Arbitration Showdown: Mock Hearing: Homer Bailey

It's salary arbitration season in Major League Baseball, and here at Baseball Prospectus we're holding mock hearings, arguing for or against the actual team/player filing figures before a three-person panel of certified arbitrators. We've selected 10 of this winter's most intriguing, highest-dollar cases to cover in depth over the first two weeks of February (regardless of whether the players' real-life cases remain unsettled). After each side's opening argument and rebuttal/summation below, we'll give you a chance to vote on what you think the result should be before seeing the panel's decision. For more on the arbitration process, read the series intro by Atlanta Braves Assistant GM John Coppolella, listen to his appearance on Episode 35 of Up and In, or check out the BP Basics introduction to arbitration.

In Part Seven of this 10-part series, we'll tackle Cincinnati Reds pitcher Homer Bailey, who is seeking $5.8 million and has been offered $4.75 million. Bailey and the Reds have yet to reach an agreement. (*Update* Bailey and the Reds avoided arbitration and settled for $5.35 million after this piece was published.)

The Criteria

The criteria will be the quality of the Player’s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal), the length and consistency of his career contribution, the record of the Player’s past compensation, comparative baseball salaries, the existence of any physical or mental defects on the part of the Player, and the recent performance record of the Club including but not limited to its League standing and attendance as an indication of public acceptance.

The complete procedure for salary arbitration is available in the Basic Agreement.

The Case

	vs
Homer Bailey Player Request: $5.8 million Represented By: Doug Thorburn	Midpoint: $5.275 million	Cincinnati Reds Club Offer: $4.75 million Represented By: Ian Miller
Position: RHP DOB: 05/03/1986 Bats/Throws: R/R Service Time: 4 years, 17 days

Player's Presentation

Homer Bailey was an integral cog in the Big Red Machine of 2012. The 26-year old right-hander took his performance to the next level, helping the Cincinnati Reds to the NL Central crown. For his part, Bailey contributed the best season of his career, as the former first-round pick began to realize his tremendous potential. He has steadily improved his performance throughout his career, building a resume of increasingly stingy run prevention while surrendering fewer baserunners on a per-inning basis. Bailey has also made adjustments to his game that will pay dividends to his future performance for the Reds. His platform performance compares favorably with similar players in his service class, and Mr. Bailey has earned the submitted figure of $5.8 million.

Homer Bailey's History of Performance

Bailey's pattern of improvement was evident within the 2012 season, as he saved his greatest performances for the end of the season. On September 28th, Bailey threw the 15th no-hitter in the 140-year history of the Reds, dominating the Pittsburgh Pirates with 10 strikeouts. A seventh-inning walk to superstar Andrew McCutchen was the only blemish on the near-perfect game. Bailey proved it wasn't a fluke 11 days later, starting Game 3 of the NLDS against the eventual World Champion San Francisco Giants, though he would get the no-decision in a game that went extra innings. Once again, he struck out 10 batters against one walk, pitching seven innings and allowing just a single hit and a lone run in the game.

The improvements in walk rate are the most impressive part of Bailey's statistical development, as what was once his biggest weakness has become a major strength. The average major-league walk rate in 2012 was 3.1 walks per nine innings, and Bailey's walk-rate was 25 percent lower at 2.3 free passes per nine, his second consecutive season of such impressive control. 

The progress in Bailey's walk rate is tied to his improved mechanics. The pictures below represent his delivery, at release point, in 2009 as compared to 2012:

Both pictures were taken from the center-field camera feed at Busch Stadium in St. Louis, which allows us to make a direct visual comparison. The yellow line that has been superimposed traces a path that begins with Bailey's front foot and runs vertically at an angle perpendicular to the rubber. In the picture on the left from 2009, Bailey uses a closed stride, in which his front foot is positioned such that it is off-center from the target, and the skewed position had him lined up with the right side of the plate. The result was that he struggled to hit the outside part of the zone.

