Lincecum’s Historic Arbitration Case

The Giants avoided a historic arbitration case with ace Tim Lincecum last year, agreeing to a two-year, $23MM deal.  That contract just delayed the inevitable, as Lincecum will still be arbitration eligible after the 2011 season and the Beverly Hills Sports Council client is in line for an unprecedented payday.

Lincecum

No Comparables

When you talk to agents about Lincecum's upcoming arbitration case, you hear phrases like "uncharted waters" and "lands unknown."  There is no arbitration comparable; the 26-year-old already has two Cy Young awards.  Said one agent, "They will use all of the free agent numbers here, including C.C. Sabathia (even if he opts out), Cliff Lee, Roy Halladay and everyone else with an impressive, cool silver and black plaque hanging in their basement.  This negotiation will transcend arbitration and will be a mini free agency discussion."

The Raise Argument

All the agents I spoke to pegged Lincecum's 2012 salary in the $19-22MM range assuming he has a "normal" year.  That's normal by Lincecum standards – something like last year's 3.43 ERA.  That kind of season easily lends itself to an argument that Lincecum deserves much better than the $5.9MM raise Carlos Zambrano received in 2007, based on both platform year and career bulk.  Lincecum is coming from a $14MM salary in 2011, so his agent Rick Thurman could demand a $7MM+ raise.

Assuming cases for pitchers such as Jered Weaver, John Danks, and Matt Garza are settled first, they could have a bearing on Lincecum.  Most agents put Weaver in the $14-15MM range, but if he finds his way to $16-17MM, Lincecum's agent could argue for a bigger raise.

Another Cy Young?

Only eight pitchers have won three or more Cy Young awards, and none of them accomplished the feat by their fifth season.  If Lincecum wins the award this year, he has a good case to be the highest-paid pitcher of all time.  That means a salary beyond Lee's $24MM, perhaps well beyond.  If Lee is worthy of five years at $24MM per, how much extra would it be worth to reduce the risk to a one-year deal?  If Lincecum were a free agent after '11, coming off a Cy Young and limiting himself to a one-year deal, something like $28MM would be within reach.  Multiple agents believe another Cy Young would propel Lincecum to $25MM or more for 2012.

Thinking About 2013

Lincecum is a Super Two player, meaning he's eligible for arbitration four times.  If he lands a $25MM salary for 2012, the stakes would get even higher for '13.  At that point even a .500 year in '12 would almost have to result in a $5MM raise, putting Lincecum at $30MM and putting the Giants in a tough spot. 

Long-Term Possibilities

Lincecum might have been earning close to $20MM this year had the Giants not signed him to a two-year deal in February of 2010.  The team figures to be motivated to attempt another multiyear deal.  Lincecum, having already earned more than most pitchers who sign extensions during their arbitration years, might not be looking for the maximum number of years on an extension now.  How about four years $90MM – $18MM in '12, $22MM in '13, and $25MM in '14 and '15?  That'd allow Lincecum to reach free agency at age 31 and go for his first $100MM deal.

If he did try to maximize the term on a new contract, Lincecum could look for eight years.  No matter how you slice it, an eight-year deal would exceed Sabathia's $161MM and be the largest contract ever for a pitcher.

Conclusion

The 2011-12 offseason is packed with fascinating storylines, led by possible free agency for Albert Pujols, Prince Fielder, Jose Reyes, and Sabathia.  But we may still have plenty to talk about in January and February, with all eyes on Lincecum's contract situation.

Photo courtesy of Icon SMI.


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21 Comments on "Lincecum’s Historic Arbitration Case"


4 years 2 months ago

There’s a point where it’s too much money no matter who you are.

HerbertAnchovy
4 years 2 months ago

I certainly wouldn’t be thinking that if it was me receiving the payday.

4 years 1 month ago

What’s his value relative to what the franchise itself earns?  Could be a pretty fair number.  Think of all the financial wizards making twice that – that’s how their pay is determined.

giantsfan4life
4 years 2 months ago

I’m willing to bet the Giants will make a serious effort to sign Timmy long term this offseason. Somewhere around 6/100 would get it done, and they could easily backload it for after Zito and Rowand’s contracts are gone.

TheHotCorner
4 years 2 months ago

6 years $100million? Really? He could easily top that in free agency when the time comes.

bosox21
4 years 2 months ago

I don’t think 6/100 will be enough

4 years 2 months ago

Probably start at CC’s contract and work from there.

LordD99
4 years 2 months ago

All this is yet another reason Sabathia will opt out of his contract with the Yankees after this season. The Phillies made Cliff Lee the highest-paid pitcher in the game, giving him more money per year than even the Yankees offered Lee, and in the process besting Sabathia’s previous annual average. Knowing Lincecum will be awarded his new contract in the $23-million-plus range, Sabathia will use all that ammunition for another record-setting deal. He’ll get it, because the Yankees need him, and they have the money. He’ll be up over the $25-million annual average on a new seven-year deal. The question is how much over.

The other question is timing. I believe arbitration cases take place pretty much after the top free agents sign. That means Lincecum could wait for Sabathia’s new contract to be signed to push the potential value of his own contract higher. The Giants will know this, so they may want to avoid getting anywhere near arbitration and get Lincecum signed to his new deal sooner rather than later. It’s going to be expensive, and the longer they wait, the more expensive it will be.

kimofromkauai
4 years 2 months ago

The Giants should have managed his service time better (hind sight) and all this could have been delayed by one year. I recall he qualified as a Super Two by about 8 days, pitching for a team that was not in a pennant race. Then, maybe, a long term deal more favorable to the team could have been structured.

