Kevin Kiermaier and the Continuing Problem of Arbitration

Back in 2010, the Rays used their 31st round draft pick on a right fielder from Parkland College, a JC that hadn’t produced a Major Leaguer since Juan Acevedo, who was drafted in 1992. This particular pick was the 941st selection in that draft, and no player taken 941st overall had ever made the majors. The Rays offered just a $75,000 signing bonus, as expectations for the long-term value received by a 31st-round pick are generally not very high.

That bit of context is important to keep in mind when reading that Kevin Kiermaier, that long-shot prospect Tampa selected seven years ago, just signed away the likely remainder of his productive years for $53.5 million in guaranteed money. At a time when many of the best young players in baseball have eschewed the early-career extensions that the previous of generation of stars signed up for, Kiermaier’s context helps explain why he’d sign a deal that will, more likely than not, cost him money down the road.

By signing a six year contract that likely includes an option for a seventh year — the Rays generally don’t sign long-term extensions that don’t include team options — Kiermaier is agreeing to sell his first three free agent years in exchange for a significant guaranteed income stream right now. And given that he didn’t get a big signing bonus and has made close to the league minimum in his first few years in the majors, this is legitimately life-changing money for him. Even after taxes and agent fees, he’s now going to bank at least $30 million during his big league career, allowing him to retire comfortably whenever he’s done playing.

For a guy who wasn’t heavily recruited out of high school, wasn’t even considered the best prospect on his JC team — Baseball America put RHP Danny Winkler ahead of him on the Illinios state draft preview — and was never considered any kind of top prospect, it’s probably not easy to turn down this kind of money. But while Kiermaier is probably happy to know he can play most of his career with the same team and retire a rich man, this is the kind of contract that should incentivize the MLBPA to fight for a total overhaul of the arbitration system.

As a player with two years and 131 days of service, Kiermaier qualified as a Super-Two arbitration eligible player this winter, and based on the expected outcome of the hearing, he agreed to a $2.975 million salary for 2017. That put him between the likes of Matt Shoemaker and Cesar Hernandez, or if we want to really highlight the ridiculous valuations the current process spits out, $550,000 below what Sam Dyson got after one year as a saves-accumulating reliever. Dyson’s a nice reliever, a guy the Rangers are happy to have in their bullpen, but the fact that arbitration paid him more than Kiermaier is a sign of how silly the system can be.

Because, while Kiermaier might not be a household name, he’s legitimately one of the very best players in baseball. We project him as a top-15 position player for 2017, and that’s with defensive forecasts that call for his UZR to be about half of what his historical ratings have been. As Jeff wrote yesterday, new data from Statcast confirms that he’s probably the best defensive outfielder in baseball, so even if you’re skeptical of defensive metrics in general, it’s very difficult to argue that Kiermaier isn’t a spectacular force out there.

Realistically, Kiermaier was the most valuable super-two player in arbitration this year, but because of the numbers used to determine arbitration salaries, he wasn’t able to count on arbitration paying him for his defensive excellence, and he got the 10th-highest 2017 salary of this year’s super-two crop. And because Kiermaier is about to turn 27, he can’t realistically count on maintaining all of his elite fielding abilities up through 2020, when he’d finally have a chance to be evaluated on the open market. So Kiermaier sold his arbitration years for roughly the $30 million or so he’d expect to get by going year to year — assuming $3 million annual raises, his arb salaries can be estimated at $3M, $6M, $9M, and $12M — and in exchange for that guarantee, he gave the Rays the rights to three free agent years at a price of around $12 million per year.

Of course, $12 million doesn’t buy much in free agency these days, and Kiermaier could lose almost all of his elite fielding ability and still be worth that in five years. That’s why this deal is a no-brainer for the Rays; even if you think his skills aren’t likely to age exceptionally well, he’s good enough that he can decline a lot and still be easily worth the pittance that the team will be giving him in 2021 through 2023. And, of course, they get the upside if he does age well, keeping him in Tampa Bay in years when he would have been priced out of their budget.

But the fact that this was the deal Kiermaier had to take to get early-career financial security is a stain on the MLBPA’s willingness to let arbitration continue to massively undervalue certain types of players. Because with the amount of money that has flooded into MLB, there’s no reason that a guy like Kiermaier should have to settle for this kind of contract in 2017. This is an extension at prices that made sense five or six years ago.

For instance, here are the recent long-term extensions signed by similar-caliber hitters who were Super Two arbitration guys, when they were four years from free agency.

