The Indians & Arbitration: A Shift in Philosophy or Market?

The day is finally here, Tribe Fans. 

I’ve been writing about the impending arbitration cases of Shin-Soo Choo, Chris Perez, and (to a lesser extent) Rafael Perez for what feels like years.*  We’ve addressed how the process works and how the Indians can use it to their benefit.  We’ve discussed what these players might do and how the Indians can respond.  If you think you’re tired of reading about it, God knows I’m getting tired of writing about.

*Much of this piece was written before Asdrubal Cabrera and Chris Perez signed their one-year deals.  We’ll see, but the rest of the analysis should still hold up.

Luckily, today is the day that the Indians and their arbitration-eligible players exchange figures, so the guessing-game is almost over.  I’ll be back once the figures are made public to dissect some of the details, but today I wanted to address what has, for years, seemed like a fundamental tenet of the Indians’ philosophy when it comes to dealing with first-time arbitration-eligible players, and how and why it might be changing.

I’m sure you’ve heard that the Indians haven’t gone to arbitration with a player since 1991*: it’s a fact of which the organization has been conspicuously proud and about which they have been particularly vocal.  The reason they’ve been so happy to avoid arbitration over the last 20 years is twofold.  First, arbitration hearings are, by their very nature, contentious.   The organization has to tell young players that they’re not good enough to make as much money as they want, and both sides end up trying to make the other look bad so the arbiters will side with them.  It’s a nasty business, and best to be avoided if possible.  For purely altruistic purposes, it seems like the nice thing to do might be to eschew the entire process when you can.

*There were two arbitration hearings in 1991, actually.  Greg Swindell and Jerry Browne.  H/T to commenter ‘nobody’ for pointing this out in the comments of a previous post.

Second, and perhaps more importantly, the Indians are proud of their record because of what it has enabled them to assemble.  The club’s typical modus operandi for arbitration-eligible players is to “buy out” their arbitration years with a contract.  These contracts typically lock the player in not only for his arbitration years (there are three of them) but also for the first few years of his potential free agency.

As an example, consider Grady Sizemore.  Grady signed his current contract in 2006, and it was a six-year extension with a club option for 2012.  This deal carried him through his arbitration years and into his first few free agency years.  The upside for Grady is that he got more money early in the deal than he would have received from the league minimum and arbitration processes.  The upside for the Indians is that they keep him from getting to free agency until he is on the wrong side of 30—all at a cost-controlled salary.

And for years, this seemed to be the Indians’ philosophy: lock up players through their arbitration period and first few years of free agency.  In many ways it was a win-win.  The player got a guaranteed paycheck and the team didn’t have to deal with the competition that free agency encourages.

So why, this year, does it look like the arbitration streak might end?* Have the Indians changed their philosophy?  If we go to arbitration with any of these guys, is that a sign that Chris Antonetti has different ideas than Mark Shapiro?  Is it a sign that Dolan is cinching the purse-strings ever-tighter?

*There is, obviously, still a reasonable chance the streak continues.  Teams and players work out deals all the time after exchanging initial figures.  It’s possible this could happen with all four of our eligible players.  I wouldn’t bet on it, but it’s certainly possible.

I would argue that going to arbitration would not represent a change in fundamental philosophy.  The change (if there is one) is in the market, and not in the Indians’ priorities.  After all, why would the Indians change a philosophy that allowed them to lock up so many good players to club-friendly deals?

No, what appears to be changing is the market, and specifically, how agents have begun to affect these types of deals through tampering.  From what I’ve read, it’s increasingly common for agents to advise star players against signing away free agency years, and in return, the agents will guarantee their players money as a reassurance.

Let’s use Shin-Soo Choo as an example.  Suppose you’re Scott Boras.  Your job is to make your client as much money as possible (you do know that’s your job, right?).  Let’s pretend that the Indians want to offer Choo a four-year contract, covering Choo’s three arbitration years and first free agency year.  Let’s say they also want a club option for a fifth year at close to Choo’s current market value.  If you and Choo agree to that contract, Choo can’t let teams bid up the price of his services until he’s 33 years old.  And it’s really hard for a 33-year old player in the post-steroid era to sign a long-term, high-dollar deal.  They age too quickly, and you know this.  So do the teams.

So you don’t want to give up any of Choo’s free agency years; you tell him not to sign any contract that delays free agency.  But Choo is worried.  He says, “What if I get hurt?  What if I don’t play as well as I have been playing?  The Indians are offering me money now and it seems risky not to take it, even if it means I can’t ever get a big free agency deal.”

This is where you get a bit devious.  You tell Choo that you will personally guarantee him a paycheck through his arbitration years, if he agrees not to sign a contract that extends beyond.  This way, even if he does get hurt, he’ll still get paid by you.  You tell him that the real money lies in free agency (because it does; you’re smart), and that you’ll assume the risk of him getting hurt, so he doesn’t have to worry.  You also tell him that waiting until he’s 33 to become a free agent could cost him close to $100 million.  In other words, you act like a friendly bully—scaring and reassuring him at the same time.

I’m not really here to say whether I think this practice is right or wrong.  I don’t even know if MLB can do anything about it.  Just that it happens, and the Indians need to have a plan to deal with it.  Boras has likely told the Indians that they have only three options in regards to Choo: (1) three years of arbitration hearings; (2) a three year contract; or (3) a ten-year contract.  The Indians, realizing that (3) is stupid, are left to choose between (1) and (2).*

*I’ve written before that I believe option (1) is the best route for the Indians, due to Choo’s age(nt).

So if the Indians do end up in an arbitration hearing or three this month, it won’t be because they’ve shifted their philosophy toward retaining young talent; don’t be fooled by the “INDIANZ R 2 CHEEEP 2 SINE CHUE” faction.  No, if the team ends up in arbitration, it will likely be due to the agents who have finally figured out how to get the upper hand in these negotiations.

I hope the Cleveland fans will understand that, and recognize that going to arbitration might be the best remaining option.  But I kinda doubt it.