 80%, and he roughly got the same value as in 2010 with bump up from 60% to 80% plus some salary inflation.

Sanchez got less than I thought.  With his good 2010, I thought that might tilt his salary higher, into at least $6-8M range, based on a $10-12M value range for what he can do.  He still got a great raise (he made $2.1M last season) though. 

Hopefully this is just to get him signed and avoid arbitration, and now they can build this into a multi-year deal going into his free agent season(s).  But I would guess that Dirty's agent will not want to settle for what he got now, he would rather have Sanchez have another great season similar to 2010 (low 3's ERA in particular) and get a really big raise in Y3 arbs plus maybe into free agent years.

I'm hoping the Giants at least broach the subject with Sanchez and be willing to push the money higher to get a multi-year signed.  I think he should be able to repeat a similar season, and if we got him signed for, say, another year plus option after the 2011 season, we should be able to trade him for a big package of prospects similar to the A's Haren deal, maybe with Royals or Pirates, they both have a lot of young and good prospects.

Ramirez got what arb theory suggests from Y2 to Y3, I think, roughly 43% raise, with 33.3% from move from Y2 to Y3 and salary inflation covering the rest.

Remaining Arbitration Cases

Three more down, only three more to go.  Hank Schulman tweets AP report on arb bids/offers:
  • Andres Torres:  $1.8M/$2.6M
  • Javier Lopez:  $2.0M/$2.875M
  • Santiago Casilla:  $1.0M/$1.65M
I assumed the hangup with Andres Torres is that his agent wants to be signed as a proven starter but that the Giants want to still sign him below because while he performed well, he's only really been a starter for less than a season, which could result in some regression, potentially.  The numbers are roughly right assuming that, but they are pretty close, so maybe they will sign for the mid-point, the Giants typically have been able to do that in the past.  Only AJ Pierzynski has gone to arbitration in the Sabean era, as far as I can remember, though Lincecum was within minutes of going into arbitration before his agent decided that it was better to strike a deal.  So around $2.25M or so.

For Lopez, his side is basically asking for the same base value as he got in 2009 (but with higher Y3 multiplier), while the Giants are pricing in the risk that 2009's performance puts into the equation.  At $2M, the Giants are already giving him a 50% raise, which is pretty good.  I think they will also meet in the middle, as well, maybe $2.5M.

Not sure what Santiago Casilla's problem is other than the old fashion difference in opinion on what he is worth.  He probably wants a salary like a proven set-up reliever who is now in arb, while the Giants has more of a wait and see attitude given that was his first season of good performance, and not even a full season.  He probably got the league minimum or so in 2010, slightly more than $400K, and the Giants more than doubled it in their offer. Hopefully they can split the difference, but my guess is that the Giants are going to hold to their guns if Casilla's side is sticking close to that request of $1.6M.  I expect another meet in the middle at $1.35M.

But as I noted, the Giants in the Sabean era has avoided arbitration with all but AJ, so I expect signings to happen before the cases get put in front of arbitration.  As was reported (by Hank Schulman I believe), the Giants are focusing on one year deals with everyone.  That makes sense for both sides, particularly the players in these cases, as they hope that their players can perform well again and get a bigger raise next season, particularly for those going free agents. 

As I noted above, I hope the Giants can sign Sanchez to a multi-year deal, which would set up a Haren-type bidding for Sanchez's services after the 2011 season.  A big stash of young, good prospects right around there would be a perfect time for an injection of talent into the farm system given that the Giants hope to be pennant contenders for the near future and thus would not be getting good draft picks in terms of probability of getting a good player.  Those players would then be maturing in the 2013-2016 timeframe, when we start losing guys to free agency, particularly Tim Lincecum and Jonathan Sanchez (I expect Cain to stick around for most of his career). 

Assuming they sign for roughly mid-point as I speculated above, that would be 19 players totalling $114.8M in payroll.  Add 6 more roster spots at $450M average, that is a total payroll of $117.5M (or $115.9M if Rowand's salary only counts for $12M in 2011; dispute over how bonuses are allocated, I would lean towards $115.9M).  That is roughly $15-20M more than the payroll in 2010.  The money the team made in the playoffs probably counts for $10-15M of that increase, so the Giants, on relative terms, isn't raising their payroll that drastically, and probably could handle another $5-10M if there was a player worth getting in that range and a roster spot.  At this point, I would rather they stick with what we got and save it for the future, when we hopefully sign Lincecum, Cain, and other young players to long-term deals.

