Rays Prove to Be Big Winners in Salary Arbitration Once Again

The saga is over. After agreeing to deals with David Price and Sean Rodriguez to avoid arbitration earlier in the offseason, the Rays finalized contracts with their remaining four arbitration-eligible players, Matt Joyce, Ryan Roberts, Jeff Niemann, and Sam Fuld, on Friday, the deadline for teams and players to exchange figures in advance of an arbitration hearing. The four players they managed to sign on the last day was tied for the second-highest number in baseball with the Cleveland Indians, trailing only the Atlanta Braves. But not only did the Rays get those cases done- they wound up coming out way ahead for the second year in a row.

The last two years, Matt Swartz at MLB Trade Rumors has made projections for each arbitration-eligible player in baseball, and his projections have been astonishingly accurate. Teams have even used his projections in hearings. You can almost say that Swartz has been able to determine what players have truly been worth the past couple of years. Obviously Swartz’s model isn’t perfect, and there’s one factor he can’t control- the negotiating abilities of the individual teams along with the players and their agents. As it so happens, the Rays have done well better than the average team against Swartz’ projections.

You would expect teams to give their arbitration-eligible players a salary higher than the projection half the time and lower than the projection the other half of the time. The past two seasons, Andrew Friedman and the Rays have signed their players to lower salaries 9 out of 12 times. If the true proportion of times that the Rays should have negotiated lower values is really .5, the odds of that happening are 24 to 1 (.0416 p-value). Not statistically significant, though, was the the difference between the value predicted by Swartz for the total value the Rays would dish out to their arbitration-eligibles and what the Rays actually paid the last two years, coming in at 7.7 to 1 odds (.13 p-value), which is not a common result but still would happen a decent percentage of the time by chance alone. But that’s before we factor in David Price’s 2013 contract.

Swartz’s model biggest miss from the Rays’ arbitration-eligible players from after the 2011 season was David Price, who was projected to earn 7.8 million dollars but the Rays somehow got him for just 4.35 million. This year, though, the Rays actually paid Price 10.1125 million dollars, over $600,000 more than the 9.5 million dollar value that Swartz projected. But wait a second- the Rays formatted the deal so Price received a 5 million dollar signing bonus and a 1.1125 million dollar base salary for 2013, with 4 million dollars deferred until 2014. Because the money is deferred, the Rays could actually saddle that money onto another team should they trade Price. While Rays fans don’t want that to happen (Price is an awfully good pitcher), if you subtract 4 million dollars from Price’s total salary for 2013 because it’s the differed money, the odds of the Rays paying as little as they did to their arbitration eligibles if what they really should have paid was Swartz’s projections was 21 to 1 (.0474 p-value), nearly as unlikely as the odds of them going 9 for 12 above.

Maybe the past two years has just been a major outlier. When you have 30 MLB teams, one or two of them is going to do well better than average by blind luck. But there’s plenty of reason to think otherwise. In arbitration hearings, teams have won 286 out of 500 times, a .572 winning percentage. The Rays are 6 for 6. The odds of that occurring is 59 to 1 (.017 p-value). Wait a second- plenty of teams that have .572 winning percentages  (93-win pace) or worse on a season win 6 games in a row. But when you play 162 games, you have plenty more opportunities to win 6 straight. The Rays have had 6 opportunities and won them all.

We’ve heard so much about how the Rays model their team off of Wall Street business strategies (with of course Jonah Keri’s The Extra 2% immediately coming to mind). A major part of any business, especially on Wall Street, is negotiations. Correlation does not imply causation, but the Rays’ record versus Swartz’ projections and their perfect mark in arbitration hearings seems to show something that we already know: Andrew Friedman and the Rays negotiate better then anyone else in baseball. It’s one of the many little things that has helped the Rays become a perennial contender the last five years with a payroll among the lowest in baseball.