Why Soriano Won’t Accept Arbitration

When the Braves signed Billy Wagner and Takashi Saito, front office sources made it clear that they expected Mike Gonzalez and Rafael Soriano to reject the club’s arbitration offer. But then Soriano’s agent Peter Greenberg started dropping hints that his client might just take up the Braves on their offer. Why? Some insiders have speculated that Soriano could get $8 million in arbitration, which is more than he might command on the free-agent market.

I think that salary number is a bit high, but let’s assume it’s true. Still, I don’t think Soriano will accept arbitration. And here’s why. Arbitration is good only for one year. If all goes well, he just postpones he gets a big annual salary and postpones his free agency by a year. No big deal, right? Take the money while it’s good, then hit the market after putting up another good season. But, what if things don’t go well? Let’s say his surgically-repaired elbow starts to flare up, or a new injury jumps up to bite him, possibly knocking him out of baseball altogether. Like all players, Soriano’s net worth is tied up in one skill. If it disappears, he’s out a lot of money.

Most of us don’t have our skills valued over such a narrow range. Even if the industry we work in implodes, most skills are transferable to new areas. Not so with baseball. Baseball players often insure against risk by trading higher annual salaries for long-run guaranteed salary. Teams are often willing to oblige, not only because they get the player at a lower price, but because they can diversify injury risks across many players. Some players will get injured, others won’t; the end result is that the team will come out ahead—that’s why insurance is a successful business.

Now back to Soriano. The advantages of free agency include not only forcing teams to compete for your services, but it also opens up more possibilities of long-run contracts. If you were in Soriano’s shoes, would you prefer a one-year, $8 million contract to two years at $12 million, or three years at $15 million? It’s ultimately a personal decision, but I’d have to think that the long-run guarantee is more valuable than garnering a high salary for one year.

I suspect that Soriano is willing to trade some risk for security, which is why I believe that it’s unlikely that Soriano accepts the Braves’ offer.

Update: Or maybe he will. Soriano surprises Braves, accepts arbitration

Braves general manager Frank Wren said nearly eight hours before the announcement that even if either pitcher accepted arbitration, it wouldn’t hinder the team’s ongoing roster moves and pursuit of offense. That statement will be tested in coming weeks.

“We feel protected either way,” Wren said Monday afternoon, and listed two possible results of arbitration decisions by Soriano and/or Gonzalez: “A., they don’t accept [arbitration]. B., they accept and at some point we trade them.

“It’s not a big deal either way.”

But there was no doubt the Braves preferred not to deal with the hassle of trying to trade either of them.

One Response “Why Soriano Won’t Accept Arbitration”

  1. JC,

    I did it just to prove you wrong! Want to try explaining yourself now?