The Giants and star pitcher Tim Lincecum have agreed to a 2 year, $23 million deal. Reports say negotiating went down to the absolute final seconds. Apparently, the deal was struck in front of the doors of their impending arbitration hearing. Since they avoided the most interesting arbitration case of all-time, I'm glad the contract negotiations stayed dramatic down to the final seconds.
The deal is interesting. I didn't see one being struck, but kudos to whoever struck the three-year idea and went in a totally different direction. Lincecum will earn $8 million in 2010, and $13 million in 2011, with $1 million bonuses each year. Essentially, instead of arguing over what Lincecum is worth, the Giants will pay what they offered him this year, and then what Tim wanted (just a year later), along with a couple cherries on top (the bonuses). Considering this deal had to come together within the past 12 hours, I doubt it's much more complicated than that.
My initial reaction was disbelief. I didn't like this deal for Lincecum. I would have taken my chances in arbitration. Upon further review though, the deal is not a clear-cut win or loss for either side.
With the way arbitration works, players are pretty much guaranteed raises each successive year they hit it. The guiding principle behind arbitration is that it transitions players from the league minimum to their open market value.
So, if Lincecum had won his arbitration case today, he would have earned $13 million this year, and likely $14-15 million next year. Rumors are that he countered with 2 years, $27 million before agreeing to this deal, which would be right in line with what he probably would have earned the next 2 years with an arbitration victory. Clearly, for the Giants to agree to a deal, it would have to be for less than that.
If the Giants had won arbitration, Lincecum would have earned $8 million this year, and probably around $10 million the next year. They reportedly first offered 2 years, $21 million, so they finally were the side to flinch. Lincecum would not have earned that much with a Giants arbitration victory.
In essence, if the Giants had won arbitration, Lincecum would have got around $18 million the next 2 years, and if Lincecum had won he would have got around $28 million. Interestingly enough, $23 million is right in the middle of those two figures.
The structure of the deal is important too. At the end of this contract, Lincecum will still have two arbitration years left. At that point, it would still be surprising if he didn't get salary raises in the process, so it's significant that the second year of the deal is for $13 million. That is only a few million dollars off what he probably would have earned in 2011 if he had won arbitration this year, so this contract did not limit Lincecum's longer term earning potential in arbitration all that much.
Overall, Tim Lincecum obviously would have earned more money if he had gone to arbitration and won. However, he only gave up about a potential $5 million over the next few years, and maybe around $5 million more in his final two years of arbitration, for the security that the Giants would not win arbitration, which would have likely resulted in $20-25 million less over the next four years. From this perspective, the deal ultimately favors Tim Lincecum slightly.
I liked Lincecum's chances to win his arbitration case though. I'm not sure this deal would have been enough for me to not take my chances. It definitely would not have been enough without the $1 million bonuses each year. I'm guessing those were added as the two sides were right in front of the doors to their hearing.
Money isn't everything though. With how relatively reasonable Lincecum's offers were all along, I'm not sure he was ever that interested in milking arbitration for all it was worth. The completely new deal offered by the Giants in the final hours signals some urgency on their side too. Maybe when both sides saw those doors, they looked at each other and tacitly agreed that they weren't going in, no matter what.
Lincecum Update - The Plot Thickens
The Tim Lincecum situation continues to look more and more interesting, at least if you find the business of baseball interesting.
(That's your cue to stop reading if you aren't interested in the dollars and cents behind the game)
This morning, a report surfaced that the Giants have made a 3-year offer to Tiny Tim, worth a total of $37 million. If the report is true, Lincecum would earn $9.5 million in 2010, $10 million in 2011, and then $12.5 in 2012. Interestingly, Lincecum would still have one more arbitration year remaining after the deal is over, if he were to sign it.
Teams routinely negotiate with players up to arbitration hearings, so I would be more shocked if the Giants and Lincecum were not talking. However, I think that San Francisco would want to buy out all of Tim's arbitration years. Also, I think that Lincecum would pursue deals similar in structure to the ones Felix Hernandez and Justin Verlander signed. That makes a potential deal which would make sense for both sides (in my eyes at least) 4-5 years in length.
