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Ryan Madson, Closing, and Contracts

Over at Brotherly Glove, Eric Seidman refutes the suggestion that the Phillies named Jose Contreras closer partially to deflate Ryan Madson‘s leverage in contract negotiations.

While the idea that the team is trying to cost-control Madson by not allowing him to close is interesting from a storyline standpoint, I highly doubt the Phillies are implementing such a devious tactic.

How would it even make sense? The front office would spend this year deflating Madson’s confidence, convincing him that he lacks the mental fortitude to be a closer, hoping that he and Boras buy in and re-sign at a lesser price, only to eventually use Madson in the role they said he could not fill? It’s just too wacky a theory when every angle is examined.

I haven’t seen anyone else suggest this besides myself, so it’s just a theory of mine and is in no way a fact. However, over the years, the Phillies have shown themselves to be very acutely aware of any and all contract situations. Before Cliff Lee, they absolutely refused to devote more than three years to any pitcher, Roy Halladay included. For all of the contracts former GM Pat Gillick and current GM Ruben Amaro have handed out, the only two that have come back to haunt them were the ones awarded to Adam Eaton and Geoff Jenkins (though some, including myself, will argue that Ryan Howard‘s contract will end up being a mistake).

Let’s not forget that Amaro’s secretive handling of the Lee signing was incredibly strategic. The New York Yankees and Texas Rangers were considered the heavy favorites to sign Lee; the Phillies were never even considered.

Additionally, the Phillies have traditionally set their payroll as a specific percentage of revenue.

Year Revenue ($M) Payroll ($M) Ratio
2005 $167 $95 1.76
2006 $176 $88 2.00
2007 $183 $89 2.06
2008 $192 $98 1.96
2009 $216 $113 1.91
2010 $233 $138 1.69
2011 $239 $169 1.41

From 2005-08, the Phillies had a ratio between 1.76 and 2.06. As soon as they won the World Series, ownership felt the best way to continue to turn a profit was to devote more money to payroll. So as the Phillies made more and more money by selling more tickets, merchandise, advertisements, etc. they sank more of it into the players and coaches on the field.

In 2009, the Phillies signed Howard to $54 million contract extension, signed Ryan Madson to a $12 million contract extension, traded for Cliff Lee, and avoided arbitration with Joe Blanton and Shane Victorino, among others.

Last year, the Phillies traded for Halladay and signed him to a $60 million contract extension, signed Howard to a $125 million contract extension, traded for Roy Oswalt, signed Blanton to a $24 million contract extension, signed Victorino to a $22 million contract extension, signed free agent Placido Polanco to an $18 million deal, and signed Carlos Ruiz to an $8.85 million extension.

Going into 2011, the Phillies signed Lee, exercised Jimmy Rollins‘ $8.5 option, and re-signed Jose Contreras for $5.5 million.

Clearly, the Phillies have become very dedicated to putting out the best possible team that money can buy. However, there is a limit to how much the Phillies can spend. As their current streak of 126 sellouts will attest, you can only sell so many tickets to every game; you can only sell so many jerseys before everyone has one (or seven); you can only sell so much advertising. As profitable as the Phillies are, they cannot yet print their own money like the New York Yankees, which Forbes valued at nearly three times the Phillies ($1.7 billion to $609 million).

The Phillies cannot continue to spend with reckless abandon, especially given how heavily some of the contracts they’ve awarded have been back-loaded. Between now and some time during the next off-season, the Phillies’ front office will be carefully analyzing what they can do with upcoming free agents and position vacancies. Potential free agents include Raul Ibanez (LF), Rollins (SS), Madson (RP), Danys Baez (RP), Brian Schneider (C), Ross Gload (1B/OF), and J.C. Romero (RP). Four arbitration cases await for Cole Hamels (SP), Kyle Kendrick (SP), Ben Francisco, and Wilson Valdez. Roy Oswalt can also be kept around for $16 million or bought out for $2 million. Brad Lidge will likely be bought out for $2 million. As of right now, the Phillies have $113 million committed to nine players.

The case of Madson may seem like an insignificant blip on the radar, but it will actually play quite a large role in how the Phillies’ manage their roster going forward. In baseball, because of the perceived importance of the ninth inning, closers make significantly more money than other relievers. Consider some closers around baseball that have hit free agency:

The only set-up reliever who has come anywhere close was Rafael Soriano, who signed a three-year, $35 million contract with the New York Yankees. But again, they print their own money.

Therefore, it is true that as Madson’s save opportunities increase, so too will his price tag. This is not a fact unknown to the Phillies. If Madson gets scant save opportunities, he and his agent Scott Boras have less leverage in negotiations. They can cite his K/9, BB/9, and xFIP as I have been for the past couple years, but when Amaro cites his relatively low saves total and save conversion rate, there’s not much of a counter-argument, as irrational as it may be.

Assuming a 2012 Opening Day payroll of $175 million, the Phillies have around $65 million to spend on at least 16 players. Chopping Madson’s asking price from (example) three years, $30 million to (example) three years, $18 million is a big deal. Saving $4 million in annual average value nets them a player worth about one extra win above replacement.

I agree that suggesting that the Phillies are intentionally fixing Madson’s price is a wacky suggestion, but I wouldn’t put it past the Phillies. Their front office has been among the trickiest (and best) in all of baseball.