from Amazon
Saturday, December 10, 2011
Inside the Friedman/Moore negotiations
This is a fictionalized account, like Law & Order, but for sabremetrics.
{tchungh tchungh}
Friedman: Matt, we both know you are one of the best young pitchers in baseball, just behind Kershaw and Strasburg. So, we want to give you a long-term deal.
Moore: After 2 starts? Cool.
F: Now, as you know in baseball, for the first three years, we don’t have to give you much more than the league minimum. For example, Jonathan Papelbon earned close to 1.5MM$ for the first three years before he was arbitration-eligible.
M: Hmmm… right, and since he went year-to-year, I’d have to give you a discount, right?
F: Right, I’m thinking 20%? So, how about we give you, today, a guaranteed 1.2MM$ deal for 3 years… even if you don’t pitch at all!
M: That sounds good. How about a fourth year?
F: Well, your first arbitration eligible year, if you were pitching as good as Verlander, Felix, JJ, and Weaver, that would cost us 3.5MM$ to 4MM$.
M: Right, but I guess I have to give you a discount right? Especially since I might not even be pitching?
F: Exactly. I’m thinking, I dunno, 30%? So, how about I give you, today, 2.8MM$ for that year. There’s a decent chance your arm will even be blown by then.
M: Ok, so that’s 4 years for 4MM$, guaranteed? We’re on a roll. How about a fifth year?
F: In that case, the second-year of arbitration eligibility for that gang of four was around 7.5MM$ to 8MM$.
M: I know the drill. 40% discount right? Good chance I won’t be pitching?
F: You’re getting good at this. So, that’s about 5MM$. We’re at a guaranteed 9MM$ for 5 years.
M: And my last arbitration year? Since the gang of 4 gets 13-15MM$ for that sixth year, I can give you 50% off, so just guarantee me 7MM$ for that year and we’ve got a deal.
F: Well, I don’t want to guarantee that one. How about we do a team option?
M: How’s that going to work?
F: Well, I will give you 1MM$ right now, if you give me the option of paying you at price higher than you expected. So, if we exercise the option, we’ll pay you 8MM$, plus the 1MM$ guarantee. If we don’t exercise the option, you keep that 1MM$.
M: Hmmm… that only makes sense if there’s an 75% chance that you will exercise, right? 75% of 8MM, plus the 1MM is 7MM. Sounds a bit low, but I’ll take it.
F: Let’s keep going. How about the first two years of free agency? You know the big guys gets 20-25MM$ a year. You give me a 60% discount on the first year and 70% discount on the second. So, guaranteed, that would be 15MM$ for the two years total. But, I like team options.
M: Ok, I think I can do this one. You give me 4MM$, and I’ll give you two team options. For each one, you pay me 8MM$ if you exercise the options.
F: That sounds good. If we don’t exercise, you get 4MM$. If we do exercise, you get the 4MM plus another 16MM for a total of 20MM$. Since you said those years are worth 15MM$, that sounds fair.
M: Right. If there’s a 68.75% chance of you exercising, then it’s fair. That’s .6875 of 16MM, plus the 4MM, that gives us 15MM. Ok, Andrew, I’ve had enough of this!
F: Me too. Let’s tally it up. Ok, the first 5 years, that was guaranteed for 9MM$. Then the three team options are going to cost me 1 + 2 + 2 for 5MM$. That’s 14MM$ guaranteed total for the 5 years. The 3 team options, if exercised, will give you 7 + 8 + 8 = 23MM$. Add that to the 14MM$ guaranteed, and you can earn 37MM$.
M: Done.