The pandemic has had a massive effect on MLB team revenues, which most expect to translate to a frigid free agent market. More quietly, a related battle looms: salary arbitration.
The first marker will be Wednesday, December 2nd. That’s when teams must decide whether to tender a contract to their arbitration-eligible players, often known as the non-tender deadline. Players with at least three years of MLB service but less than six – as well as a group of Super Two players – are eligible for arbitration, which is the established system in which teams and agents use comparable players to determine salaries. Every year, certain players meeting the criteria for arbitration eligibility are simply cut loose, or non-tendered, by teams that feel they’re not worth the salary that would come out of the system. Last winter, non-tenders included Kevin Gausman, C.J. Cron, Cesar Hernandez, Maikel Franco, Yimi Garcia, Taijuan Walker, and Kevin Pillar.
This winter those within the game expect a record number of non-tenders, as teams seek opportunities to slash payroll. The result is that the free agent market will be flooded with players, driving salaries down for everyone. Players, agents, and clubs expect this, creating pressure to consider “pre-tender” deals. Pre-tenders are contracts signed prior to the December 2nd deadline, often at a discounted rate due to the threat of a non-tender. Pre-tender deals exist somewhat outside of the arbitration grid, meaning they are not used for salary comparisons in the event of a hearing.
It’s also worth considering that players that are tendered contracts on December 2nd and will be the best and most valuable ones. Teams generally don’t relish the idea of forcing their franchise players into hearings, so the balance of power may swing back toward the players to a degree.
Arbitration eligible players who do not sign contracts prior to December 2nd but are tendered a contract will enter uncharted waters. That is, how should a 60-game season be treated? The team side could argue that Cody Bellinger’s raw numbers – 12 home runs and 30 RBI – should determine his salary. Bellinger’s agent could choose to extrapolate: his numbers should be treated as 32 home runs and 81 RBI, which he projected to do over a full season. Or, a simpler pitch to an arbitration panel would be the idea that “a full season is a full season,” and the exact number of games is irrelevant in the face of more prominent themes of role, health, and performance. In an arbitration hearing, the narrative each side presents is an important element.
It’s possible a solution lies somewhere in the middle, though I’d argue not exactly at the midpoint – it’s not as if Albert Almora hitting 12 home runs in all of 2019 is comparable to Bellinger doing so in 56 games. In our forthcoming arbitration projections, we plan to present multiple numbers, including a calculation that determines the player’s full raise and takes 37% of that, since 37% of a season was played. For players eligible for arbitration for the first time, their entire body of work is considered. For everyone else, there’s a philosophical divide in which teams focus on an appropriate “raise” amount while agents tend to hone in on their favored specific salary.
It could be argued that second, third, and fourth time arbitration eligible players already fell well short of earning the salaries warranted by their 2019 production. Bellinger was slated to earn $11.5MM in 2020 in large part due to his 2019 MVP season, but instead received about $4.26MM. Arbitration, after all, is a backward-looking system where you get paid for past production.
No one actually knows where arbitration salaries will fall on the spectrum from raw to extrapolated 2020 numbers. Considering the philosophical differences at hand, both sides carry significant risk of getting entrenched in their positions and pushing the entire market into hearings. For players, the risk is obvious – millions of dollars. Teams with large arbitration classes could have quite a bit of money hanging in the balance, impacting their approach toward free agency. In a hearing, a three-person panel hears from both sides and picks a winner – they don’t meet in the middle. There’s a good chance we’ll see a record number of hearings, so teams and agencies will be taxed in trying to prepare. While there’s always pressure on both sides to hold the line, it’s generally easier on the team side, since there’s only 30 clubs and they can work together. The players’ union naturally has a harder time getting agents to act as a cohesive unit.
The March agreement set forth that these arbitration salaries won’t be considered precedent. But while salaries this year will not directly impact future classes, the deals may have a compounding effect on this particular class as they move through the arbitration system. It’s unlikely MLB would agree to disregard 2021 salaries when considering what a player should earn in 2022, 2023, and 2024. That calls back to my point about the philosophical divide between raises and salary.
There’s also a larger backdrop to consider: how will the 2021 season shake out? When President Trump declared a national emergency in March, that gave MLB commissioner Rob Manfred the authority to suspend contracts in 2020, creating a scenario for a broad negotiation on the 2020 season. It seems plausible that with gate revenue far from certain for 2021, teams would seek to do something less than a full-salary 162-game regular season. As Jared Diamond of the Wall Street Journal wrote in September after interviewing the commissioner, “Manfred described the idea of playing 162 games next year without fans as ’economically devastating,’ adding that the losses ’would be a multiple’ of the $3 billion from this season.” It is unclear if MLB will have standing to negotiate a shorter season without a similar declaration of national emergency leading up to the 2021 season.
