The New York Yankees’ 2007 playoff run had barely ended when Hank Steinbrenner declared that hard-throwing rookie right-hander Joba Chamberlain would be installed in the Yankees starting rotation for 2008. As spring training approached, however, others weighed in and the decision was made for Chamberlain to begin the season in the Yankees bullpen. Some say the change was made to manage the young pitcher’s workload, others point out that the Yankees have a surplus of starters and that Chamberlain would add more value as the eighth-inning setup man – the bridge to closer Mariano Rivera.
Although the short-term decision appears locked in, a number of factors will determine whether Chamberlain remains a reliever beyond this season. For a 22-year-old pitcher armed with a 100 mph fastball, Chamberlain has developed an impressive array of secondary pitches, which could enhance his ability to convert to a starter.
Beyond baseball considerations, another important variable in the debate is the economic impact on the Yankees. Chamberlain is a valuable asset – beyond the fact that the Yankees made him the 41st overall pick in the 2006 amateur draft. How they choose to deploy the asset will impact the financial return on their investment and determine Chamberlain's earning potential.
A look at the going rate for pitching talent provides insight into where Chamberlain can be most valuable. I recently applied statistical analysis to the more than 70 free-agent signings over the last four months. In doing so, I was able to estimate the going rate for pitchers based on both their role – starter, middle reliever, closer – and their level of performance, measured by win shares from "Hardball Times."
My analysis suggests that a true staff ace – the likes of Josh Beckett, Jake Peavy, Brandon Webb, and C.C. Sabathia – could command an annual salary of around $19 million per year in the current free-agent market. A No. 2 starter – comparable to Chien Ming-Wang, A.J.Burnett, Tim Hudson, and Kelvim Escobar – would be priced in the $14 million per year range.
A more conservative placement for Chamberlain may be a No. 3 starter – pitchers such as Jamie Moyer, Jeff Suppan, Tim Wakefield and Ted Lilly. I estimate pitchers of this caliber could command approximately $9 million per year.
How much would an eighth-inning setup man command? My analysis says the best of the setup men – the likes of Hideki Okajima, Rafael Betancourt, Tom Gordon and Brian Fuentes – would be paid an estimated $5 million per year. (See Figure 1 for the market values of the five slots in the starting rotation, as well as closer and setup roles.)
This analysis shows that the Yankees would derive almost twice as much financial value from having Chamberlain in the role of No. 3 starter instead of the setup role. The fact that the Yankees may have other options to fill the No. 3 role inexpensively (e.g., Phil Hughes) doesn’t change the economics of the market.
By placing Chamberlain in the starting rotation versus the bullpen, the Yankees stand to gain more than $24 million in value over the next six years before he is eligible for free agency.
The value could be even greater when we consider that a commitment to a No. 3 starter via free-agency would come in the form of a multi-year contract, which is fraught with injury risk. Chamberlain could be retained on a series of one-year contracts, minimizing the Yankees’ exposure to risk of a catastrophic injury. Should he perform at the level of a No. 2 starter, he would be worth about $50 million versus a setup role.
A few years from now, the Yankees may be faced with another decision – whether to have Chamberlain succeed Rivera, once the legendary closer retires. Depending on Chamberlain's success as a starter, this might be a much tougher call, particularly since Rivera’s new three-year, $45 million contract called for a 42 percent raise over last season, dramatically increasing the pay scale for closers.
Yankees general manager Brian Cashman and the Steinbrenners will determine where Chamberlain can be most effective. Giving the team the best chance to win will be the overriding factor, but the economics of the decision shouldn't be ignored, even by the cash-flush Yankees.
Vince Gennaro is a consultant to several Major League Baseball teams and the author of "Diamond Dollars: The Economics of Winning in Baseball," an innovative look at the business of baseball. This followed a 20-year career at PepsiCo, where he was president of a billion-dollar division. Gennaro teaches a graduate course on the business of baseball in the Sports Business Management program at Manhattanville College.