Arbitration Breakdown: David Price

Over the next few weeks, I will be discussing some of the higher profile upcoming arbitration cases. I will rely partly on my arbitration model developed exclusively for MLB Trade Rumors (read more about it here), but will also break out some interesting comparables and determine where the model might be wrong.  To see projected salaries for all arbitration eligible players, click here.  To follow all the deals in advance of the January 18th exchange of figures, bookmark our arbitration tracker.  

I’ll start by looking at the reigning American League Cy Young, David Price.  This post was written before Price's agreement was announced today, so we decided to publish before his salary is announced. My model predicts that Price will earn $9.5MM in arbitration in 2013, a $5.15MM raise over his 2012 salary. Price earned $4.35MM last season while compiling a 20-5 record, thanks to a 2.56 ERA in 211 innings. Price and the Rays presumably were looking for comparable players in the pitcher’s service class—second-time arbitration eligible starting pitchers. There are very few players like Price, so they needed to stretch the criteria to find eligible players. Cy Young Awards are very important in arbitration cases, but pitchers who win them rarely reach a hearing or even settle for one-year deals. Even among players with the approximate three to six year service time window for arbitration, many elite pitchers who win Cy Youngs had already been signed to multi-year deals before winning (e.g. Zack Greinke, Felix Hernandez). The last time a reigning Cy Young Award winner became eligible for his second year of arbitration was eight years ago, when Johan Santana got a $3.9MM raise as part of a multi-year deal. Cases that old are rarely considered in hearings, especially if they were part of multi-year deals.

The only pitchers in recent years who have been eligible for arbitration after getting a Cy Young have been Tim Lincecum and Clayton Kershaw, both of whom were only eligible for their first year of arbitration and both of whom signed multi-year deals in lieu of reaching an agreement. Neither is a good comparison for Price. However, it is worth noting that Lincecum’s and Kershaw’s first-year salaries of $9MM and $7.75MM are between $3.4 and $4.65 million more than the next two non-Cy Young winners in recent years (Cole Hamels in 2009 and Price himself in 2012). Since Lincecum’s larger raise was partly due to having two Cy Youngs already, this suggests that the extra value in winning a Cy Young is probably about a couple million dollars. Remember that Lincecum’s and Kershaw’s numbers were also much better than Hamels’ and Price’s, so not all of the salary gap can be explained by the Cys.

There have been no second-time arbitration eligible starting pitchers in the last several years to earn a raise like the $5.15MM that I have projected for Price, which makes sense because there have been no comparable pitchers. The largest single-season raise in the last six years for a second time arbitration eligible starter went to Jered Weaver in 2011, who got a $3.105MM raise. However, he only had a 13-12 record and a 3.01 ERA in 2010, making him clearly a poor match.  Weaver was not the only pitcher who got a pretty big raise in his second year of arbitration on a one-year deal—slightly smaller raises went to Shaun Marcum ($3.1 million), Francisco Liriano ($2.7 million), and Jonathan Sanchez ($2.7 million).

Felix Hernandez might have been a better comparable in 2010, when he and the Mariners exchanged arbitration figures to follow up on his $3.85 million salary. Hernandez had just finished second in Cy Young voting, with a 19-5 record and a 2.49 ERA in 238.2 innings. The Mariners proposed a $3.4MM raise to $7.2MM, while he instead asked for a $7.7MM raise to $11.5MM. He ended up signing a five-year deal, which paid him just $6.5MM in 2010, but splitting his signing bonus between his two remaining arbitration eligible years, this can best be treated as an $8.25MM salary, a $4.4MM raise. Obviously, multi-year deals are different than one-year deals, so they are not ideal comparisons, but in the case of Price, this could be useful. The Mariners proposal of $3.4MM could be cited as a floor as well, since he did not have a Cy Young and Price does. Technically, if my assumption about how to distribute Hernadez’s signing bonus is correct, I could see an argument for a $4.4MM floor for a potential raise for Price.

Justin Verlander could also be a clue as to the floor for Price’s raise. He finished third in Cy Young voting in 2009, while receiving a $3.675MM salary in his first arbitration year. Verlander signed a multi-year deal in lieu of a one-year agreement, but beforehand he had proposed a $5.825MM raise and the Tigers had suggested a $3.215MM raise, which was pretty close to what he received in his multi-year deal.

It’s also worth noting that the largest salary raise for any arbitration eligible starting pitcher (other than first-time players) went to Cole Hamels in 2012, who got a $5.5MM raise. However, he was eligible for the fourth year, so he is definitely not a comparison. Raises grow over time. While hitters are not comparable either, it’s worth noting that the largest raise for a second-time eligible hitter was $5.65MM for Jacoby Ellsbury in 2012.

All of this points to a number that is considerably larger than a $3.5MM raise for Price, while the floor is much less clear. The Cy Young Awards of Lincecum and Kershaw in their first year of eligibility seemed to add close to a couple million to their salaries, so it seems like Price could probably get something like a $5MM raise, but really anything in the $4.5-6MM range would not surprise me for a case as unique as his.