2020 brought months of fighting and a season like no other, and we’re set up for more of the same this offseason.
Time to find a new commish! We can use the COVID-19 excuse, furlough him, and let’s see him try to find another job! Just like the 2500+ employees of ML organizations!! Scouts/Coaches/etc…
The commissioner is approved and assigned by the 30 team owners of major league baseball. Sadly, we are stuck with this guy until team ownership decides they would be better served by someone else. Fans and even players don’t get a vote. Well, we COULD vote..kind of..with our wallets but that’s it.
It’s not all Manfred, it’s all of them from the players on up.
I don’t think it’d be all that hard for him to find another job.
I love how people comment to be 100% against players.
GMs/Onwers also agree to massive contracts & if you were offered $100mil+ you would also sign on the dotted line.
Arbitration this offseason should be viewed as a shorten season & players paid accordingly to a scale reflected of that. If a shorten season is played again then the salaries are adjusted but if not then the salary stays at 100%. MLB like any other Pro sports league will have a revenue dip for a bit. Everything will eventually go back to normal.
The Human Rain Delay
Eddie Rosario and Gary Sanchez have stood out to me for awhile as good barometers
I think we will see a lot Non tenders this year with the ability to pick up players of the same ilk in the bargain bin for half the price- That bin is going to be pretty vast as well
For awhile now we have been trending in a direction that leads to bigger market teams being able to buy talent via taking on money- There will be no bigger Opp than next year to flex that cash advantage – I think a team like Sf/Bos can benefit greatly here in their rebuilds with some niffy maneuvering taking on cash around the league
You brought up Sanchez, and that reminded me of this: Is it nearing the time that Kyle Higashioka should start getting more playing time over Sanchez? He’s obviously better defensively, and Sanchez has been back and forth with the bat each season he’s played. One year good, the next bad, and he flip flops each season. Kyle should at least get 1/3 time behind the plate even when Sanchez is healthy.
I don’t see non tenders happening as much as you think. If that were the case many guys would have been traded during the deadline, especially for teams out of contention.
Cause of the uniqueness of the season I doubt you see a huge increase in arb numbers. Which means teams will be more inclined to keep guys given the small increase in price while other financial commitments come off the books elsewhere.
Yankees for instance aren’t brining back Gardner and possibly Paxton. So any money they save from that will go towards arb raises for guys.
You also have to consider injuries guys sustained this year that also hurt their arb numbers overall.
I disagree marvel with the deadline implication
The reason many expect a large wave of non tenders is the lack of revenue flow, this year plus the unknown of what revenue flow will look like next year, fan tickets, merch, etc. as of now, players will get full salaries not 1/3 as well
So the idea is teams will cut more higher priced 2nd and 3rd year arb players, hoping/planning to re-sign them for less than arbitration calls for as free agents
We see it every year. Many expect it to be a larger wave though because 9M to the Indians(random example) may be too rich if they expect limited fan revenue
So then, take that a step further. If they are worried about 2021 payroll, why would a team maybe out of contention add a player making a decent salary to this years payroll, if they don’t think they need/want to ph the player in 21? Why waste assets and not just wait? Remember it could be up to year 3s of arbitration cycles with super 2s
Finally, teams may not want to lose the guy. They just don’t want to pay him what his arbitration would call for. If you traded him, no guarantee you get that chance
Let’s go team by team for a minute looking at their 28 player roster.
Arizona – Junior Guerra is in his 3rd arb season (I’m not sure if he has a 4th). Possible candidate, Ahmed, Peralta, and Marte are safe bets to keep.
Atlanta – Grant Dayton and Adam Duvall stick out as possibilities to me (I havent followed Dayton at all so maybe Braves fans think differently). Greene, Jackson, and Swanson are safe bets they are tendered.
Baltimore – Bryon Hallady probably doesnt get tendered. Hanser Alberto absolutely does. So does Mancini.
Boston- Triggs, Kickham, Plawecki, Godley most likely are non tendered. Barned Benintendi, Vazquez are probably tendered (if available).
Chicago Cubs – Bryant, Contreras, Baez, Schwarber are tendered. Winkler, Chafin, Tepera are toss ups due to Cubs need for pen arms.
Chicago White Sox – Colome and Marshal absolutely, McCann absolutely. Rodon, Sanchez, Mazara, Garcia most likely not.
Cincinnati – Bradley and Lorenzen are locks. Casalli, Descaflani, Bowman, Biddle, and Goodwin likely not.
