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Friday, February 12, 2010
Did Lincecum make the best move?
Here’s the details:
Lincecum gets a $2 million signing bonus, $8 million this year, $13 million in 2011 and the chance to earn performance and award bonuses. The agreement is subject to a physical.
In addition to his salary, he would earn $200,000 for pitching 225 innings, a figure he reached in each of his two full seasons. He would get $500,000 for each Cy Young Award, $250,000 for second, $100,000 for third, $75,000 for fourth and $50,000 for fifth. He also would get $100,000 each time he’s an All-Star, $100,000 for NL MVP, $75,000 for World Series MVP and $50,000 for league championship series MVP.
What would have happened had he gone to arbitration? If the Giants win, he’d get 8MM$ this year. And what about next year? Let’s say he would have been demanded by the Giants anywhere from 8MM$ to 12MM$, depending on circumstances. Let’s say 10MM$. He would have asked for anywhere from 10MM to 16MM, again, depending on circumstances. Let’s say 14MM$. Split the difference, and his expectation for next year is 12MM$. So, under this scenario, he gets 20MM$
Had he won the 13MM$ award, then next year, Giants would have demanded between 13MM$ and 15MM$, and he would have offered 15MM$ to 21MM. Let’s settle on 16MM$ as the likely estimate. So, under this scenario, he gets 29MM$.
To recap: Giants win arbitration award in 2010, Lincecum gets a 20MM$ 2-yr deal. Giants lose, Lincecum gets a 29MM$ 2-yr deal.
If each side thought they had a 50/50 shot at winning, Lincecum should haev signed for 24.5MM$. He actually signed for 23MM$ plus bonuses, which we’ll value at an expected 0.5MM$. That is 23.5MM$. For whatever reason, Lincecum thought he had a tough case, and settled for below the mid-point.
There’s also potentially the discount that Lincecum gave for being guaranteed 2 years, as opposed to going year-to-year. In my worst-case scenario I had at the top, I presumed something like Bedard or Sheets, where he’s out for half a season, but still will get something big in arbitration.
Overall, it sounds like a fairly fair deal, given the high-risk unchartered waters both sides were in.
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