July 24, 2014

Justin Masterson’s offer might be fair, but that doesn’t make it good: The Diff

Angels Indians BaseballIt’s a popular opinion to dislike the Dolan family for their ownership of the Cleveland Indians. Ever since purchasing the team in 2000, they’ve been characterized as cheapskates unable to consistently afford to compete in the non-salary cap landscape of Major League Baseball.

Last night’s news that Justin Masterson negotiations have ended for the spring certainly didn’t help that narrative. Per the reports, the team’s ace had been eager to sign a short-term deal to stay in Cleveland after narrowly avoiding arbitration for a final time. Now, it appears he’ll at least test the open markets this winter.

Despite the popular opinions, there actually might be some logic to what the Indians might (or might not) be doing with this maneuver. There might be sound reason for hesitation with Masterson’s reported three-year $52 million offer. Let’s explore some reasons why.

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photoJason Kipnis and Contract Extensions (Feb 13)
The Cavs and Poor Shot Selection (Feb 5)
The Cavs and Lost Momentum (Jan 29)
CJ Miles, Difference-maker? (Jan 22)
Tribe Pitching Decisions: A Review (Jan 8)
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Some MLB franchises have unlimited spending abilities; others do not. In an ideal world, the financial playing field would be completely even, and that includes separated massive TV dollars that are greatly benefiting teams like the Dodgers and Orioles. In such a market, a professional sports team in Cleveland will usually never be able to spend with the New Yorks and Los Angeleses. It’s not sustainable. It might not be fair, but that doesn’t make it logical to always spend more.

On Opening Day 2013, the Indians were scheduled to pay $80.6 million on player salaries, per the great Cot’s Baseball Contracts resource website. For 2014, they’re projected to spend about the exact same, albeit slightly less. Here’s a breakdown of those dollars, which should almost be 100% set:

2014 indians salary

The changes are pretty significant from last season, actually, despite the fairly similar final numbers. Gone are the $20.3M that were set to be paid to Chris Perez, Mark Reynolds (later cut) and Brett Myers (later cut). Nick Swisher and Michael Bourn alone received $10.5M in scheduled pay increases. Asdrubal Cabrera, Justin Masterson and Carlos Santana all got some pretty big raises too.

But salary dollars don’t exist in a vacuum. That’s a given. Most teams likely (should) think about payroll within three-year windows or other such rotating frames of moderate flexibility. So how does the team’s 2015 look so far? Well, we know that the $10M owed to Cabrera will be off the books. And Masterson’s $9.76M is up in the air. How about everything else?

2015 indians salary

Even with losing the nearly $20M in those two possible free agents, the team’s salary is only about $4M less. With these projections, I’m estimating about $15M in internal increases. The bulk of those increases are due to arbitration ticks for Santana, Jason Kipnis and Michael Brantley. Those are looming long-term financial topics that will continue to bump up the salary figures.

That leaves the Indians at a presumed base of about $76M for 2015. Will they be able to jump all the way up to the $92-96M range? Should they? Should just three players (Swisher, Bourn and Masterson) account for about half of the payroll? These are difficult questions to answer. To properly answer them, any organization should require teams of analysts, scouts and contract experts. Any rational owner would require crystal clear rationale for increasing payroll so drastically.

Obviously, prospect superstar Francisco Lindor should join the fold at a minimum price in 2015, taking over Cabrera’s lofty salary. A replacement will be needed for Jason Giambi’s occasional playing time. And other changes will certainly occur because roster turnover is normal.

But before even evaluating the fairness of $17M annually for Justin Masterson, can the Indians actually do such a deal? It’s likely their maximum for 2015 Opening Day player salaries will increase and be more than $86M, almost regardless. That might be inevitable. But anything much more than that could be a bit too much too soon with other increases on the long-term horizon as well.

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Fangraphs’ Dave Cameron wrote two weeks ago about this exact topic. His article title: “Is Justin Masterson actually being benevolent?” The conclusion:

“The value to the Indians here probably isn’t the total cost, but instead, the chance to get that fourth year on a team option. Even if Masterson simply agreed to sign for 3/$45M with no option, it’s not clear that this is a large enough discount for a mid-revenue team like the Indians to take the risk of doing the deal a year ahead of time. After all, the Indians aren’t a team that can afford to buy a ton of market priced wins, and so to take on the risk of his 2014 health and performance, they should get a real discount over what Masterson would be expected to get as a free agent.”

As many have done, Cameron compared the negotiations to Cincinnati’s recent deal with Homer Bailey, who is one year younger. Bailey also was scheduled to be a free agent at the end of 2014. He received a five-year $90 million base deal with a $5M buyout or a $25M sixth year team option. But just because Masterson’s offer seems like a deal in comparison, does that necessarily make it a good one?

For his major league career, the Jamaican/Texan actually has a perfectly average 100 ERA+. Overall, he’s been average. Of course, average is valuable. Specifically, Masterson has had two very good seasons – he produced 4.1 bWAR in 2011 and 3.4 bWAR in 2013. But in all of his other remaining career seasons (about three full starter years), he’s contributed only 3.5 bWAR. He’s a valuable pitcher, but not necessarily that valuable. He’s not really an ace, even with the arbitrary connotations of that title.

