While the baseball world has waited for the Yankees to become involved in the Manny Machado sweepstakes, they re-signed CC Sabathia. They traded for James Paxton. They re-signed J.A. Happ. They signed Troy Tulowitzki. They re-signed Zach Britton. They signed DJ LeMahieu. And now, on Thursday, they’ve signed Brooklyn native Adam Ottavino. You can say that Machado would still be a fit — indeed, Machado would still be a fit — but you can’t accuse the club of inaction. Brian Cashman and his staff have been busy.

Ottavino is signing for three years, with a $27-million guarantee. While so far we’ve seen just two contracts of three or more years given to position players, this is the fourth of the offseason for a reliever, with Ottavino joining Britton, Joe Kelly, and Jeurys Familia. At 33 years old, Ottavino counts as the elder statesman of the group. Teams now tend to be disinclined to give such multi-year guarantees to players entering their mid-30s. But the thing about Ottavino is that he’s great.

Read the rest of this entry »

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In our Introduction, we reviewed some of the issues attendant with the salary arbitration system. Today, we begin to examine solutions. As the system exists currently, I would argue that the largest difference between salary arbitration in baseball and arbitration of the type you see in other disputes is the requirement that the arbitrators must select the position of one side or the other in toto, a feature that seems at odds with arbitration’s goal of helping the parties reach compromise. As MLB’s online glossary explains (emphasis mine):

If the club and player have not agreed on a salary by a deadline in mid-January, the club and player must exchange salary figures for the upcoming season. Unsurprisingly, the club files a lower number than the player does. After the figures are exchanged, a hearing is scheduled in February. If no one-year or multi-year settlement can be reached by the hearing date, the case is brought before a panel of arbitrators. After hearing arguments from both sides, the panel selects either the salary figure of either the player or the club (but not one in between) as the player’s salary for the upcoming season.

This “either/or” approach is unique not just in sports but in arbitration generally. Even the National Hockey League, the only other major North American sport to utilize an arbitration system, doesn’t bind the team and player to only those two options. As one NHL agent explained:

Hockey, unlike baseball, does not have final offer arbitration whereby an arbitrator is bound to pick one side’s proposal or the other. The arbitrator, under current guidelines, is free to pick their own level of compensation anywhere between the two requests.

Hockey’s system, by allowing more freedom to arbitrators in selecting salary figures, granting award rejection rights (in many, but not all, arbitration settings, the losing party has the right to reject the award, at which point various other means ranging from litigation to mediation to a second arbitration are used to reach a resolution), and setting caps on the number of arbitration hearings allowed per team, is substantially more in line with traditional arbitration in other settings. It’s therefore no surprise that hockey has substantially fewer arbitration hearings each year than baseball does.

So why does the ability to select a different number matter? Because the current system in baseball actually incentivizes teams to proceed to hearings, a reality that many teams are now taking advantage of with “file-and-trial” approaches. Consider: as attorney Justin Sievert explained for the Sporting News, when an arbitrator is bound to choose one number or the other, “the panel will choose the offer that is closer to what they believe is the player’s true arbitration value.” To show how this creates issues, let’s look at Dellin Betances‘ 2017 arbitration hearing with the Yankees – the one that had Randy Levine so riled up. Betances asked for $5 million; the Yankees countered with $3 million. Let’s say that the panel had concluded Betances was worth $3.95 million. Under current rules, the Yankees win the hearing – and, by extension, are able to pay Betances less than what he has been deemed worth as a result of submitting a lowball figure.

Now you might think that players also benefit from this margin of error: after all, teams that lose arbitrations arguably end up overpaying their players. But that’s not really how it ends up working, for several reasons. First, teams are allowed by the league to confidentially coordinate arbitration filings and salaries, the effects of which can linger long after an individual player’s case is resolved. Per Jeff Passan:

While MLB works diligently and impressively to coordinate the arbitration targets of its 30 teams — this behavior is sanctioned under the collective bargaining agreement and not considered collusive — agents occasionally make far-under-target settlements. The effect, in a comparison-based system, is devastating: A bad settlement can linger and depress prices at a particular position for years.

