Bronson Arroyo's Contract Coming Home to Roost?

When the Reds extended Aaron Harang's contract to keep him in Cincinnati, I was ecstatic about the decision. When the Reds followed up by extending Bronson Arroyo's contract, I had a number of concerns. A year later, I still doubt the wisdom of extending Bronson Arroyo's contract.

ACQUISITION AND EXTENSION

Prior to his acquisition, the Red Sox signed Arroyo to a below market contract. Arroyo agreed to the below market deal in an effort to improve his chances of staying with the Red Sox, who promptly took advantage of his resulting bump in trade value created by the below market contract by sending Arroyo to the Reds for Wily Mo Pena.

So, when he was acquired by the Reds, Arroyo was under a below market three year contract. He was set to be paid $2.75M in 2006 in his age 29 season, $3.8M in 2007 in his age 30 season, and $3.95M in 2008 in his age 31 season.

In 2006, Arroyo posted a career best season, posting a 3.29 ERA, 1.19 WHIP, and a 184/64 K/BB ratio in 240.2 innings. That level of production for only $2.75M is a tremendous bargain. However, it seemed like a misstep at the time for Krivsky to extend his contract at that point and the decision doesn't look much better now.

After the 2006 season, Krivksy gave Arroyo a contract extension, which increased the 2008 salary and extend him through 2010 with a team option for 2011. Arroyo received a signing bonus to be paid in 2008 of $2.5M, which essentially increases his 2008 salary from $3.95M to $6.45M. He is set to paid $9.5M in 2009, $11M in 2010, and a team option of $11M in 2011.

Given that Arroyo was coming off a career season, Krivsky picked a poor time to negotiate a new contract, which is highlighted by Arroyo's return to earth in 2007. In 2007, Arroyo posted a 4.23 ERA, 1.40 WHIP, and a 156/43 K/BB ratio in 210.2 innings pitched. Even so, he was still a good bargain at $3.8M, but his performance was a bit disappointing.

However, the question is whether the Reds would have been better off if Krivksy hadn't extended Arroyo's contract.

ELIAS RANKING AND POTENTIAL FOR COMPENSATORY PICKS

After the 2007 season, Arroyo was ranked by the Elias Sports Bureau as the #13th NL starting pitcher, which makes him a type-A free agent. Type-A free agents net two compensatory draft picks when they leave via free agency. Of course, his performance in the 2007 and 2008 seasons will dictate his ultimate 2008 Elias ranking, but there's a good chance that he'll maintain a type-A rating and at the very least he'd net one compensatory draft pick as a type-B.

So, if Arroyo had not been extended, then he would have been under contract for 2008 at $3.95M and had the potential to bring in two compensatory draft picks after the season. In addition, for the first time in a long while, the Reds have homegrown pitching on the horizon in the form of Homer Bailey, Johnny Cueto, and Matt Maloney. So, if things break right, then there could be viable options to replace Arroyo after 2008.

ALTERNATIVE 2009 REALITY

If the Reds hadn't extended Arroyo, then they would get his 2008 production at a lower cost and be in position to receive two compensatory picks after the season. If they were to let Adam Dunn walk after the season, then they'd be inline for two more compensatory picks.

If they followed this course, they'd have four compensatory picks to bolster the farm system, millions of dollars from the departure of Dunn, Griffey, and Arroyo to improve the MLB roster, and a 2009 lineup resembling the following:

Rotation
1) A.Harang r
2) H.Bailey r
3) J.Cueto r
4) ???????
5) M.Maloney l

Lineup
c) ??????
1b) J.Votto l
2b) B.Phillips r
3b) E.Encarnacion r
ss) A.Gonzalez r
lf) J.Hamilton l
cf) ??????
rf) J.Bruce l

If the Reds had chosen to follow that plan, then they'd have a strong, young, cost effective lineup for 2009, a great deal of payroll flexibility, and the ability to restock the farm system with four compensatory picks. That's a team that's built for the present, but with a definite eye towards the future. Instead, they have Arroyo locked up at the going market rate when there are likely better starting pitching options developing in the minors.

It seems like the Reds overreacted to a perennial shortfall in starting pitching by unnecessarily extending Arroyo. In short, the Arroyo contract extension seems ill-advised and the result of a poor balancing of present and future needs. Unless Arroyo bounces back to his 2006 level performance this year, it seems like they would have been better off letting him walk after the season for compensatory picks.

Busy Week

Well, it's been a busy and important week for Reds fans. With the 2007 season looking more and more like a lost cause, this week has fans looking toward the future. This week saw the long awaited arrival of Homer Bailey and the MLB draft.

As for Bailey, he performed well against a tough Indian lineup in front of 38,696 screaming Reds fans. Bailey went only 5 innings, giving up 2 runs, 5 hits, 4 walks (1 IBB), and 3 strikeouts. Oddly enough, the Reds let him throw 114 pitches in his first Major League outing. Given Homer's importance to the fortunes of the Reds over the next decade, let's hope that this outing isn't indicative of things to come.

Young pitchers throwing a substantial number of pitches at a young age can lead to arm problems. Young pitchers are often still growing and developing, which makes them even more susceptible to arm injuries from a heavy work load.

As for the draft, the Reds had a number of draft picks and really need to hit a homerun in this draft. The 2007 draft could restock a much improved farm system and pay huge dividends for the future.

In order for a small market team to compete with the larger payroll teams, the small market team must embrace player turnover. A prime example is the Oakland A's, who for years have seen All Stars and MVPs leave for greener pastures in free agency. However, the A's received additional draft picks as compensation for the losses.

That strategy enabled the A's to continually restock their farm system with inexpensive homegrown talent. As player salaries continue to rise at ~10.4% each season, the disparity between the salaries of the established veterans and young prospects continues to grow. Accordingly, the value of inexpensive homegrown talent increases each and every year. That's part of the reason why trade deadline deals for prospects are becoming increasingly rare. Teams have begun to appreciate the actual value of their top flight prospects.

The Reds need to implement a strategy that will see them lose a solid player every year or two to free agency. That will enable them to get compensatory draft picks for those players, which will ensure that they can continue to restock their farm system. The more picks you have, the better your chances of drafting successfully.

This is an important week for the future of the Reds. Time will tell how they did in the draft, but if Homer's performance is indicative of his future performance, then the Reds are at least one step closer to the promise land.