He is the poster boy for how to not manage service time for MLB.

4 years 2 months ago

can we just order zito to hand over his money to timmy

4 years 2 months ago

It’s ridicoulous the amount of money these players get. How many millions does one need to live by? Who pays for it but the fans with higher ticket, merchandise, food prices etc.
It take more then 1 person to make a franchise and if that player leaves for money purposes then so be it. He didn’t really appreciate his fan base anyways!!

4 years 2 months ago

Yeah, if only those players weren’t so greedy, the owners would definitely lower all those prices since they appreciate their fan bases much more than money.

Just ask the NFL players.

4 years 1 month ago

so the owners can make all that money? i’d rather see it go to the players at the cause of the money being made and not the people standing in luxury boxes drinkin cognac.

4 years 2 months ago

I don’t get this post’s assertion. I thought it was understood by both the players and management that the salary for arbitration years reflect a discount for the baseball team. Thus the rule of 40%/60%/80% that people use to value how much the player should get in arbitration. Thus if his value is $24M, shouldn’t his equivalent arbitration value be $14.4M for 2012? At $30M, that would be $18M in arbitration.

Not that these are not huge too, and historic, but this progression is my understanding of how arbitration discussions should follow. This article seems as hyperbolic as the ones that accompanied the last time he went into arbitration, there were so many people saying he was going to get $20M+ and he ended up with $8M.

Then again, given the $14M he is getting this year (I thought it was $13M; I guess he got a bonus for something?), that values his season at $35M (using 40%), dwarfing the numbers mentioned in this article.

The Giants have been interested in a long term deal. They had signed Lowry and Cain to them before. Unfortunately, whatever numbers they threw at Lincecum, his agents were uninterested previously, stating that they would prefer to go year by year. Then when arbitration happened, his agents said they were interested in a long term deal, but then ended up at 2 years with the Giants. I would love to go longer term (4-5 year deal) but people act like 8 years is not a risk: it is, and it is a huge risk. Even 4-5 is too much risk for me, but I know that is how the market works.

Jason_F
4 years 28 days ago

The problem with the 40/60/80% corollary is that Lincecum is a super two.  There’s one year missing.  Is the 40% assigned to the first arb year and it is assumed the player makes 100% of his market value in the fourth arb year?  Or is he supposed to earn 20% (or some other figure) of his market value in his first arb year?  

I think $24 million is a fair assessment of his market value given Lee’s contract, so 40% is $9.6 million, which is roughly equivalent to what he received in his first arb year (actually $9 million if you prorate his bonus).  Second year would be $14.4 million, third at $19.2 million and fourth at $24 million.

I just can’t imagine any pitcher, given their attrition rates, assigned a value of $30 million (much less $35 million, for that matter) per year.  I have to believe that the fourth year arb eligible players expect to earn their full market value in that season.

4 years 23 days ago

I am aware that Lincecum is a super two.  That was an important piece of fact two off-seasons ago when he was super-two eligible.  Not so much now that he’ll be in his second to last arbitration year with regards to the 2012 season.

There is no standard that I’m aware of regarding that first extra year of arbitration when you are super-two.  My understanding is that the 40%/60%/80% applies to the last three years of arbitration, no matter whether you are super-two or not.  I’ve used a 20% for the super-two year before, as that would be the logical progression, just to get an estimate, but again, I’ve seen no standard for that yet.

Thinking more about this, another logical progression for this, given that super-two implies that the player is so close to arbitration that he gets an extra year, might be 30%/50%/70%/90%.  

That would actually work for Lincecum, his $8M then $13M original amounts would result in $26.7M and $26M in equivalent actual salary, and now $28M if you include the $1M bonus for this season.  That would be very close to the $24M that Lee got (and I think most people would view Lincecum as better than Lee and hence it would be higher).  $28M times 70% would equal $19.6M for 2012 and $25.2M for 2012, which is pretty close to the contract that was proposed in the original post as a 4 year contract offer.

But I still think the speculation that the Giants might have to pay $25-30M in arbitration is still hyperbole.  

The 4 year contract proposed, however, appears to be in the ballpark, and I think that is the most likely outcome, because while arbitration might lead to such high numbers in speculation, the Giants will likely try to mitigate that with a longer-term contract where the numbers will be so big that Lincecum and his agent would not want to risk getting to free agency.  

$90-100M for 4 years is probably that midway point between what they potentially might get and the risk of losing that if Lincecum were to be injured and unable to perform (like Lowry or Brandon Webb or Dontrell Willis).  I think 3 years would be too little unless the Giants are paying $25M per each season, they will need the 4th year to balance out the money on a per-season basis plus to make the total package big enough to tempt Lincecum and his agent.  That, I agree with the original post.

dyanna1
4 years 22 days ago

Lincecum certainly deserves more than he is being paid now. If it wasn’t for him I don’t believe that we would have won the World Series last year. He deserves more.Two Cy Young awards at the age of 24…of course he does.

East Coast Bias
4 years 2 months ago

Just don’t change your name to kmarx01.

4 years 2 months ago

You were pretty good at writing crappy love songs.

4 years 2 months ago

As a Giants fan I agree and would probably try for a 6/140 type deal with incentives (1MM for 200IP in a season, 1MM/CY, 500K/2nd Place CY, 200K/3rd Place CY, etc)

East Coast Bias
4 years 2 months ago

“4 yr / 96 mil extension this offseason. Would equate to 20/24/28/28 but they could divide it out to be 24 each year.

There are too many numbers in your username to get the math wrong.