Why do we care that teams coordinate filings? Because agents, who are in competition for the same clients, clients with disparate individual interests, don’t achieve the same level of cohesion. Imagine, if you will, that you’re an employee looking for a job. You’ve received three offers from three different employers for roughly the same position. Now imagine that those three employers talked amongst themselves, and decided to make you exactly the same offer for each position. And, to make things more interesting, imagine that they are also collaborating to set the salaries for the other candidates, too. You wouldn’t have much in the way of leverage to make salary demands. The three employers have set the market for your salary, and your ability to effectively counteroffer has been essentially rendered moot.

Now, you might point out that, unlike our job example, arbitration isn’t a free market. The Cubs can’t compete with the Nationals over Kyle Barraclough. But what the Cubs can do is agree with the Nationals on what a Kyle Barraclough is worth. Why do we care? Because arbitration is a comparisons-based system. The current system allows teams to, in essence, work together to set the prices for the comparables their own players will cite. The teams are coordinating amongst themselves to drive down prices for all players, because every player is a comparable for someone, and the teams have set prices for everyone.

The trouble is that agents have no way of knowing what those internal calculations are until after all of the arbs are finished in a given year. Another way to look at this is to consider that teams are building their own valuation tool in arbitration, one that is universal across teams, is position- and comparable-adjusted, and – most importantly – is internally consistent and predictable. Agents’ numbers don’t have that level of cohesion. So when teams enter arbitration with consistent numbers, and players don’t, it’s the players’ requests that appear out of step with the realities of the market. The either/or arbitration system facilitates that trend.

This knowledge gap creates a structural mismatch in favor of teams, a mismatch that shown itself in arbitration outcomes. Players who went to arbitration last winter did fairly well in their cases, and Passan cited an oft-used statistic that “[t]he league historically has won well more than 50 percent of cases.” But in reality it’s much more lopsided than that. In March of last year, attorney Christopher Deubert noted that:

[there] seems to be an increasing willingness of clubs to challenge a rise in player salaries by pursuing salary disputes through the conclusion of the arbitration process – albeit, in many instances, unsuccessfully – as reflected in the aggregate arbitration hearing records.  In 43 years of salary arbitration:

• In 32 of those years (74.4%), clubs won the majority of salary arbitration hearings;
• In 10 of those years (23.3%), players won the majority of salary arbitration hearings; and
• In 1 year, all the cases settled.

That teams won a majority of cases in three-quarters of the years for which data is available is pretty remarkable, and demonstrates just how lopsided the present either/or system is when confronted with the knowledge gap created by team coordination. Teams are incentivized to offer lower numbers, knowing that, because all other teams are doing the same, they are likely to succeed. For a player, proceeding to arbitration has meant that they are more likely than not to be underpaid relative to the figure they submit to the arbitrator, which generally serves to incentivize settlements and drive down overall player earnings. Given that the likelihood of winning is priced into settlements, a midpoint between the two figures is no longer the ideal settlement posture; players are incentivized to accept a number closer to the team’s figure just to take every dollar they can. And players, their agents, and the MLBPA have far fewer resources at their disposal for hearings, a problem that is compounded as file-and-trial method results in more cases reaching arbitration. From Passan:

Going to trial can be pricey, particularly for smaller agencies that do not have in-house lawyers with enough expertise or experience to argue an arbitration case. Hiring outside counsel costs up to $55,000, an expense that falls on the agent. And when the spread, or the difference between the sides, is minimal and the 5 percent fee on the difference won’t come close to covering the attorney fees, the incentive is clearly to settle — a fact that teams know and leverage.

So why would eliminating the either/or system help? First, it incentivizes numbers closer to the player’s actual worth, rather than basing a result on resource allocation and structural features. Second, it allows arbitrators leeway to avoid outliers – the current system incentivizes extremes, whereas scrapping the either/or system allows arbitrators to push the parties towards compromise. And third, it creates organic salary movement as arbitrators begin to make their own determinations regarding player worth, requiring them to become more educated in baseball vernacular. And better educated arbitrators are good for everyone, a fact that will be the focus of my next piece.

