Yankees Decide Not to Offer Arbitration to Cap'n Jetes

Did you hear that?  If you listen closely enough, you can hear about ten million people scream "WTF" in unison.  Why?  Wallace Matthews of ESPN New York reported that the Yankees will not be offering salary arbitration to Derek Jeter.  Yankee GM Brian Cashman took it a step further in his interview:

“We understand his contributions to the franchise and our offer has taken them into account. We’ve encouraged him to test the market and see if there’s something he would prefer other than this. If he can, fine. That’s the way it works . . . We feel Derek Jeter gives us the best chance to win. But we’re not dealing with Derek alone. We’re dealing with our closer, we’re trying to add to our club, and if putting all out eggs into one basket takes away from our ability to add to our club, I ain’t gonna do it.”

Excuse me for a second, but...HOLY CRAP!  Did Cashman really just say that?  First of all, let me say that I love the fact the Yankees are playing hardball with him.  Clearly, they're sick of seeing Jeter and his agent, Casey Close, negotiate through the media.  Rather than ignore the attacks (a la John Kerry in the 2004 Presidential race), the Yankees are fighting back.  Hardball Talk's Craig Calcaterra gave his perspective regarding the Yankees strategy in one of his posts today:

"That’s most likely it was rhetorical, meant more to signal to Casey Close that he needs to negotiate with the team rather than grouse to the Daily News or whoever.  Of course, the team is clearly planting its talking points with the New York Times and now ESPN New York, so they’re all a part of the same hypocrisy, Senator.  It’s just that Cashman has the leverage, it seems, so his little digs are way more delicious."

Yeah, it is a little hypocritical, but what did you expect the Yankees to do?  Jeter and Close are trying to holding the Yankees hostage, and the Yankees aren't going to take it.  As I've mentioned before, the Yankees hold most of the cards.  While both parties need each other, Jeter needs the Yankees far more.  By re-signing with the Yankees, Jeter stands to make significantly more money in terms of both contract and endorsements.  Additionally, he gets to build upon his legacy.  First, sometime during the 2011 season, he'll become the first Yankee to ever accumulate 3000 hits while playing with the club.*  Second, he gets to accomplish two things that Yankee greats like Babe Ruth and Yogi Berra can't say they did--spend their entire career and retire with the Yankees.  You can belittle these all you want, but it's a big deal.

*Consider that for a moment.  With all of the great players that have put on a Yankee uniform, no player has ever accumulated 3000 hits during his tenure with the team.  Babe Ruth had 2518; Lou Gerhig had 2721; Joe Dimaggio, who lost three years to serving in military, had 2214; Mickey Mantle had 2415; and Yogi Berra had 2148.  Jeter currently has 2926.

So what does the Yankees decision mean?  Well, for starters, the reality of this decision is likely to be significantly different than fan perception.  Most fans will look at this decision (combined with Cashman's comments to Wallace Matthews) as the Yankees choosing to move on without their captain.  The reality of the situation is that the Yankees are trying to put themselves in the best position to not get burned.

Case in point.  After the 2002 season, Greg Maddux, coming off of a season where he made $13.1M, was a free agent, and was looking for another long term contract.  During his previous season, Maddux started showing signs of decline.  While he went 16-6 with a 2.62 ERA, he did so in only 199-1/3 innings despite making 34 starts.*  Plus, his K/9 rate plummeted from 6.7 to 5.3, while seeing his BB/9 rate jump from 1.0 to 2.0.  As a result, the Braves decided to let Maddux leave as a free agent.  Believing that several teams would be coveting the four time Cy Young award winner, the Braves offered Maddux salary arbitration believing they would receive two compensatory draft picks in return from the team that signed him.  After a month of negotiating with teams, Maddux's agent Scott Boras found that no one was willing to give a soon-to-be 36 year old starting pitcher the kind of long term contract he was demanding.  Rather than settle for a less than optimal contract, Boras recommended that Maddux not only accept the Braves offer of salary arbitration, but also use 2003 as a season to rebuild his value.  Maddux's acceptance of salary arbitration gave the Braves no choice but to negotiate a one year deal.  The two parties weren't able to come to a consensus, and ended up pleading their cases before an arbitrator.  Based on the strength of his primary statistics and previous salary, the arbitrator gave Maddux a pay raise to $14.75M, which was far more than he was worth.  2003 would end up being Maddux's worst season as an Atlanta Brave providing only 3.9 Wins Above Replacement, and providing $11M in value.  Needless to say, the Braves did not offer him salary arbitration after the 2003 season, and let him walk.  He ended up signing a three year deal to return to the Chicago Cubs.

*It was the first time since 1987 that he failed to record 200 innings.  He'd even done so during the strike shortened seasons of 1994 and 1995.  

What does Greg Maddux have to do with Jeter?  Everything.  Jeter and the Yankees are currently entangled in an ugly, high profile contract negotiation.  Team Jeter believes he should be paid not only for his on field performance, but also the intangible value he provides to the Yankees.  The Yankees, while recognizing his intangible value, understand that Jeter is a declining asset.  At 36 years old, there's reason to believe Jeter is in a state of decline, and has been since 2007.  While he was great in 2009, it was likely an aberration that was enhanced by his ability to take advantage of the jet stream that was carrying balls out of the park in right-center field.  Without the advantage of the jet stream (in 2010), he reverted back to the player he was in 2007 and 2008.  If the Yankees were to offer Jeter salary arbitration, it's very likely he would accept the Yankees offer.  Considering how far apart the two parties are on a long term contract, I think it's safe to say they won't come to terms on a one year deal prior to arbitration.  With Jeter's reputation, recent MVP worthy season (2009), and 2010 salary ($21M), Jeter is almost guaranteed to be awarded a salary in the neighborhood of $21-23M.  Armed with a salary he finds acceptable, he could use the 2011 season to rebuild his value and improve his bargaining position.

Obviously, the Yankees are too smart to allow themselves to get pulled into a losing situation.  By not offering Jeter arbitration, they've essentially backed him into a corner.  Sure, the Yankees won't get to the two guaranteed compensation picks (in the unlikely event he went to another team), but in doing so, they've minimize his negotiating power.  Jeter's intangible value exists only for the Yankees.  They know that he won't be receiving contract offers anywhere near what the Yankees are offering from any other team.  By offering him the ability to seek employment elsewhere, they're giving him the opportunity to find that out first hand.  When he does, he'll have no choice, but to come back to the Yankees and agree to a contract on their terms.  As disgusted as this makes me (as an ardent Yankee hater), they're playing it brilliantly.  The Yankees are the premier franchise for a reason.  They not only have the most money, but they're often one of the two or three smartest teams in baseball.   For that, I tip my hat to both the Yankees and Brian Cashman.