The report from this morning also says that Lincecum offered a counterproposal worth more than $40 million total. That shouldn't be surprising. Players just about automatically earn raises on arbitration, which is partly why this first hearing is so critical. Lincecum's hearing will slot him on a pay schedule that escalates from $8 million, or from $13 million. Over the duration of his arbitration years, that's likely a total of $20-25 million on the table. Therefore, if he wins his arbitration case (and as I wrote yesterday, I like his chances), he is just about guaranteed to earn around $45 million the next three years in arbitration. If Tim likes his chances of winning his arbitration case, he shouldn't settle for much less.
I have struggled to understand why the Giants seem so unwilling to give money to Tiny Tim. They have low-balled him from the start, and haven't budged that much.
Buster Olney might have finally supplied an answer in a few tweets this morning. He heard rumors that as few as one member from the Giants front office will attend the looming arbitration hearing. The "heavy lifting," as Olney put it, would come from Major League Baseball.
In other words, the owners don't want Tim Lincecum to get paid.
I don't get why they care so much. Let's say that Lincecum wins. He gets $13 million, and has set the precedent for what Super Twos with two Cy Young awards will get in arbitration. Sure, it's a ton of money, but how many back-to-back Cy Young award-winners are going to hit arbitration? Lincecum is the first ever, and this process has been around for about 30 years.
I'm not going to soften up on the Giants too much, but for different reasons now. If today's reports are true, it looks like they are pawns in a bigger game about limiting arbitration salaries. Who knows if the Giants really wanted to offer Lincecum $8 million. There is obviously pressure to keep the Lincecum deal rather moderate from the rest of the owners. I guess baseball's anti-trust exemption makes this kind of action legal.
Still, I think a team's obligations to its on-field product and fans comes before obligations to other owners, so I would like to see the Giants (or any team) negotiate in good faith with their players. It doesn't seem like that's going on right now.
I question even more why Major League Baseball cares so much about the Lincecum arbitration case though. Indeed, their are implications that come with such a massive amount of money at stake. However, this case is so exceptional. Are the Corey Harts of the world really going to compare themselves to Tim Lincecum in future arbitration hearings? Yes, a precedent will be set, but it might not even be a once-in-a-generation type of precedent. This sort of scenario is extremely rare.
On top of that, Major League baseball signed an odd agreement with the Florida Marlins a couple months ago, essentially forcing the franchise to spend more money. I wrote a post about it, and didn't care for the agreement all that much. Regardless of how I feel though, it's clear the intent was to make low-budget teams spend some more money on players. So, it seems a little odd that Major League Baseball would turn around a few months later and put a concerted effort into limiting a player's salary.
The timing is even more curious considering that the current Collective Bargaining Agreement expires in a couple years. That means negotiations are going to start up in earnest pretty soon, and you can bet the MLBPA will notice if the owners do all the arguing for the Giants in the Tim Lincecum arbitration case. Maybe that won't bother MLBPA head Michael Weiner all that much.
What if it does though?
I know it's all a "what if" game, but it all gets back to the point I made in my post yesterday. This is not a risk worth taking. Tim Lincecum, given his age and accomplishments, isn't asking for the world. He is being reasonable, especially by professional athlete standards.
If the Giants are getting pushed around by other owners, they should man up and get something done anyway.
On a bigger level though, the owners are taking a bad risk with this case. Is Lincecum's arbitration hearing worth risking bargaining relations over as CBA discussions start up? Doesn't it look a little bit like collusion when the owners argue why Tim Lincecum shouldn't get the money he wants, and doesn't the MLBPA have a long history of yelling about collusion? Really, stirring up those kind of long-standing ill feelings heading into CBA negotiations is worth limiting the precedent set in a once-in-a-lifetime kind of arbitration case?
Apparently it is worth it. I think the owners should hit Tiny Tim up for a joint, chill out for a few hours, and reassess what they are about to do.