Cleveland – Ramirez, Lindor, Wittgren, Nayquin are yes. Hedges (depends on Perez), Deshields likely not.
Colorado – Story, Givens, Freeland, Gray, Dahl are locks. Wolters, Estevez, Oberg, Diaz probably not.
I think you will see a trend with every team. Big name guys will be tendered. Fringe or below replacement level guys won’t. Which is what happens most seasons.
I don’t see teams getting rid of guys cause of 2020 finances; they’d normally let go of many of these guys due to performance, injury, etc in a normal year.
I don’t see teams letting pre arb guys go.
There will probably be a “few” guys who are let go we are shocked by, but many names on the list they’d be non-tender candidates anyways during a normal year given their production…..or kept due to their production.
Oh no. Pre arb guys are gold in the game atm
No point going back and forth guessing what’s going to happen. But I think we’ve already seen teams using pandemic as excuse/justification for cutting payroll and comments out of Clev+Pitt+Chi, among others, that indicate its likely to continue. Again everyone is making 100% of their salary next year and many teams have to prepare to not have fans, certainly not capacity. If you believe the STL exec who claimed 70% of revenue is from game day. You can see why teams are saying their revenue is way down
But I think the Cubs are the perfect ex of a team to watch. In a normal year those guys are all tendered. With lack of revenue over 2 years+ their building disaster, we could see a big name non tender… or more money driven trades than in recent years at the tender deadline
Maybe the best way to word what I think will happen is there will be more action around the tender deadline in the past.
Going to be a lot of “how does front office X value player A compared to Front office Y” stuff. Is a front office Y willing to risk negotiation with an agent and possibly multiple teams, or do you trade a mid/low level prospect To secure his rights? That type of action. I could be 100% wrong, we’ll see. But personally I expect teams to be looking to cut costs where they can
He always looks high to me
I also wonder how teams adding prospects to the 40 man rosters early this season due to there being no minor leagues impacts non-tenders.
My theory would be that these prospects pushed other players off the 40 man, meaning that there is a larger supply of those fringe type players out there. If there’s more bench/role players readily available for cheap, I’d assume teams will non-tender arb eligible players more and then replace them with the cheaper alternatives.
Thank you Tim for this great article. Some of this stuff I have thought about like the idea of arguing over numbers in the shortened season vs projection, but things like considering what the base salary should be considered that the raise would go from (full season vs prorated) is a very interesting point.
Reminds me of Charlie Finleys quote: let them ALL be free agents!”
…..”let them ALL be free agents!”
Exactly. And most don’t realize that it was the PLAYERS (and Miller) who fought against it…the more players in the pool, the lower the individual salaries.
There’s going to be a TON of non-tenders and free agents this year…a literal ton. Lots of opportunity for the have-nots to get better, quicker.
The question is, will they?
It would only take about 10 players for there to be “a literal ton” of non-tendered players, so I’m guessing it will be more than that.
Only about 6 if you include Pablo Sandoval.
If MLB is a $10B industry (in terms of revenue), how would not having fans cause losses that are ‘a multiple” of the supposed $3B loss this year? At that point, they’re essentially arguing nearly all revenue comes from fan attendance, which is bull. TV revenues are a large percentage.
Oh, that’s right – the owners lie.
While I’m no owner defender. It comes down to the math
Players will make 100% of their salary. Not 37% or whatever is it in 2020. That’s one huge factor
They are also playing 2.7x as many games. That’s 2.7x the travel expenses, game day expenses (possibly larger too with more travel in a normal schedule), etc
Remember, the Cards claimed 70% of their revenue came via game day. Whether you buy that or not, it’s fair to say a lot of teams revenue comes from game day
One other factor, owners probably operated 2020 thinking 2021 was going to be back to a relative normal. I doubt many planned to have this impact multiple years of games, but that’s reality now
Tim – I agree that this off-season, like the 2020 season itself, is quite unusual, and it may produce a large number of non-tenders on December 2. That would decrease the number of arbitration-eligible players that might go to a hearing in February. A record number of hearings, however, would need to exceed 35, the number of hearings in 1986 according to my research. The teams won 20 hearings and the players won 15. The number off cases filed in 1986 was 159. So, the percentage of filed cases that resulted in hearings was 22%. The number of arbitration-eligible players is likely to be 150-175 at the moment. If they is a high number of non-tendered arbitration-eligible players, that number will move to the low side.
I apologize for the typo in the last sentence. That sentence should read “If there is a high number of non-tendered arbitration-eligible players, that number will move to the low side.”