The average market value of a free agent win is about $6-8 million, based on calculations. So yes, if Masterson can produce 7.5 WAR for his age 30-32 seasons, then an overall $52M valuation seems fair per the market norms. Risk is somewhat high because he’ll be getting older, he’s been an inconsistent year-to-year performer and we don’t know what 2014 might bring. The upside isn’t necessarily that high. Overall, it’s fair.

This isn’t to say that Masterson might provide some type of marginal value for the Indians, who might need his extra 2.5 WAR annually to bridge the gap from fringe mediocrity to legitimate contender. He also might provide even more value to the team’s clubhouse than any possible replacement. This was a point that was well stated by Wahoos on First’s Ed Caroll.

But the Indians are in no set pressure to reach a deal on Masterson’s terms this spring. They control the board. They’ll try again after the season. And if the likelihood of a deal isn’t high, they’ll be able to use the team-friendly trump card: the dreaded one-year qualifying offer. Ubaldo Jimenez and Scott Kazmir likely each were worth the one-year $14.1 million offer this past season. They only offered it to Jimenez. In return, they tagged him with draft pick compensation, hurting his free market value.

The qualifying offer will likely be a tad bit more next offseason. As long as it exists within the framework of free agency, however, teams still should use it to control their own players. And the Indians would be foolish not to if negotiations are looking sour again with Justin Masterson.

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Justin Masterson’s reported offer is fair. There’s no dancing around that fact. It’s somewhat rare for a starter in his prime to be so upfront about his desire to stay with a small-market team during his free agency seasons. Is it appreciated by the team? Maybe. The media politicking might a strategic tactic used by the player’s camp for reasons unknown. And that might be because the team has shared the deal isn’t necessarily that good.

The Indians can compete in 2014 and play this situation by ear for the next six months. If the complementary talents do not develop quick enough, it might not make as much sense to invest as heavily in Masterson’s 2015-17 seasons. But if Danny Salazar can be an actual ace, Corey Kluber can produce a full season of No. 2-caliber stuff and others thrive? Then Masterson might be more expendable than fans all first thought. And that might just be OK.

Photo: AP Photo/Tony Dejak

  • The_Real_Shamrock

    Going to be difficult to convince a team to give up much for a guy with a one year deal. Sorta kinda like Sabathia and Lee revisited except at least those two had the words Cy Young in front of their name.

  • The_Real_Shamrock

    It’s not even about the money it’s about what you do with it which is why the great debate over Masterson’s worth. The thing I don’t get is I’ve said from the time the Indians got him, even when he had the one great season, he wasn’t a true #1 and yes I was in the minority. Now when it comes time for the Indians to pony up all of a sudden there are fewer Masterson fans and more of these fiscally responsible Indians fans. I get that Masterson shouldn’t be given whatever he desires or be overly paid but the facts are, as of today, he is the Indians best pitcher. It’s debatable whether he’s been their best pitcher since being acquired but I think he’s definitely in the running. That’s not exactly something to be joyous about but it’s the truth. When it comes time to pay him now all of a sudden he isn’t so popular. I don’t know maybe it’s me.

  • Jason Hurley

    I guess a lot of that doesn’t really matter – when it comes down to it, fans need to be realistic with their expectations. Masterson is still plenty popular, and to your point, is likely the best starting pitcher on this roster as of now (at least, the one the majority are most comfortable getting the ball in a Game 7-type situation). But, the point is that the “fiscally responsible” Indians fans that (I think?) you’re blasting are the same ones that think Masterson is a swell guy and a good pitcher. But, it’s not just about happy feelings at this point for fans or for the franchise – it’s about determining value. The more realistic fans realize that it’s an opportunity cost situation – if you spend $16-$17 million on Masterson, you’re not going to be able to spend it elsewhere. This franchise isn’t the LA Dodgers – it’s just not – it doesn’t print money. Masterson the player is likely still very popular. Masterson the commodity is the thing people are a side-eyeing a little bit.

  • nj0

    Just like Masterson….

  • Dave

    A serious question about this: Why are we paying John Axford $5.5 million? That seems like we’re far overpaying for a fellow who I’m sure is a decent bullpen arm, but isn’t worth 2 Zach McAllisters. Also, why is Marc Rzepczynski getting starter’s pay? If you don’t make those deals, all of a sudden the money to pay Masterson shows up.

  • The_Real_Shamrock

    I knew you weren’t a TRUE Tribe believer!!!!

  • http://www.wahoosonfirst.com Ed Carroll

    Axford’s 2015 salary is an estimate; he’s actually going to be arbitration-elligible, and he can’t make less than his $4.5 million 2014 salary ($5.5 mill seems like a decent guess). It’s important to note the Indians are NOT on the hook for any 2015 salary unless they choose to be (think the Drew Stubbs situation this offseason); if they want, they can always non-tender him, too.

    Rzepczynski isn’t making starter money – you can’t get a good starter in free agency or arbitration for $2 million. Also, that 2015 number is again an estimate.

    As to your point on Masterson, that only frees up potentially $7.5 million, which is less than what Masterson is making this year. Not sure it would actually do any good there. Hope this helps!