In the photo from 2012, Bailey's stride is lined up perfectly with the middle of home plate, and he had no problem hitting the outside target for a strikeout. He has also improved his posture over the last few years, as indicated by the position of the head relative to the yellow line. The corrections to Bailey’s stride and posture have greatly improved his ability to repeat his delivery and find a consistent release point, which is a very positive indicator for his walk rates in the future.

There is a long list of pitchers within Bailey's 4-year class of service time, allowing us to narrow the range of outcomes to those players who provide the closest comparison to his platform season. The following list comprises every pitcher from the previous three years whose ERA and innings pitched fell within 10 percent of Mr. Bailey's 2012 numbers.

Bailey's numbers adhere very closely to the group averages across the board, and though the exercise was designed to find pitchers with similar ERAs and innings pitched, the other four measures are nearly identical to Bailey's 2012 stats (which were not included in the averages). The group's average salary came in at $5.41 million, which exceeds the midpoint salary of $5.275 million and is close to the $5.8 million figure that we have filed for compensation.

*includes playoffs

Mr. Bailey has established a substantial learning curve throughout his development, and his mechanical improvements support the statistical gains to provide confidence as to his future performance. Bailey was at his best down the stretch, and he stepped up his game under the high-pressure environment of the playoffs. His skills are clearly on the upswing, and he deserves a salary that is commensurate with his peers. —Doug Thorburn

Club's Presentation

The Reds would like to thank Homer for his contributions as a Red. We are willing to offer him $4.75 million for 2013—a 98 percent increase over what he was paid in 2012.

As happy as we are with Homer’s production in 2012, we believe it was an outlier. His peripheral statistics from 2012 were essentially the same as his ’11 numbers; much of the difference was attributable to factors beyond his control. His batting average on balls in play (BABIP) was abnormally low, at .290. League average is typically around .300, and Homer’s career average BABIP, including 2012, is .308. He also stranded baserunners at a higher-than-normal rate in 2012. His left-on-base percentage (LOB%) was slightly above league average (typically around 70 percent) at 73.6 percent. Homer’s career average LOB rate, including 2012, is 70.1 percent. Both BABIP and LOB% can vary greatly from year to year and are largely factors of luck; we believe Homer was on the lucky side of both data points in 2012, and expect his ERA, win-loss record, and innings pitched all to regress back to career norms in the coming season.

Injury Concerns
The 2012 season was also the first year since 2009 in which Homer did not miss significant time due to injury. He missed a total of 72 games due to a right shoulder injury in 2010 and 57 games in 2011 due to additional issues with his right shoulder. Those ailments accounted for a total of 25 starts missed in those two seasons alone.

Comparables
We arrived at the $4.75 million figure by reviewing compensation for comparable players. Here are the closest comps in several key categories.

The average salary for these six comparable players is slightly under $4.46 million.

Given Homer’s 2012 salary and how unlikely he is to repeat the success of 2012, as well as the injury risk he poses, we feel that $4.75 million is fair and reasonable compensation. We thank the board for its time and consideration. —Ian Miller

Player's Rebuttal/Summation

The injury issues that were mentioned in the Club's opening argument are somewhat misleading. While we acknowledge the risks inherent in pitching, it should be noted that Mr. Bailey's shoulder injury on May 26, 2011, occurred while he was batting, and therefore is not an indication of vulnerability with his pitching motion. The swing-related nature of the incident is particularly relevant with respect to his long-term health, which looks even better when one considers his recent mechanical improvements, and the fact that Bailey has since held a pristine health record is another point in his favor.

The Club has questioned Bailey's ability to sustain his improved performance, stating that he was the beneficiary of fortunate circumstances. However, the evidence available from the pitch-tracking technology of PITCHf/x demonstrates that the right-hander has greatly enhanced the quality of his repertoire, enabling him to become a more effective pitcher. His statistical gains are due to noticeable changes in his approach and his pitch quality, as opposed to the vague explanation of “luck.”

