Will Lincecum Be a Bargain?
The Tim Lincecum arbitration saga has been perhaps the most interesting story of the offseason. As soon as the possibility of Lincecum asking for $23,000,001, or one dollar more than CC Sabathia‘s salary, surfaced on the internet, the speculation began and the questions spilled out. What would Lincecum ask for? Would he do the unthinkable, as mentioned above? Would the Giants call his bluff and give a low offer? What will his case mean for future pre-arbitration stars?
There is no doubt that he is a special case. With two Cy Young awards in his first three seasons, the only player to even compare to Lincecum in terms of pre-arbitration hardware is Ryan Howard, with a Rookie of the Year award and an MVP. Howard came away with $10M in his first arbitration hearing – obviously a far cry from $23M, but also a number that most players don’t see in their third arbitration hearings.
Tim Lincecum’s camp came in at what some thought to be a conservative number, at $13M, making the Giants submission of $8M seem meager in comparison. Given the drop in free agent salaries the last two years, the dollar value of a win is almost certainly lower than the $4.5M we saw in 2008, these numbers compare favorably to Howard’s first reward.
Despite all the questions, it seems almost universally accepted that Lincecum will be a bargain at either price. Relative to his value on the free agent market, that is certainly true. As a 6 WAR pitcher, as projected by CHONE, Lincecum would be worth roughly $21M in this market, which has been paying about $3.5M per marginal win. Both totals submitted to the arbitrators are far less than this amount.
Remember, though, that we expect Lincecum, as a first year arbitration player, to only receive 40% of his market value. As a $21M free market value player, Lincecum should receive about $8.4M from the arbitrators.
So what does this mean? First of all, don’t be surprised if the Giants win their case, as it would be right in line with what the arbitration market has done in the past. Still, I wouldn’t be surprised if Lincecum wins the case, either. Much like Howard, it’s possible that the arbitrators will award Lincecum a dollar amount above his true value due to his superstardom and his awards. If Lincecum wins his case, he wouldn’t be a bargain in comparison to other first-year arbitration cases. This isn’t to say that he’s not an asset – even at a market value contract, Lincecum is still an asset due to what he could fetch via trade and the fact that he can be worth six or more wins in any given season.
Regardless of what happens, it will be fun to watch.
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If he doesn’t get more than Ryan Howard did, there’s something wrong. Howard’s obviously a very, very good player, but anyone who thinks he accomplished more in his first three seasons than Lincecum, probably watches too much of the Eastern SPorts Network.
(Yes I’m from Boston, I called out East Coast bias anyway, the only West coast baseball we regularly hear about out here is the Dodgers, including Joe Morgan’s weird attempts to proclaim James Loney a star, and Ichiro).
Part of the reasoning behind Howard receiving as much as he did though was b/c of how long it took for the Phils to bring him up to the majors after he was clearly major league ready. They ended up delaying his arbitration clock in what could be argued an unfair way for Howard. And so part of his arbitration award could be tied into this.
True, I didn’t think of that.
BUT LOOK HOW MUCH HE STRUCK OUT!
Sarcasm in italics for everyone.
I doubt that was a real reason. Not only could they counter with the stirkeouts (and he did strikeout A LOT in the minors), but they could also just say they have Jim Thome blocking him, so they had no place to play Howard. Also, as stated in the labor agreement:
A) The criteria will be the quality of the Player’s contribution
to his Club during the past season (including but not limited to his
overall performance, special qualities of leadership and public
appeal), the length and consistency of his career contribution, the
record of the Player’s past compensation, comparative baseball
salaries …
the existence of any physical or mental defects on the part of the Player, and the recent performance record of the Club including but not limited to its League standing and attendance as an indication of public acceptance …
Any evidence may be submitted which is relevant to the above criteria, and the arbitration panel shall assign such weight to the evidence as shall appear appropriate under the circumstances. The arbitration panel shall, except for a Player with five or more years of Major League service, give particular attention, for comparative salary purposes, to the contracts of Players with Major League service not exceeding one annual service group above the Player’s annual service group. This shall not limit the ability of a Player or his representative, because of special accomplishment, to argue the equal relevance of salaries of Players without regard to service, and the arbitration panel shall give whatever weight to such argument as
is deemed appropriate.
