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April 13, 2005

Avoiding Arb

When To Sign and Not Sign Arbitration Buyout Deals

by Joe Sheehan

Long-term contracts have traditionally been seen as the province of star free agents. But as baseball teams look for ways to control costs, multiyear deals have been finding their way to younger players with less impressive resumes. Last week the Cleveland Indians signed catcher Victor Martinez, who has a mere 730 career at-bats under his belt, to a five-year contract worth $15.5 million. That deal came on the heels of Rich Harden's four-year, $9 million agreement with the Oakland A's; the 23-year-old has thrown just 269 career innings.

These contracts shift risk, as teams assume some risk that the player will not develop, while saving money if he does become a star. The player locks up millions of guaranteed dollars that might not be available to him if he doesn't perform well through his third season, the first point at which he has negotiating leverage.

For a young pitcher like Harden, the risk of arm injury is never far enough away--just ask the Cubs' Mark Prior. Locking up $9 million, while forgoing a chance to make a big score in arbitration after 2007 or 2008, is a reasonable decision.

The A's stand to benefit, too. The trades of Tim Hudson and Mark Mulder underscored the importance of securing the next wave of young guns at affordable prices. With Joe Blanton and Danny Haren still unknown commodities and farther from arbitration, Harden was the only obvious choice for an arbitration-buyout deal. With a sub-4 ERA and nearly a strikeout per inning in his first full season, the A's knew Harden could command a load of cash if he kept up that kind of production once he became arbitration-eligible.

The higher risk of signing a pitcher instead of say, a center fielder was then defrayed by the lower cost of the deal.The A's can only hope Nick Swisher, Bobby Crosby, Blanton, Haren, Dan Meyer, and other young talents force more of these decisions in the next couple years. Rather than a Moneyball-type strategy, it'll simply mean that the A's found the talented, young, cheaper commodities they crave with zero to three years of major league service time.

John Hart pioneered the practice of locking up young players and locking out arbitration in the early 1990s, when he was the general manager of the Cleveland Indians. Hart, faced with a bumper crop of young players on a rebuilding team, traded dollars up front to players such as Jim Thome, Carlos Baerga, Manny Ramirez, and Charles Nagy in exchange for the certainty of having them under contract for up to four seasons. The players Hart signed became the backbone of six AL Central championship teams, but as Jacobs Field filled the Indians' coffers, the low-cost contracts helped the team keep the lion's share of that money.

The size of the investment makes judicious use of the tool a must. Hart signed virtually every young player the Indians developed - in some cases, like Thome's, even before the player had become a regular. That worked well, but also left him with occasional busts, like Sandy Alomar Jr. Across the game, the rush to avoid arbitration led to some ill-advised agreements with players who would go on to disappoint. Ben Grieve signed a four-year deal with the A's after his 28-homer sophomore season. They dealt him one year into it, leaving the Devil Rays stuck for three years, $12 million, and just one year (2000) of even adequate performance.

What makes a player a good candidate for this kind of deal? The same factors that make a free agent a good candidate for a contract. You want to sign players who are relatively young.You want players who contribute in a variety of areas. You want players who will age well. You want players with versatile defensive skills who have room to move as their glove work wanes.

Great catchers, like great center fielders, shortstops, and second basemen, are also rare commodities. Like pitchers, though, they also bring more injury risk and more questions about longevity. The 26-year-old Martinez, who posted a .283/.359/.482 line last season, showed that he is a rare talent, getting the contract that comes with that kind of profile. As the Indians' young core comes together for a potential run in the next few years, Martinez's signing could prove as well-timed as the Thome and Ramirez deals of the last Indians regime.

The Indians had another breakout player step forward in 2004 in Travis Hafner, who has been mentioned as a candidate for this kind of contract. It would be a mistake; Hafner is 27, a DH, and his monster 2004 season--in which he hit .311 with a .410 OBP and .583 SLG--was almost certainly his peak. A long-term contract for Hafner would end up costing the Indians more than one-year deals will. Rather than throw longterm deals at every young player who looks good at the moment, the Indians and other teams need to seriously consider all the nuances and make the right decisions.

Two Blue Jays contracts illustrate this point. Just prior to the 2003 season, the Jays reached virtually identical longterm agreements with center fielder Vernon Wells (five years, $14.7 million) and third baseman Eric Hinske (five years, $14.75 million). Hinske, the more celebrated of the two at the time, won the AL Rookie of the Year award in 2002 with a .279/.365/.481 line. Wells, a long-time prospect, had just completed his first season as the Jays' regular center fielder with a less impressive stat line in '02 (.275/.305/.457).

Wells had everything else in his favor, though. He was younger than Hinske by a year,and possessed more speed and more defensive value as a top-tier center fielder. He had more of a prospect pedigree, having reached the majors briefly at age 20. His 2002 performance wasn't overly impressive, but unlike Hinske's, it didn't stand out from the rest of his career in a way that indicated it might be a peak.

Since signing the deals, the two players' fortunes have diverged. Wells was one of the best players in the AL in 2003, as Hinske's performance plummeted. In '04, Wells fought injuries, but still won a Gold Glove award and showed development at the plate, despite disappointing overall numbers. Hinske, on the other hand, continued to regress from his award-winning '02 season. As we open '05, Hinske is trying to hold on to a job as the Jays' first baseman, while Wells looks like a potential MVP candidate.

In other words, signing a 25-year-old poor defensive third baseman isn't as good a bet as signing a 24-year-old center fielder who can fly. When teams look to invest in a young player, they have to choose a package that includes age, talent, positional value and likelihood that the player has not peaked. Victor Martinez and Rich Harden both fit a profile that looks more like Vernon Wells than they do the Hinske/Grieve model.

This article originally appeared in The New York Sun newspaper. Baseball Prospectus contributes two articles a week to the Sun throughout the season. You can read those and other articles at daily.nysun.com.

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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