In 2009-10, Bailey utilized his fastball greater than 70 percent of the time, allowing opposing hitters to lock in on the pitch. His fastball usage has decreased to 60 percent in 2011-12, and he has integrated his tremendous slider with much greater frequency, upping his slider usage from 11 percent in 2009-10 to over 20 percent in 2011-12. The slider has also gained velocity, with 2012's average speed of 88.0 mph representing the highest mark of his career. The significance of these gains is reflected in the final row of numbers: whiff percentage reflects the frequency of swings-and-misses that are induced by a particular type of pitch, and Bailey's rate of whiffs on sliders has increased by greater than 50 percent between 2009-10 and 2011-12. The pitcher who coaxed just 19 empty swings with his slider in 2009 has upped the ante to more than 100 whiffs in 2012.

The player comparisons that were offered by the Club were each selected based on just a single statistic, with disparate lists based on innings pitched, ERA, and won-loss record. These lists confuse the issue, as there is an ample amount of players for comparison when utilizing the dual constraints of innings and ERA, as demonstrated in the list of 13 pitchers provided in our opening argument. The individual player profiles from our list of comparable pitchers conform much more strongly to the performance of Homer Bailey, and his compensation should reflect the precedent set by his peers. —Doug Thorburn

Club's Rebuttal/Summation

There is no doubt that Bailey had a stellar 2012, putting up career-best numbers in many categories. But when determining what to offer Bailey for the forthcoming season, we must look at his entire career, not just his fantastic—but luck-aided—2012.

Bailey has pitched four full seasons with the Reds (2009–2012), along with parts of two other seasons (2007–2008). Looking at his career averages in a few key categories over his full seasons brings into relief just how far outside the norm his 2012 lies.

We acknowledge that Homer has become a better pitcher over the course of his career. Mechanical adjustments may have played a role, but we also expect pitchers to improve from year to year as they learn their craft.

In 2012, Homer showed moderate improvement in his hits allowed per nine innings, as well as his home runs, walks, and strikeouts per nine. We also see it with his ERA between 2009 and 2011: a moderate improvement each year. Then in 2012, his ERA dropped nearly by nearly 0.6 runs. If this were due to some dramatic improvement in his mechanics, we would expect to see commensurate improvements across his entire stat line.

But we believe that Homer was simply the beneficiary of better luck in 2012. He allowed fewer earned runs because opposing batters had a relatively low Batting Average on Balls in Play (BABIP), and the baserunners he allowed were left on base at a higher-than-normal rate (as shown in his LOB%). Research has shown that most pitchers have very little control over these factors and the fluctuations in them from year to year are attributable largely to luck.

Ultimately, we are not confident that Homer was able to reinvent himself as an entirely new pitcher in 2012. We know he improved, and we expect him to continue to improve in 2013. But we feel that it is unlikely that he will replicate last season’s level of production this year.

One final word regarding Homer’s injury history: his representatives are correct in pointing out that there were two separate right shoulder injuries in 2011. One was sustained while hitting, which caused him to miss 27 games. But that was his second 2011 DL stint with a right shoulder injury; he had already missed 30 games earlier that season due to right-shoulder impingement. He also missed 72 games in the previous season (2010) with right shoulder inflammation. While he remained injury-free in 2012, we cannot assume that he will be able to pitch more than 200 innings again this coming season. —Ian Miller

The Reader Poll

Before scrolling down to read the three-person panel’s decision, record your own decision here:

The Panel

Burt Fendelman is an attorney with more than 45 years of experience, initially in corporate finance and securities laws working as inside counsel for several major securities brokerage firms. He has performed as an arbitrator for FINRA (Financial Industry Regulatory Authority), the American Arbitration Association, and currently as an arbitrator and mediator for the New York County Lawyers Association in fee dispute-related matters. He is presently a self-described “work in progress”, working with clients in areas related to art and antiques. He attended Washington University in St. Louis and NYU Graduate School of Tax Law, and he now lives in Manhattan.