The last sentence is, I think, most relevant to Lincecum.
To clarify the above: the only arguments that may be made and considered by the arbitration committee is the length of major league service time, quality and consistency of contribution to team wins, any external factors (community/team leader, fan favorite, etc.), and, most important to Howard and to Lincecum, any awards received by the player which demonstrate his relative value.
The last bit is why Howard got so much more than his “actual” value (MVP awards are hard to argue against), and is why Lincecum will win his arbitration case (2 Cy Youngs are even harder to argue against). Awards have historically been considered to be exceptions to the service time rule, and should net Lincecum a good chunk of change.
But an interesting thing to think about is the monetary value of a player. There’s a reason awards and superstardom gets you more money in arbitration, and that’s because it makes you worth more. Not in terms of WAR, but in terms of attracting fans, and the overall financial health of a ballclub. It’s completely fair to be subjective with salaries in this case, if it’s a small fluctuation.
While I’d prefer to see a long-term deal worked out, if $8.4M is Lincecum’s value as a first-year arbitration-eligible player, then the Giants should win. Arbitration salaries should be kept low, to reward organizations that take the risk of developing players with extra value from farm players. It costs money and involves risk to bring a guy up, and if the six years of team control aren’t kept low, the incentive to bring up your own guys largely goes away; the FA and trade markets provide less risk and the same value per win. The arb process needs to be revised to prevent this kind of thing before it becomes problematic for low income teams to compete.
$8.4M is not his “value” its 40% of his “value” which is what arbitors typically give to first year players.
There should be no thought given to organiztional risk. No one is forcing anyone to own a baseball team.
You say CHONE predicts him to be a 6 win player, which is fine, but real-world arbitration evaluation is more likely to look at his recent performance than what CHONE predicts.
He was a 7.5 win player in ’08 and 8.2 win player in ’09. So figure they average it to 7.85 wins. That’s $27.5M given $3.5M per win, and 40% of that is about $11M. That’s a bit closer to Lincecum’s arbitration number than the Giants’. You’re also assuming that the arbitration panel will assume a market rate of $3.5M/win, which is true for this year but in the past couple years the market rate was $4.5M/win– I’m not sure that they will respond drastically to the rapid change in market conditions, so assuming a $4.0/win seems safer. Which would bring his arbitration value even closer to $13M than $8M.
End result is that the only way to assume that the arbitration panel will select $8M is if they expect him regress by almost 24% in value from his previous two years and assume a rapidly reduced market value of wins. I find that the probability of the panel using both of these rationales to be unlikely, and thus the probability of Lincecum winning his arbitration case very likely. He shouldn’t be afraid to go into the hearing and not settling with the Giants.
I think you’ve got a great point about the market rate the arbiters might use as a comparison. They are provided with salary information for comparable players from the previous season as one of the criteria. I’m not sure it’s appropriate to use this years signings as the baseline. I’m sure the club can present salary figures for arb-eligible players who have already signed this offseason (nothing that I can see in the CBA seems to exclude this), but the evidence might weigh in favor of using last years salaries as the most relevant comapison point.
Yes, but the dollar per win is based on projected values as well IIRC. If you’d use non-regressed actual performance from players, the dollar per win would be higher than 3.5.
If Lincecum and his agent had submitted a number closer to his actual worth on the open market (say 18+ mil), it would be easy to see the case decided in favor of the team. Since he can point to what he’s done to this point and fairly easily show that those number are equal to or better than players making what he’s asking for (13 mil) – I would be very surprised if he lost the hearing. I would think after this year, the arb hearing prices wouldn’t go up as fast.
