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January 23, 2004

Prospectus Today

Headed to Arbitration

by Joe Sheehan

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This week, 27 players exchanged arbitration figures with their teams. Now, that doesn't mean we're in for 27 hearings; just seven cases reached a panel last year, continuing a pattern of fewer and fewer hearings that goes back a decade. Two players, Damian Rolls and Roy Halladay, have already agreed to terms with the Devil Rays and Blue Jays, respectively. More will follow, as the exchange of figures puts numbers on the table and, in many cases, spotlights how little difference exists between player and team.

Although it's been blamed for everything from higher salaries to the decline of the American family, arbitration has been a net benefit for the baseball industry. It has eliminated holdouts, which were an annual event in the not-so-long-ago days when salary negotiations were a one-sided affair. The romantic memories of the good old days of baseball tend to leave out the vicious treatment of holdout players by management, media and fans.

General managers are often quoted as saying that they hate the arbitration process because it's confrontational. I don't mean to state the obvious, but salary negotiations are confrontational. The process of asking for a certain amount of money, and trying to employ someone for a lesser amount, is necessarily going to be adversarial. To point at arbitration and declare that it drives a wedge between player and team without acknowledging that it replaces a process that was responsible for some of the most divisive player/management confrontations in the game's history is both ignorant of that history and more than a little deceptive.

The salary increases many players see through arbitration have more to do with the transition from having no leverage--the condition of all players in their first three seasons--to having some, as opposed to some structural problem in the system. Over the next month, you'll read about how some player lost his arbitration case and settled for a $3 million raise. (This is often reported as a percentage: "Jones lost his case and will be stuck with a 400% increase over last year's salary.") The eye roll is implied in print, explicit on television, but the skewed number isn't the new salary, but the old one, which is held down by the rules which leave players without recourse until they reach three years of service time.

Albert Pujols made $900,000 last season not because it's what his performance merited, but because he had two choices: take the money, or not play. Alfonso Soriano made $800,000. Roy Oswalt made $500,000. Does that sound like they had leverage? Of course they're going to get a huge raise in their fourth year. Acting like it's some sign of the apocalypse when it happens is just another indication of how poorly the mainstream media understands sports economics.

Arbitration is a middle ground between no leverage and the best leverage. That's a fair compromise, no matter what people over 50 tell you. It forces both sides to pick a number and either negotiate from it or defend it in front of the panel. It's a good system.

The big stories on this year's list are a pair of first-time eligibles. Both Pujols and Eric Gagne are attempting to set a record for fourth-year player salaries in their figures. Pujols has asked for $10.5 million, with the Cardinals offering $7,000,000. The Dodgers and Gagne are separated by nearly as much, at $8 million and $5 million.

Under normal circumstances, the clubs' figures would seem likely to carry the day. In arbitration, players are compared to others in their service class, and even the best three-year players rarely make more than $4 million in their fourth season. Soriano just agreed to a $5.4 million salary for his fourth year. Lance Berkman made $3.5 million in 2003, his fourth year. Mariano Rivera made $4.25 million in his fourth year of service.

What complicates things is a clause in the CBA that allows players of "special accomplishment" to compare themselves not just to players of similar service time, but to all players. Now, that's a vague enough phrase to allow for a lot of wiggle room, but I'm going to go out on a limb and say that Albert Pujols is a player of special accomplishment. He's been the runner-up in the NL MVP voting the past two years, and finished fourth in his rookie season. His career line of .334/.412/.613 would be the peak season for many Hall of Famers, and in fact, his list of best statistical comps has a definite bronze tint to it.

Soriano, Berkman and Rivera all achieved great things before they were ever eligible for arbitration. But does Pujols have more in common with them, or with Barry Bonds ($16 million in 2004), or Carlos Delgado ($18.5 million in '04), or Todd Helton ($11.6 million in '04)? There's no precedent for giving an eight-figure salary to a player in his fourth year, but if anyone is going to get there, it's the guy with the words "Joe DiMaggio" all over his baseball-reference page.

My guess is that the Cardinals won't let that decision be made by three arbitrators; both they and Pujols are motivated to reach a long-term deal, and if nothing else they've established a range for a 2004 salary. It's the biggest spread on the board, but I'm pretty sure it will be closed before the case is heard. If it's not, though, I'd love to be at that hearing. "Well, sure, he finished high in the MVP voting, but did he ever win one?" "He's never done the job as a pinch-hitter: just .222 lifetime!" "We didn't want to bring this up, but he stiffed a waitress on a road trip in 2002."

Gagne's argument is less clear-cut. He has just two years of performance as opposed to three, and what he does is usually considered, rightly so, to be less valuable than what an everyday player does. Also, the Dodgers are going to have an easier time finding comps for Gagne--heck, teammate Guillermo Mota hasn't been much worse than Gagne the past two seasons, in a different usage pattern--than the Cardinals will for Pujols. On the other hand, Gagne has hardware--the 2003 NL Cy Young Award--and the hook of being far and away the most marketable player the Dodgers have had since Fernando Valenzuela.

The thing to remember is that fans of both players can be assured that the two will be in camp in late February, and in uniform Opening Day. No matter what Gagne and Pujols make in 2004, the game wins for having a mechanism in place to make sure that happens.

Joe Sheehan is an author of Baseball Prospectus. 
Click here to see Joe's other articles. You can contact Joe by clicking here

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