(That's your cue to stop reading if you aren't interested in the dollars and cents behind the game)
This morning, a report surfaced that the Giants have made a 3-year offer to Tiny Tim, worth a total of $37 million. If the report is true, Lincecum would earn $9.5 million in 2010, $10 million in 2011, and then $12.5 in 2012. Interestingly, Lincecum would still have one more arbitration year remaining after the deal is over, if he were to sign it.
Teams routinely negotiate with players up to arbitration hearings, so I would be more shocked if the Giants and Lincecum were not talking. However, I think that San Francisco would want to buy out all of Tim's arbitration years. Also, I think that Lincecum would pursue deals similar in structure to the ones Felix Hernandez and Justin Verlander signed. That makes a potential deal which would make sense for both sides (in my eyes at least) 4-5 years in length.
The report from this morning also says that Lincecum offered a counterproposal worth more than $40 million total. That shouldn't be surprising. Players just about automatically earn raises on arbitration, which is partly why this first hearing is so critical. Lincecum's hearing will slot him on a pay schedule that escalates from $8 million, or from $13 million. Over the duration of his arbitration years, that's likely a total of $20-25 million on the table. Therefore, if he wins his arbitration case (and as I wrote yesterday, I like his chances), he is just about guaranteed to earn around $45 million the next three years in arbitration. If Tim likes his chances of winning his arbitration case, he shouldn't settle for much less.
I have struggled to understand why the Giants seem so unwilling to give money to Tiny Tim. They have low-balled him from the start, and haven't budged that much.
Buster Olney might have finally supplied an answer in a few tweets this morning. He heard rumors that as few as one member from the Giants front office will attend the looming arbitration hearing. The "heavy lifting," as Olney put it, would come from Major League Baseball.
In other words, the owners don't want Tim Lincecum to get paid.
I don't get why they care so much. Let's say that Lincecum wins. He gets $13 million, and has set the precedent for what Super Twos with two Cy Young awards will get in arbitration. Sure, it's a ton of money, but how many back-to-back Cy Young award-winners are going to hit arbitration? Lincecum is the first ever, and this process has been around for about 30 years.
I'm not going to soften up on the Giants too much, but for different reasons now. If today's reports are true, it looks like they are pawns in a bigger game about limiting arbitration salaries. Who knows if the Giants really wanted to offer Lincecum $8 million. There is obviously pressure to keep the Lincecum deal rather moderate from the rest of the owners. I guess baseball's anti-trust exemption makes this kind of action legal.
Still, I think a team's obligations to its on-field product and fans comes before obligations to other owners, so I would like to see the Giants (or any team) negotiate in good faith with their players. It doesn't seem like that's going on right now.
I question even more why Major League Baseball cares so much about the Lincecum arbitration case though. Indeed, their are implications that come with such a massive amount of money at stake. However, this case is so exceptional. Are the Corey Harts of the world really going to compare themselves to Tim Lincecum in future arbitration hearings? Yes, a precedent will be set, but it might not even be a once-in-a-generation type of precedent. This sort of scenario is extremely rare.
On top of that, Major League baseball signed an odd agreement with the Florida Marlins a couple months ago, essentially forcing the franchise to spend more money. I wrote a post about it, and didn't care for the agreement all that much. Regardless of how I feel though, it's clear the intent was to make low-budget teams spend some more money on players. So, it seems a little odd that Major League Baseball would turn around a few months later and put a concerted effort into limiting a player's salary.
The timing is even more curious considering that the current Collective Bargaining Agreement expires in a couple years. That means negotiations are going to start up in earnest pretty soon, and you can bet the MLBPA will notice if the owners do all the arguing for the Giants in the Tim Lincecum arbitration case. Maybe that won't bother MLBPA head Michael Weiner all that much.
What if it does though?
I know it's all a "what if" game, but it all gets back to the point I made in my post yesterday. This is not a risk worth taking. Tim Lincecum, given his age and accomplishments, isn't asking for the world. He is being reasonable, especially by professional athlete standards.
