Nats Journal: Why the timing of Strasburg's debut is so important
The only question that really matters with the Nationals right now (and the one I've heard everywhere I've been this spring) is this: When will Stephen Strasburg be in the majors?
I'm not going to be able to answer that question definitively here -- even if team officials know exactly when it will happen (and I suspect it is still at least somewhat fluid) they are keeping it a closely guarded secret -- but I will venture a guess. And even more importantly, I aim to cut through all the speculation and incorrect assumptions about the contractual and economic issues that play into the equation.
The bottom line: The Nationals have a strong incentive to keep Strasburg in the minors until at least late May, in order to delay his reaching free agency and arbitration eligibility.
That's not to say the Nationals will do that. But doing so could gain them an extra year of Strasburg's services and save themselves a significant amount of money. I also do not want to imply that only financial issues play into this decision. There are also obvious developmental reasons to send Strasburg to the minors for a few weeks or a couple of months. Doing it this way would be smart baseball management.
Here's how this works:
First, the breakdown of Strasburg's four-year $15.1 million contract, which began in 2009: He received a $7.5 million signing bonus (paid in three installments, two of which have already been made), plus salaries of approximately $100,000 in 2009 (a pro-rated portion of the major league minimum), $2 million in 2010, $2.5 million in 2011 and $3 million in 2012. For the purposes of determining his future compensation -- or his "tender amount," in industry jargon -- the key number is his total earnings in 2012, which is calculated to be $4.875 million. (That's the $3 million salary plus one-fourth of the signing bonus, or $1.875 million.) This number will be important later.
Strasburg's contract covers him for the next three seasons, which are known as his "zero-to-three" years, referring to a player's service time. But Strasburg will remain under team control beyond the life of the contract -- until he reaches free agency. And that's where it gets a bit complicated.
Delaying Strasburg's free agency is fairly simple. A player needs six full seasons in the majors to become eligible for free agency, and a full season is defined as 172 days. However, a zero-to-three player who is optioned for fewer than 20 days gets those days added back to his service time at the end of the year. To simplify: The Nationals need to keep Strasburg in the minors for about three weeks to prevent him from having six full years of service time at the end of 2015, thus retaining his rights through 2016. It's not being cheap. It's being smart. And every team does it.
Under the above scenario, Strasburg would be tied to the Nationals for four years beyond the life of his current contract -- 2013, 2014, 2015 and 2016. Three of those will be arbitration years. (I'll take it on faith that, by virtue of the fact you are reading this blog, you understand how the salary arbitration system works. If not, Google it.) But the nature of the fourth year would depend on whether or not Strasburg will have qualified for arbitration as a "Super Two" player at the end of 2012.
You probably know how Super Two status works, but in a nutshell: The top 17 percent of players who have fallen short of three full years of service time in a given year become eligible for arbitration as Super Twos. There is no predetermined date when a player gains or loses Super Two status; it depends on the service times of every other player in that service class. But typically, a team can safely block a player from gaining Super Two status by keeping him in the minors until late-May of his rookie season.
(The San Francisco Giants famously miscalculated on this in 2007, calling up Tim Lincecum on May 6, which wound up being about a week too soon to prevent his Super Two status in 2010. The cutoff for Super Two eligibility in that particular year was two years 141 days, and Lincecum had two years 148 days. As a result, Lincecum will make $9 million this year in salary/signing bonus as a Super Two, instead of the $700,000 or so the team could have paid him as a zero-to-three player, had they kept him down an extra week in 2007. We'll return to the Lincecum example in a moment.)
For the Nationals to be safe with Strasburg -- and prevent him from reaching Super Two status in 2013 -- they would probably need to keep him in the minors until late-May. If they do this, Strasburg would be considered a zero-to-three player in 2013, saving the Nationals a lot of money. This, too, happens all the time and is seen as smart management. The Baltimore Orioles did it last year with Matt Wieters, who is to catching what Strasburg is to pitching, and whose call-up came on May 29.
But there is an additional catch in Strasburg's case because his contract is a major league contract. According to the collective bargaining agreement, a player under team control cannot receive a pay cut of more than 20 percent from the previous year. Here is where Strasburg's 2012 compensation -- that $4.875 million figure -- comes into play. Because of this rule, the Nationals would have to pay Strasburg at least $3.9 million in 2013 (that's 80 percent of $4.875 million) if he fails to attain Super Two status.
Now, let's take a major hypothetical leap here and apply Lincecum's case to Strasburg's. Let's further assume Strasburg turns out to be as good (and more to the point, as accomplished) as Lincecum -- a humongous assumption, given Lincecum's unprecedented accomplishments (two Cy Youngs before reaching arbitration eligibility). Finally, let's also take a guess and extrapolate Lincecum's third and fourth arbitration years from his first two.
Prorating the signing bonus in the new contract he signed last month, Lincecum will earn $9 million and $14 million in 2010 and 2011, his first two arbitration years. We'll be conservative and say those figures will rise to $18 million and $22 million in 2012 and 2013, his remaining arbitration years. (The actual figures will depend on several factors, including how well he peforms.)
If, for argument's sake, Strasburg is as good as Lincecum, and thus is compensated equally via arbitration, his first three arbitration years will earn him $9 million, $14 million and $18 million. If Strasburg reaches Super Two status, those first three arbitration years would be 2013-15, with a fourth arbitration year in 2016, in which (in our little hypothetical universe) he would make the same $22 million as Lincecum.
But if Strasburg fails to attain Super Two status (and assuming the Nationals keep him down for at least three weeks to delay his free agency), his three arbitration years would come in 2014-16, with a zero-to-three year on the front end, in 2013.
So, using our made-up numbers for Lincecum and applying them to Strasburg, here is what is at stake for the Nationals:
*If Strasburg reaches Super Two status, he gets: $9 million in 2013, $14 million in 2014, $18 million in 2015 and $22 million in 2016, for a total of $63 million in those four years.
*If Strasburg fails to reach super two status, he gets: $3.9 million in 2013, $9 million in 2014, $14 million in 2015 and $18 million in 2016, for a total of $44.9 million.
In other words, it could be worth about $18 million to the Nationals -- or a little less than what they are paying for two years of Adam Dunn -- to delay Strasburg's debut until Memorial Day.
Two quick thoughts:
One, this franchise has survived for five years without him. What's another two months?
And two, you may want to get your tickets now for the June 4-6 weekend series at Nationals Park against the Cincinnati Reds.