In 2018, for the first time in more than a decade, player salaries went down from the previous year. At one point, there was some thought that this offseason’s free agent class might reverse the course charted last offseason. For years, we’ve been hearing about the monster class of free agents that would sign this winter. Here’s Jeff Passan back near the beginning of the 2017 season:

For those who have yet to hear about the free-agent class of 2018-19, here’s a sampling: Bryce Harper, Manny Machado, Clayton Kershaw, Josh Donaldson, Daniel Murphy, Dallas Keuchel, Charlie Blackmon, Andrew Miller, Zach Britton, Craig Kimbrel. There are dozens more. Teams will guarantee $3 billion to players that winter. The number could exceed $4 billion.

Two years later, that free agent class isn’t quite as good as we expected. When we put up our Top-50 free agents, along with crowdsourced contract expectations, the expected outlay to 66 potential free agents didn’t come close the $3 billion assumed; the crowd predicted a number that was just about half of $4 billion that was thought possible about 20 months ago. Our readers provided estimates for 66 players, including Joe Mauer and Adrian Beltre, who have since retired. Of the remaining 64 players, 36 have signed contracts so far. Here’s how the contract totals compare to the crowdsourced average.

So far, free agents have signed for roughly 15% less combined than predicted. It’s interesting to note that the discount is being taken almost entirely in the length of the contracts, as both the predicted and actual AAV are around $12 million. Now that many players have reached agreements to avoided arbitration and a good number of players have signed free agent deals, we can take a look at where teams’ Opening Day payrolls stand at this point in the offseason. There are obviously a few huge contracts to go, with five of the top six contract projections still unsigned, so these numbers are nowhere near final. As of this writing, here’s what Opening Day payrolls look like for every team.

The Red Sox are well out in front of everybody, just like they were last season. The Cubs payroll is up compared to where it was. It might be somewhat difficult, if not impossible, to tell how every team’s payroll has moved based on the graph above. For reference, here’s a graph showing each team’s change in payroll from Opening Day last season.

Some of this will change in the coming months, though a lot of those teams at the bottom aren’t really expected to move the needle much. Last year’s Opening Day payroll average came in at around $136 million. Keep in mind, these numbers don’t include benefits or players on the 40-man roster. Last year, the end-of-season payroll average including those numbers went up to around $152 million. Right now, the average 2019 Opening Day payroll comes in at close to $128 million. In total, the difference between last year’s combined Opening Day payrolls and payrolls right now is $243 million. If we take a look at how much spending is left to be done, we might be able to approximate payroll for next season.

Here are the remaining crowdsourced free agents, their projected total salaries and the average annual value of each deal.

If the crowd is correct and $296 million in salaries are added to the 2019 season, we’ll be looking at around a $50 million increase over last season. That probably won’t happen, though. Last season when I did this same exercise, I was overly generous in my estimates, giving the players the crowdsourced money, and adding in another $60 million for all the other players for whom we did collect estimates. By the time Opening Day rolled around, I was more than $100 million off, and instead of a potential 1% increase in payroll, teams moved down 1% from the previous year.

If the rest of this offseason is anything like the remainder of last offseason, we are going to be looking at flat Opening Day payrolls. Even more troublesome for the players is that while Opening Day payroll was down about one percent from 2017 to 2018, when the end of season numbers were calculated, that figure was closer to 2.5%. While not definitive yet, there seems to be a pretty good possibility that major league payrolls will go down for the second consecutive season.

Ben Lindbergh and Jeff Sullivan banter about Ben and Travis Sawchik finishing their new book, The MVP Machine, Willians Astudillo‘s MVP voting results, the Kyler Murray baseball/football decision and why it’s unusual for players in his situation to have leverage, Manny Machado rumors, and Yasmani Grandal‘s comments about the contract he didn’t sign, then answer listener emails about why baseball players don’t hold out and Rickey Henderson’s base-stealing today, plus Stat Blasts about the biggest gaps between best and second-best years and the giant New York Yankees.

Audio intro: The Decemberists, "Midlist Author"
Audio outro: Cake, "Open Book"

Link to preorder The MVP Machine
Link to Astudillo results
Link to Jeff’s Garcia post
Link to hitter height data
Link to Grant’s Little League WAR article
Link to article about baseball terms in Spanish

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There’s a report out today about Manny Machado:

Manny Machado remains unsigned, but the Chicago White Sox have made at least one pitch to the superstar shortstop.