Doris Lindbergh is a retired lawyer who is an arbitrator with FINRA (Financial Industry Regulatory Authority) and its predecessor forums, the National Association of Securities Dealers (NASD) and the New York Stock Exchange. She also arbitrates for the National Futures Association (NFA). She attended Washington University School of Law and has a Master of Arts from Fordham University. Her employment history includes stints at Wall Street investment banks and, most recently, the MTA New York City Transit Authority, but her most challenging assignment was raising a future Editor-in-Chief of Baseball Prospectus.

David Marcus is a retired lawyer and serves as an arbitrator with the Financial Advisory Regulatory Authority (FINRA). He lives in Metuchen, New Jersey. He attended Columbia College and Yale Law School, after which he served as an enforcement attorney with the SEC. His subsequent career includes working for the New York Stock Exchange heading its regulatory division, and working for several broker-dealers as a regulatory attorney or General Counsel.

The Panel’s Decision

3-0 in favor of the Player

The inning count for Bailey nearly doubled in 2012, 208 vs. 132, and his ERA fell to 3.68 from 4.43. Looking at his overall improvement from 2007 to date, excluding injuries in earlier years, my opinion is he is a rising star. I believe $5.8 million, although a hefty increase, is appropriate for Bailey. —Burt Fendelman

Although he did have a better year than before, I don't think it is as aberrational as the team claims, other than perhaps his ERA, especially as compared with 2011.  The claim re: luck really does not grab me, since they don't seem to cite anything to support it. —David Marcus

The Sabermetric Perspective/Additional Commentary

Doug made a convincing case that Bailey has improved since his early exposure to the majors, when he was difficult to coach, overly reliant on his fastball, and had trouble putting people away. Ian made a convincing case that the Bailey of 2012, while more durable than he’d ever been before, wasn’t noticeably better on a per-inning basis than he had been in recent seasons.* One of the questions the decision came down to was whether Bailey could be expected to be that durable again, since the difference between 118 innings—his three-year average from 2009-11—and 208 innings, his 2012 total, is worth many millions of dollars (provided the quality of the innings is essentially equal). As Ian observed, “While he remained injury-free in 2012, we cannot assume that he will be able to pitch more than 200 innings again this coming season.”

*Convincing to a BP audience, at least—Dan Evans, a veteran of over 75 hearings, said that he’d never seen delivery analysis used in an arbitration argument. Not because it couldn’t work, necessarily, but because it would present the same risk as attempting to use advanced statistics to sway a panel of people who haven’t heard of Bill James or Baseball Prospectus, another tactic teams have historically tended to avoid.

The most depressing part of Ian’s assertion is that it actually applies to all pitchers: it’s not really safe to assume that anyone will be able to pitch more than 200 innings in a given season. Last December, Matt Klaassen did a study on whether workhorse pitchers can be counted on to continue to work like horses. First he identified instances of three consecutive 200-inning, non-strike seasons over the past two decades. Then he looked at how many innings the pitchers responsible for those durable three-season stretches pitched the following season. He found that their average innings count in year four was only 86.1 percent of what it was from years one through three. In other words, a pitcher who averaged exactly 200 innings per season over a three-year stretch would tend to pitch about 172 innings in the fourth.

And that’s the typical drop-off for a starter who’s already demonstrated that he deserves to be called durable, the type of pitcher we mentally tend to pencil in for the same number of innings he provided the season before. There aren’t many close recent comps for Bailey, a pitcher who made it to the 200-inning mark for the first time after three seasons in the 100-150 range and three shoulder-related stints on the disabled list. One would assume, though, that a pitcher fitting that profile would be a good bet to be in for a bigger decline.  

Only five years ago, Bailey was still one of the best 10 prospects in baseball, a consensus future ace. Now, even after what looked like a breakout year, the praise is (understandably) much more measured: Baseball Prospectus 2013 says his upside is “a solid mid-rotation innings-eater.” While not the top-of-the-rotation future that was once projected for him, that would still a financially rewarding role, if his appetite for innings is up to it. —Ben Lindbergh
 

Thanks to Dan Evans, R.J. Anderson, Colin Wyers, Hudson Belinsky, Jonah Birenbaum, and Andrew Koo for research assistance.