Context For The 2020 Arbitration Class

The just-finished flurry of arbitration news settled a bunch of price points. Some are reasonably notable; many were already largely anticipated and accounted for. More than ever before, the deals were closely fought (is it me or did they used to settle at rounder numbers?) and closely held (heaven forbid anyone learn anything any second before absolutely necessary). But at the end of the day, quite a few hit the books.

But what of the unfinished negotiations — those that did not come to resolution? I’m going to endeavor to give some context to the slate of arb-eligible players who’ve exchanged figures with their respective teams.

As you may have heard, or picked up from following along for some time, the arbitration process has evolved quite rapidly over the past several years. Once upon a time, there weren’t many hearings at all. There weren’t any in 2013 and we had only a few piddling disputes to be heard in 2014. The action picked up quite a bit in the ensuing winter, as 14 cases went to hearings — some for a decent bit of coin. But things went back on ice in 2016, when there were four hearings, none with more than $550K at stake.

Teams and players exchanged figures plenty often in those days. There were typically more than thirty unresolved cases when the mid-January deadline rolled around. And, clearly, some cases did go to hearings. But for most teams, there was a willingness to continue a dialogue well past the exchange of figures. In many situations, the exchange of figures was just a step towards a negotiated resolution.

The “file and trial” concept certainly existed in those days, but the majority of teams didn’t employ it. Now, it’s functionally universal. Many clubs will keep talking, but most will only do so if it involves future seasons beyond the one subject to the upcoming hearing.

Let’s take a closer look at the recent numbers to see this in action. After the dust settled yesterday, we were left with twenty unresolved cases — far fewer than would’ve remained un-done even a few years ago. It’s possible that all could go to hearings, Jeff Passan of ESPN.com suggests on Twitter, though surely there’ll be some kind of multi-year breakthrough in at least a few cases. That’s almost certainly what it’ll take to avoid a hearing, as we’ve seen a near-complete elimination of pure settlements after the exchange of figures.

Back in 2017, among the 29 instances of figure filing, seven were eventually tied up with single-season arb settlements. Three more involved arbitration-only extensions or option additions. There were four full-blown extensions. And just more than half of the cases went to trial, with the teams edging the players 8 to 7 in outcomes.

In the ensuing year, there was yet further creep. Among the 27 filing situations, all but five went to trial. (The players prevailed a dozen times.) One open matter was closed with a long-term extension, another was resolved by an arb-only deal, and three were settled in the traditional, one-year manner.

In 2019, there were only 14 cases in which figures were exchanged. Among them, only two were settled — both with contracts that included club options that created cost certainty in a future season. Two more involved significant, multi-year extensions. The balance went to hearings, with the players winning six of ten times.

The primary takeaway, then, is that the remaining contractual spreads are likely to go one way or the other — unless a multi-year arrangement of some kind can be arranged. That’ll actually be relatively more difficult now than before for a different reason. In 2020, six of the twenty filers are in their final season of arbitration eligibility. The prior classes had far fewer: 2 of 14, 2 of 27, and 4 of 29. Working out deals involving seasons of presumptive free agency is quite a bit more complicated.

So, is this an especially high-stakes year? In some regards, yes. It features the largest absolute case we’ve seen in some time in George Springer, whose filing figure of $22.5MM is a whopping $5MM north of the team’s counter. Million+ dollar spreads are fairly rare. Three were settled in 2017 (Drew Pomeranz, Pedro Strop, Jake Diekman). Two more settled in 2018; Springer also avoided a hearing, agreeing to a two-year deal. But Mookie Betts and Trevor Bauer both won trials that year with big money at stake. Bauer and Gerrit Cole repeated the feat in 2019. In 2020, there are three big-money cases, with Josh Hader and J.T. Realmuto joining Springer with voluminous spreads. There are also some big spreads in relative terms. The Brewers’ two open cases — with Hader and fellow lefty Brent Suter — each features 50+% spreads (as against the team number) in value. We’ve rarely seen that kind of spread, though there was one greater that went to trial: Dellin Betances, in 2017. He lost that memorable case. But his agents at Excel are still willing to duke it out; per Passan, via Twitter, they lead the way with six of the still-open cases this winter.

From a global perspective, there isn’t necessarily more at stake than has been the case in recent years. The total player demands this year tally $128.4MM, with the team counters amounting to $108.2MM — good for a $20.2MM gap. There was obviously far less at stake last year with so few cases, though the total ~18% net spread between the sides is about the same. The tallies look different in prior years. In 2018, we saw nearly $140MM in demands but only a $18MM+ gulf, so the spread was a narrower 15.25%. The cases were smaller on average in 2017, with a file/counter split of $113.55MM and $95MM, but that was good for nearly a 20% divide — the largest of the four-season sample.

All things considered, it seems that the 2020 arbitration hearing class is more a culmination of recent developments than terra incognita. Perhaps it will function as a new standard for years to come. Then again, as the above exercise shows us, the tendency always is one of change. It’s possible we’ll begin to see new trends emerging; some may now be hiding in plain sight while we focus on those that have already been identified.