6 comments:

  1. Turns out Casilla had agreed to $1.3M, but did not get out in time. So only two to go, and according to Haft on sfgiants.com, they should both meet in the middle.

    ReplyDelete
  2. Nice analysis Martin.
    Any idea why salaries have shot up so much the last couple of years? Make it to the majors, hang around and 'presto', earn millions.

    ReplyDelete
  3. Money, money, money: MONEY!

    Lots of money been pouring into MLB coffers since the Offensive Silly-Ball era began, which roughly coincides with the end of the last strike.

    Of course, coinciding with one of the biggest economic expansions in the history of the U.S. helped too.

    It got even better with MLBAM, their internet business, becoming a smash hit. It was expected to be money drain for years to build up business, but paid off quickly and been a huge success so far.

    And where there is money burning a hole in a MLB team's budget, it will sometimes get spent on players. The motivation to win will eventually drive a team to spend big money on players.

    And it is not like the players can just hang around. Most people who "hang around" are pretty good ballplayers who are kept around because they are pretty good. It is the people who you are referring to, who might be hanging around, who bounce between AAA and MLB. Teams are not going to pay $1M (at least until the MLB minimum pay reaches there; around $425K now) for a player who is just hanging around. They must be able to do something or the team will either go with a cheap prospect or sign a cheap vet free agent.

    The problem is that just because you pay them millions, they might not produce, because we're all humans and at some point your body will fail you. Those are possibly the people you are talking about hanging around and getting millions.

    Frankly, that's a gamble each team makes with each player they put on their roster. And a privilege for the players who have proven, to some degree, to have MLB talents/skills. Those people tend to "hang around" because they had exhibited some degree of skill, and get the millions that you are talking about.

    But, to me, that is an earned privelege of surviving in the majors for over 6 years, giving the bulk of your best years to your first team at reduced salaries, and getting it back on the back end of your career. It is not like they just make the majors, then hang around. That's still good money at $400K+ per year, but not millions.

    The millions made by hangers are, to me, more the result of years of good performances, making the majors is not enough to get millions, you actually have to be a pretty good ballplayer (and probably 80% of players are pretty good) and healthy enough to last long enough to get that gravy train.

    ReplyDelete
  4. Good explanation for where the $ is coming from, but why the spike in salaries (the last couple of years)? The large economic expansion you speak of is pre Bush, that was 10 years ago.

    ReplyDelete
  5. Sorry, I thought you were talking big picture vs. long ago rather than recent years.

    Well, that was part of it, but baseball has been growing much faster than the economy over the past 10 years. Revenues grew 50% from 2004-06 and doubled between 2000 and 2006. The Great Recession has hurt but even with the economic problems, baseball's revenues have grown 10% from 2006-2009.

    New stadiums have helped goose those sales totals. So have new TV and radio deals, which get larger and larger. MLBAM, which I mentioned, as also provided additional revenues.

    Another reason for the rise in the big contracts, in my opinion, is that the market for players is bifurcating into Haves and Nots, where the best players are bid upward (driven by a lot of the work that Scott Boras has done), leaving less for the rest of the roster, resulting in lower salaries for the other players. Teams are also realizing that players that rare are worth more.

    Lastly, something I've been waiting to write about for a long time is the upper effect of the Yankees' huge revenues. Their bidding sets the market for a lot of good players, a market the other teams feel forced to follow to get the best players. That takes away money from the lesser players too.

    I can't explain the whole thing here, but basically because they have extra money to overpay for players, other teams are forced to overpay at certain positions, on a relative basis to their lesser revenues, and thus have less to spend on the non-star players, though there probably is a trickle down effect for the good players too.

    ReplyDelete
  6. Just ran into three article talking about MLBAM that explains more about the money it is bringing into baseball:

    http://www.bizofbaseball.com/index.php?option=com_content&view=article&id=5034:mlb-advanced-media-rejects-1b-in-offers-from-private-equity&catid=60:internet&Itemid=125

    http://www.bizofbaseball.com/index.php?option=com_content&view=article&id=1810:interview-bob-bowman-president-and-ceo-mlbam&catid=15:biz-of-baseball&Itemid=81

    http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/01/19/businessinsider-private-equity-throws-a-billion-dollars-at-mlbcom-gets-stonewalled-2011-1.DTL#ixzz1BbZQLEhB

    With revenues in the half billion dollar range and fast growth (from $0 in 2000), it is probably worth between $3B and $6B. That $1B investment would suggest the high end of that range. That would be roughly $150-200M value per team.

    ReplyDelete

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