Recent Super Two Extensions
Player Years Contract PA BA OBP SLG wOBA wRC+ OFF DEF WAR
Starlin Castro 2010 – 2012 7/$60M 1912 0.297 0.336 0.425 0.330 103 1.4 12.5 7.7
Jay Bruce 2008 – 2010 6/$51M 1412 0.257 0.327 0.474 0.346 108 17.9 13.3 7.8
Ender Inciarte 2014 – 2016 5/$30M 1586 0.292 0.337 0.385 0.316 95 -2.6 43.8 9.5
Kevin Kiermaier 2013-2016 6/$54M 1313 0.258 0.313 0.425 0.320 105 19.4 61.3 13.1

Kiermaier effectively signed the same deal Jay Bruce did in the winter of 2010, as a young outfielder coming off a very good season but with career numbers that showed him to be a roughly average hitter (to that point) with some defensive skills as well. Kiermaier has actually been a better offensive player when you include his baserunning value, and is clearly a better defender now than Bruce was then, but he still signed basically the same contract as Bruce signed six years ago, when the MLB economic market was dramatically different than it is today.

But, dingers. Arbiters love home runs and RBIs, and Bruce had those, while Kiermaier doesn’t. But Starlin Castro didn’t have homers and RBis, and he got basically the same kind of deal as Kiermaier got now, only he got it in 2012; again, pushing five years ago. And Castro was objectively a worse player at the time of his deal than Kiermaier is now. Kiermaier’s deal is what lesser players in similar situations were signing for before the TV rights wars and BAM Tech’s streaming behemoth made every team even richer than they already were.

But the arbitration system just hasn’t kept up with the changes in baseball, especially the way teams are valuing different skills. The system penalizes guys like Kiermaier — or Ender Inciarte, who signed an even worse deal a few months back — in order to funnel more money to guys who specialize in hitting the ball a long way. So now, baseball is left with a system that pays for Chris Carter’s skills in an environment where the teams themselves don’t.

After the 2014 season, Carter was a Super Two player, like Kiermaier is now. To that point in his career, he’d accumulated a total of +2.1 WAR, but because he had 85 career home runs, he got $4.2 million to settle before the arbitration hearing. That’s more than Jacob deGrom or George Springer got as Super Two players this winter, to give you an idea of the kind of value that the arbitration system put on Carter’s home run skill. And that high early valuation led to him getting non-tendered the next year, since he was cheaper to re-sign as a free agent than to take to arbitration a second time, and then led to Carter getting DFA’d this winter, as the Brewers were again unwilling to pay him what arbitration would have awarded him; he eventually got $3 million from the Yankees.

By taking money that should rightfully be going to legitimate stars like Kiermaier and giving it to one-trick ponies like Carter, arbitration gives teams the ability to get huge savings on guys who don’t hit a lot of home runs while also forcing the overpaid-dinger-guys into the open market, where arbitration can’t artificially prop up their salaries. So in the end, the money the Rays are saving by arbitration undervaluing Kiermaier just isn’t going to another player, since teams have gotten more aggressive about non-tenders and avoiding big overpays in free agency.

Guys like Kiermaier and Inciarte are highly valuable players, but because arbitration is still an archaic system that doesn’t acknowledge that reality, some of the best young players in the game are signing long-term deals for a fraction of their value, because they know their skills peak early and they may not have the ability for a make-good contract after accruing six years of service. And this is a problem for the MLBPA, because a significant portion of their union is being systematically underpaid, with teams now circumventing the offsetting overpays by non-tendering guys whose actual value isn’t what arbitration thinks it is.

I’m sure Kiermaier is happy to get $53.5 million in guaranteed money, especially given that he wasn’t expected to ever turn into this kind of player to begin with. But for the players at large, this contract is a reminder that the current arbitration system is incapable of identifying elite players, and that flaw encourages guys like Kiermaier to sign long-term contracts that simply don’t reflect their actual on-field value. If arbitration was going to pay Kiermaier more like $5M/$10M/$15M/$20M over the next four years, at the least he’d have had more leverage in asking for an extension that better matches up with his actual value.

But instead, the perpetual undervaluing of guys who don’t hit home runs or record saves means that another star-level talent won’t free agency after six years of service, and the union’s plan for having free agents lift the bar for all other players takes another hit.

The player’s association needs to take a long hard look at arbitration, and ask themselves whether they want to continue to let teams systematically undervalue some of the best players in the game on the hope that the savings will go to one dimensional sluggers. Because in 2016 and 2017, the evidence suggests that it isn’t all coming out in the wash, and with guys like Carter getting non-tendered while players like Kiermaier and Inciarte sign cut-rate extensions, the current arbitration system is simply not working.

We hoped you liked reading Kevin Kiermaier and the Continuing Problem of Arbitration by Dave Cameron!

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Ron Baugh
Member
Ron Baugh

There are a couple of issues with this idea. Arbitration is as a process is fine and a great idea. What has happened isn’t the fault of the process but the people involved.

