Howard Avoids Arbitration For Good

We can all rest easy from now on safe in the knowledge that we no longer have to hear about Ryan Howard‘s arbitration demands again. Today the Philadelphia Phillies and Ryan Howard agreed to a three-year, $54 million contract.

The $18 million average annual value matches Howard’s arbitration request for this, his upcoming fourth year of club control. This contract buys out Howard’s remaining three arbitration years, and does not have any control over what was going to be his first free agency year, following the 2011 season.

Howard will hit free agency going into his age 32 season, still young enough to probably get another mega-value contract, though if anything like this winter’s trend continues, he may not be looking forward to the 6-8 year deal that he would have gotten as little as last winter in a similar circumstance.

Eric Seidman took a look at Howard’s projections when the arbitration demands were leaked and came to a conclusion that Howard would account for about 4.2 wins. I’m a little more pessimistic on Howard, thinking he’s more about on the 3.7-win level. At that level, Howard is still around the $18 million mark in value, though a tad under and given the falling amount that teams are paying per win, this could get worse as time goes on.

Furthermore, we usually expect players to take a 10% discount when they sign multi-year deals to account for the long-term security that they get and to mitigate some of the risk the teams assume when they sign players to market value for more than one year. Given that, I project a fair deal for Howard at about $15 million per year, making this an overpay on Philadelphia’s part if Howard were a free agent.

Given that he’s not, and that his value is tied to the arbitration process, this looks like even more of an overpay on the surface, the typical 40/60/80% suggesting that for these three seasons, Howard should earn about $27 million instead of the $54 he will get paid. The problem is that the arbitration process works in favor of Howard in this case because it overrates the aspects of the game that Howard excels at (power) and underrates that which he lacks (position, defense). So the Phillies had to balance against what they would expect Howard to win in arbitration rather than receive on the open market. All in all, this looks like it is close enough to a fair deal, though perhaps siding a tinge on Howard’s side.

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Matthew Carruth is a software engineer who has been fascinated with baseball statistics since age five. When not dissecting baseball, he is watching hockey or playing soccer.

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