Multiple sources told ESPN’s Buster Olney that the White Sox have a seven-year, $175 million offer on the table for Machado.

I do think there’s something important to understand here. Machado hasn’t yet signed anywhere. The idea that he would sign for $175 million seems almost preposterous, but then again, he hasn’t signed for $175 million. If the reported terms are true, they do seem too small, but that’s how a negotiation is conducted. The player side asks for X, which is ultimately too high. The team side proposes Y, which is ultimately too low. If an agreement is reached, it’s for Z. We’re going to learn the most information when Machado actually has a new employer. Then, and only then, will we have a fuller understanding of what his market looked like. Said understanding still won’t be complete.

So Machado is still out there, available. Bryce Harper is also still out there, also available. Machado’s age is 26 and six months. Harper’s age is 26 and three months. There was thought that, through free agency, they might be able to reach some record contracts. Those contracts might still be out there in front of them. Increasingly, however, it feels like they might not be. Which is why this little post is going up.

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Arbitration season is upon us. This winter, Mookie Betts‘ contract set a record for a second-time arbitration-eligible player after agreeing to a $20 million deal with the Boston Red Sox to avoid arbitration. NL Cy Young winner Jacob deGrom set some records of his own with his $17 million agreement with the Mets. But other players didn’t fare as well. Aaron Nola and the Phillies were over $2 million apart; a smaller but still significant gap exists between the Yankees and Luis Severino. We’ve talked before about the problems inherent in the current system of salary arbitration for major league baseball players. With a growing number of cases going to arbitrators, and with those cases proving to be seemingly quite contentious, I thought it would be useful to explore solutions to an increasingly thorny problem. This piece will serve as a refresher of the basics; we’ll offer some fixes in the days to come.

Often, analyses of MLB salary arbitration focus on the fact that the hearings typically only consider traditional, “old school” statistics.

Another quirk to the arbitration process is that it usually only factors in “baseball card statistics” rather than more sophisticated metrics. While teams signing free agents are typically up to speed on sabermetrics, the arbitration process does not account for them. Counting stats are important, as is playing time in general. Since labor lawyers typically sit on arbitration panels, the concept of “making it to work every day” is something that holds value.

That last sentence is something else important to focus on: salary arbitrators are typically randomly selected labor lawyers. And while some have a comprehensive knowledge of baseball, it isn’t their day job: arbitrators usually hear many different types of cases, with many different fact patterns. That means that a baseball salary arbitrator may well also arbitrate cases on entirely different matters.

Now, the 2016 Collective Bargaining Agreement does allow for the use of some publicly available advanced metrics.

Only publicly available statistics shall be admissible. For purposes of this provision, publicly available statistics shall include data available through subscription-only websites (e.g., Baseball Prospectus). Statistics and data generated through the use of performance technology, wearable technology, or “STATCAST”, whether publicly available or not, shall not be admissible.

But, often, salary arbitrators aren’t well versed in sabermetrics or advanced analytics. As a result, the statistics being used tend to be basic – very basic. In developing their arbitration projection model, Matt Swartz and MLB Trade Rumors noted as much.

Hitters are typically evaluated using batting average, home runs, runs batted in, stolen bases and plate appearances. There are some positional adjustments, but typically the added defensive value of a shortstop relative to a first baseman is not as important in arbitration hearings as it is on the free agent market. Hitters also can receive larger arbitration awards if they have unique accomplishments, such as winning an MVP award. Pitchers typically are evaluated using innings pitched and earned run average. Starting pitchers are rewarded for wins, and relievers are rewarded for saves and holds. Unique accomplishments, such as Cy Young Awards, matter for pitchers as well.

Still, despite its flaws, the arbitration system was, for some time, considered a great success. After all, while it’s generally accepted that free agency led to rising salaries for major league players, there’s at least some evidence that salary arbitration – the process by which players who are not yet free agents, but have at least three years’ service time, have their salaries determined – has also led to improved compensation. Over the last few years, however, salary arbitration has devolved from a system teams and players can leverage to obtain a negotiated contract into a viable means for teams to contest players’ salary demands in the hopes arbitrators side with teams’ lower salary figures.

