Analyzing Howard's New Deal

The Philadelphia Phillies agreed to a three-year, $54-million contract extension with first baseman Ryan Howard on Sunday, avoiding a potentially landmark salary arbitration hearing later this week.

While the A-Rod drama is grabbing the headlines, this revelation is perhaps more surprising.

Howard and his agents recently asked for $18-million in arbitration, an $8-million raise from the total that he won through the process in February 2008. The Phillies countered with a $14-million offer, which seemed more than reasonable. While he has been one of the most prolific power hitters in baseball since he burst onto the scene in 2005, the left-handed-hitting slugger has some major flaws in his skill set. With all factors considered, he did not deserve such a hefty raise (for a player still under team control entering his second time through the process) when looking at it objectively, and, had he won, the ruling may have set a bad precedent.

Howard had a real chance to win, though, since he has posted outstanding stats in the categories that arbitrators have overvalued in the past; he led the league with 48 home runs and 146 RBIs and has hit more homers and driven in more runners since his MVP performance in 2006. Since the odds of winning were in his favor—despite the fact that his slash stats line reached a three-year low and his poor defense at first base—this was a solid decision for Ruben Amaro and the Phillies. While Amaro took some heat for the puzzling Raul Ibanez contract, he has now successfully avoided going to arbitration with all 10 arb-eligible players on the Philadelphia roster, including fixtures such as Cole Hamels, Howard and Jayson Werth.

At first glance, Philadelphia appeared to be on the wrong end of this. Howard, who becomes a free agent in 2011, will earn an annual average of $18-mil, the total which he was looking for originally. It is hard to ignore that free agents Bobby Abreu and Adam Dunn, who are each poor defenders but solid offensive producers, are expected to settle for around a little above half of that average annual total in a depressed market; especially considering that they are obviously not under team control. There is also significant risk, as Howard could get hurt or enter a steady decline phase; with his old-player skills, he could become the next Travis Hafner. It is not that simple, though. Had he won the ruling, who knows what he would have asked for in his next two potential arbitration rounds? Twenty million-plus? Players typically earn an increased percentage of their fair market value through escalating arbitration years, but he was pushing the envelope. In the current deal, he will earn $15-mil in 2009, $19-million in 2010 and $20-million in 2011.

In the meantime, the Phillies posses cost certainty with the majority of their star core. Perhaps more important, Amaro and his staff will no longer have to worry about possibly alienating Howard by pointing out his flaws or breaking the bank in messy arbitration hearings in the future. The rookie general manager can plan the budget accordingly. While projections are pegging Howard at around a 4.0-win player, he could easily end up living up to the paycheck if he returns to his 2006 and 2007 levels, when he posted .436 and .396 wOBA totals, respectively. According to CHONE, he is projected to hit .271/.379/.576 with a .955 OPS and .409 wOBA next season, though this is on the optimistic side.

There is no telling what would have happened had the situation not been resolved before a panel of judges heard the arguments for each side down in St. Petersburg. Amaro and the franchise took action before the case had the chance of becoming a major distraction, though. Howard can focus on helping his team defend their title, likely removing a chip on his shoulder that might have come with a loss in court. In fact, the former MVP has to be smiling right now. Since he broke into the majors at an advanced age, his window for cashing in on his rare baseball talent was fairly limited. He now has financial security, though, with the chance to receive another big payday when he enters free agency.

In this market, perhaps the Phillies overpaid for a player (who has some weaknesses) under team control. Preventing the situation from getting out of hand in the future and the distraction, though, seems like a smart bet. Howard is clearly winner as well, but, given the common arbitrators love of counting stats, the extension needs to be looked at in context. The organization keeps its star power hitter in the middle of the lineup while the window for staying in contention in the National League East is wide open, but he is a candidate to fall off the table as he enters his 30s. Thus, it was perhaps in the Phillies' interest to not extend their offer to buy out any free agency years.

For now, the news can be classified as a win for both parties.

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