“If Lincecum wins his case, he wouldn’t be a bargain in comparison to other first-year arbitration cases.”
First-year arbitration players as a whole though are huge bargains. Even if he’s not a bargain *relative to other first-year arbs* he would still be a huge bargain overall. If you walk into a store where everything is marked 60% off their fair-market prices and you buy something in there at 60% off, you got a huge bargain. I think it’s misleading to then point out that it was not a bargain relative to other things in the 60% off store, even though it’s true.
Dave really nailed it in his piece on the Clemens precedent. One argument for around 8 mil and a cap between 12-14. It will be interesting to see who wins. I do not think Lincecum is a lock to win this thing like many appear to.
I think the “rule” is 20%/40%/60%/80% and Lincecum will be arb eligible for 4 years. 20% would change the math quite a bit.
The two highest paid pitchers are currently Santana and Sabathia at an average of approximately $23MM a year. Given a first arbitration year value of 40% of a comparable pitcher, if he was valued as their equal then he would be valued at $9.2 and the team would win with their $8MM offer. He would have to be valued at more than $26MM a year market value to have his arbitration submission of $13MM to prevail.
Lincecum will win the arbitration case. If the Giants had chosen 9.5 millon or something, they would have had a chance. Their best bet is to try to settle for 11.5 or so.
Lincecum’s argument for getting $3 million more than Howard is way, way stronger than the club’s argument for him getting $2 million less. That will be obvious to an arbitrator.
Why does everyone think Howard is the best comp?
Afraid that Mr. Lincecum will have to except MLB minimum based on the Giants front office reading the in-depth analysis done at the beginning of last season at Fangraphs. That analysis, using the always reliable Pitch F/X system, concluded that after 2 starts, he had ‘lost something’ and will most likely be injured and his previous seasons out put never revisited again. Though Lincecum didn’t get the memo and continued to dominate the league, his agent was informed and they are currently exploring options in the janitorial industry to supplement his income in the future.
Tim questioned his agent about the data but was reassured that statistical analysts on the internet have crossed over into scouting successfully having completely revamped Felix Hernandez’ career based on their input. The Giants also plan to save money by dismissing all pitching coaches because the internet experts have rendered them obsolete.
When the Phillies went to a hearing with Ryan Howard, they would have been in position to cite Ryan’s .235 average against lefties the previous season and his 181 and 199 strikeouts the two prevous season.
Lincecum’s splits are amazingly consistent — except that he hasn’t been a very good pitcher with the score isn’t within four runs. Gee, Tim. You’re only average in one-sided games. You suck.
The Giants have already said there isn’t much they can quibble with regarding Tim.
I agree that the price of talent has declined along with the economy, but have you noticed that the decline has occurred almost entirely among the second-tier players and lower. The top dogs are still getting the top money, as is illustrated by the $80 million contract Justin Verlander just signed to buy out his last two arb seasons and his first three years of free agency.
Need I point out that Justin’s career ERA is about a run higher than Tim’s and that it was about a run higher last season?
What I found intriguing about Justin’s contract was that it came with the arbitration numbers being $6.9 million (team) and $9.5 million (player). If we assume that $8.5 million would make a good middle ground and that $14.5 million would be a good number for Justin’s last arb year, that leaves $57 million over his first free seasons of free agency. That’s an average of $19 million per season — for a pitcher who is a run per game worse than Lincecum.
How much is this guy worth? And if Verlander is worth $19 million a season in free agency, wouldn’t Matt Cain and his ERA that is two-fifths of a run less than Justin (and more than half a run lower last season) worth at least that same $19 million?
It could eventually cost the Giants $45 million or so just for their top two pitchers (assuming Madison Bumgarner hasn’t snuck ahead of Matt).
Park, league, and division adjustments would cut your gap between Verlander and Lincecum significantly and cut your gap between Verlander and Cain completely.