There is a perception that players like Kiermaier don’t make money in arbitration so they don’t challenge it much. Last I checked both sides are given an opportunity to press the case of a player. As more and more advanced metrics get published and accepted as mainstream, more an more players should get the benefit of these numbers in arbitration.

The panels for arbitration are made up of attorneys who have risen high in their profession, a profession where having an open mind and critical thinking are at least given lip service. A good agent should be able to convince these people the value of defensive numbers, OBP and the randomness of RBIs.

If the players association needs to do anything it is to promote the use of advanced metrics, so that they become mainstream enough that an attorney looking over the arguments for a player can see the value of a Kiermaier over a Chris Carter. WAR is a fine metric and maybe it is simple enough that we ask all potential arbitrators that they understand simple advanced metrics before they are added to the pile.

Instead of saying how the process is screwed and should be reconsidered, perhaps the real important step is to stop undervaluing players like this throughout mainstream baseball. It is clearly started to happen and will continue, but a Players Association stance on advanced numbers would be helpful.

tbjfan
Member
tbjfan

“If the players association needs to do anything it is to promote the use of advanced metrics”

Before the players’ association can promote the use of advanced metrics, they first must understand the advanced metrics too.

I don’t think it’s clear that the MLBPA is on board with advanced metrics.

Beep Boop
Member
Beep Boop

This is only tangentially relevant, but here’s an argument that in the legal world, the arbitration process regularly and necessarily uses and creates precedent.

http://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=4556&context=nclr

It doesn’t take a big stretch of the imagination to realize that the MLB salary arbitration process is based almost exclusively on historical precedent. Otherwise, MLBTR and other resources wouldn’t be able to predict arbitration salaries as accurately and regularly as they do.

The process as it currently exists can’t entertain any “disruption” in conventional wisdom. Changes can only come about slowly and methodically, as player agents incrementally build arguments (and win cases) espousing the value of their clients in terms of advanced stats and traditional metrics in parallel.

Player agents have successfully promoted the value of advanced metrics in free agent negotiations, and most (if not all) front offices are willing participants, as they compete with one another to identify and exploit the next market inefficiency.

The antiquated arbitration process really is the bottleneck, not some industry-wide distrust of math.

jianadaren
Member
jianadaren

This doesn’t really apply to baseball arbitration because baseball arbitration has no written opinions, so it doesn’t have any precedential reasoning to follow.

Beep Boop
Member
Beep Boop

The precedents are the decisions themselves, and the financial models (implicit or otherwise) that allows so many third parties to accurately and consistently predict both arbitration bids, and decisions.

I would be very surprised if any knowledgeable expert describes the MLB arbitration process as ad-hoc.

jianadaren
Member
jianadaren

OK, you didn’t read your source carefully, because it concludes that a system like MLB’s arbitration (which resembles securities arbitration in that it also doesn’t publish opinions) is likely to be ad hoc.

See, for example, page 1110:

“a pattern of citing to no precedent would provide some evidence that parties are content for arbitrators to resolve disputes in an ad hoc, discretionary manner.”

Part of this confusion is that “precedent” in a legal context, refers to the *reasoning* of past decisions, and not merely the decisions themselves. MLB arbitration is necessarily not a precedential system, because it does not explain its reasoning.

Arbitrators do use ad hoc reasoning to determine which players are comparable. The fact that their decisions are somewhat predictable does not mean that they are applying precedential reasoning. That’s simply not what precedent is.

Beep Boop
Member
Beep Boop

Fair enough. My lack of understanding of legal semantics is duly noted.

John
Member
Member
John

This is very well said. Thanks

JoeIQ
Member
JoeIQ

You missed the point entirely. This is a huge win for the players association. The more you screw over young players the more money left for the old timers in the union

Ben
Member
Member
Ben

No, I think you’ve missed the point. The owners aren’t paying the veterans. They have largely adjusted, meaning more money is simply going in their pockets. The MLBPA has chosen so far to look the other way on this.

frivoflava29
Member
frivoflava29

Absolutely true. Would love to see the exact numbers again. Relative to the money in baseball now vs then, stars are getting paid less than they used to.

Lanidrac
Member
Lanidrac

More advanced thinking is fine, but you can’t promote metrics like WAR that are based on guesswork over cold hard statistical facts.

John
Member
Member
John

Which cold hard statistical facts are you referring to? Honest question. It’s my understanding that determining total player value (whether that’s a super-formula like WAR, or an examination of a group stats you favor) you’re still interpreting data to make an opinion about value. There “facts” are the strikeouts, the hits, the catches, but that’s not where the “value” comes from in a non-WAR calculation. The value comes from you, a player, a team, an agent, saying what the facts mean. Someone correct me here. Non-statistician, non-attorney, non-economist here….