The concept of “file-and-trial” – that of a team electing not to negotiate with players after arbitration figures are submitted and exchanged – has become so commonplace that Major League Baseball has a glossary entry defining and explaining it. This method has an effect on the strategies employed by players and their representatives, who find themselves at an obvious resource deficit compared to teams. As Craig Calcaterra detailed:

There is certainly an advantage to file-and-trial for a team. It makes the player and the agent work harder and earlier in order to be prepared to negotiate with the club before the file deadline. It also makes them work a lot harder to come up with a defensible filing number given that, rather than merely being an opening salvo in an extended negotiation, it’s something that they will certainly have to defend in open court. It’s also simple hardball. Teams have greater resources than the players and the agents and it’s less painful for them to pay for lawyers and hearing prep and to conduct the actual hearing. There’s risk to the team, of course — they might lose and pay more than a settlement would’ve cost — but teams are obviously concluding that the risk is worth it.

Ken Rosenthal wrote late last year that the MLBPA feared that every team would soon adopt the “file-and-trial” approach. And while that didn’t happen this offseason, the number of arbitration hearings continue to rise, and they are increasingly acrimonious, as Michael Baumann noted for The Ringer.

For years, it was generally accepted that it was undesirable for a team to let arbitration-eligible players actually go to a hearing over salary, since a hearing would force the team to bad-mouth a player; the morale costs outweighed the potential financial gain from holding a hard line. Last year, more arbitration cases went to a hearing than in any year since 1990.

Yankees executive Randy Levine famously ripped Dellin Betances‘ arbitration request of $5 million in the media, comparing Betances’ submission analogous to Levine calling himself an astronaut. Blue Jays righty Marcus Stroman took to Twitter to remark that “[t]he negative things that were said against me [in the hearing], by my own team, will never leave my mind.” The salary arbitration system, initially designed to encourage settlements between team and player, is now driving wedges between the parties, though it is worth noting that whether those wedges persist once players make free agency decisions isn’t a settled question.

What we can say is that the salary arbitration system isn’t working optimally: it doesn’t reflect what we actually know about baseball by excluding publicly available advanced metrics, and it’s further damaging player-team relationships. With this in mind, it’s no surprise that agents are starting to take a harder line on arbitration.

In a mission statement distributed among some players, Jeff Berry, who helps run the baseball division at CAA, outlined a number of steps he believes are necessary to rectify the imbalance of power in the relationship between MLB and the union. It was no surprise that his first target was arbitration. “[A]ttacking the arb system,” Berry wrote in the memo, which was obtained by ESPN’s Buster Olney, “is an ideal battleground for MLBPA/players/agents to take a unified stand and to feel empowered and proactive rather than victimized.”

There’s no doubt that the current arbitration model suffers from some deep structural problems. Over the course of the next few days, we’re going to take a look at how to fix them.

When I interviewed him for Baseball Prospectus in March 2007, Curtis Granderson was a young outfielder coming off a promising first full season with the Detroit Tigers. He’s since made three All-Star teams, bashed 332 home runs, and accumulated 48.7 WAR. Still active at age 37, Granderson has had a very good career.

How much has his approach — and the game itself — changed since our bygone spring training conversation? Wanting to find out, I approached Granderson with an idea this past summer: what if I were to ask him the exact same set of questions I did more than 11 seasons ago?

Granderson was amenable. Standing by his locker, I pulled a copy of the old interview out of my back pocket and proceeded to revisit the past.

———

Q: Cutting down on your strikeouts has been a main focus for you this spring. What adjustments are you making?

Granderson: “I think we’re all facing that in today’s game. Strikeouts are at an all-time high. Part of it is the talent that pitchers have now. Speaking 11 years later, they throw harder. Guys have more movement. Guys are bigger, more physical, and there are more of them doing different things — they have different pitches.

“It’s a constant battle to keep your strikeouts down. How to do that? Hopefully not getting yourself in too many two-strike counts. There really isn’t too much more you can do, except that when you do get to two strikes, just continue to battle. Fight.” Read the rest of this entry »

Read the rest of this entry »