If the Giants are getting pushed around by other owners, they should man up and get something done anyway.
On a bigger level though, the owners are taking a bad risk with this case. Is Lincecum's arbitration hearing worth risking bargaining relations over as CBA discussions start up? Doesn't it look a little bit like collusion when the owners argue why Tim Lincecum shouldn't get the money he wants, and doesn't the MLBPA have a long history of yelling about collusion? Really, stirring up those kind of long-standing ill feelings heading into CBA negotiations is worth limiting the precedent set in a once-in-a-lifetime kind of arbitration case?
Apparently it is worth it. I think the owners should hit Tiny Tim up for a joint, chill out for a few hours, and reassess what they are about to do.
Really Dumb Risk
However, the deal also kept both sides from going to arbitration, and we are about to find out how much better that makes everything. That's because the most interesting arbitration case of all-time is about to go down: The San Francisco Giants vs. Tim Lincecum.
At this point, Lincecum is the Giants' version of King Felix (with apologies to Matt Cain and Madison Bumgarner, both great young pitchers in their own right). However, San Fran's version of the King has won back-to-back Cy Youngs. Nobody so decorated has hit arbitration, mostly because players (by the design of the system) hit it in their second or third full pro season. That's not much time to accumulate such honors, and usually it takes a little time for even elite players to become elite as well.
That's all to say that nobody is really comparable to Tim Lincecum when it comes to previous arbitration cases. The closest is the Ryan Howard 2008 hearing. Howard, 28 years old at the time, was the NL MVP in 2006, and hitting arbitration for the first time. He won his case in what was considered a landmark decision, and awarded a $10 million salary.
Lincecum has asked for $13 million, while the Giants have countered with $8 million. There is no middle ground in arbitration. The arbitrator picks a side, so it's up to Tiny Tim to convince the arbitrator that he's worth making another landmark decision over.
However, the Giants have practically paved the way to victory for Lincecum. That's saying something considering clubs historically tend to win arbitration cases (for a much more detailed look at arbitration history, check out this article at Hardball Times).
Let's stick with the comparison to Ryan Howard. Who is worth more money: a 28-year-old first baseman a season removed from an MVP award, or a 25-year-old pitcher that is the reigning Cy Young champ twice over? Even if the Cy Young is considered less of an award than the MVP, we are talking about two versus one, in succession no less, and entering arbitration as the reigning award-winner. All of those factors should be worth something.
On top of that, $10 million in 2008 is not the same as $10 million in 2010. According to historical salary data, The average salary of an MLB player was $2,944,556 at the end of the 2007 season, the most recently one completed before Howard's arbitration case. The average salary in 2009 was $3,240,000. Using these numbers as inflation statistics, awarding $10 million based on 2007 salaries would be like awarding $11,003,356.70 based on 2009 salaries. In other words, a player equivalent to the 2008 Ryan Howard would probably earn $11 million in arbitration this year.
Therefore, it is up to Tim Lincecum to argue why he is worth $2 million more than 2008 Ryan Howard, and up to the Giants to convince the arbitrator why he is worth $3 million less than that. Again, there is no middle ground. One side will win.
Even if an arbitrator decides that Lincecum is asking for too much money, how in the world are the Giants going to make a case that he is worth only $8 million? What are they going to say in that room, with Lincecum there to hear every word, that backs up their stance?
If I were the Giants, especially after seeing the deals Felix Hernandez and Justin Verlander got this offseason, I would have given him $13 million without much thought, if that's what negotiating came down to. However, realistically, Lincecum is probably willing to settle for a little less. $11-12 million seems highly doable. Why are the Giants risking what looks like an ugly arbitration case waiting to happen, especially with the relatively reasonable demands made by Lincecum?
This could have been Felix, and probably would have been if Bill Bavasi was still around. He never seemed that interested in signing Felix to a long-term deal. I'm glad it's not my favorite team about to take an unnecessary risk with a young star.