Decision to Non-Tender Daniel Hudson Understandable, but Not Great

The D-backs non-tendered Daniel Hudson before last night’s deadline for arbitration-eligible players.  Matt Swartz pegged Hudson’s likely salary at $1.1M for 2014, due in large part to service time (he is barely over three years).  As a general caveat for this post, I do note that both the team and Hudson definitely know a lot more about his health situation than I do.  That said, I can’t help but think that even though a negotiated settlement was the preferred outcome yesterday, tendering Hudson a contract would have been a better decision than not doing so.

If you’re unfamiliar with Hudson’s situation, he was on the verge of rejoining the team this year after Tommy John surgery in 2012 when his new UCL tore, necessitating a second surgery.  Nick Piecoro addressed Hudson’s situation today.  As he reported earlier this year, the failure rate for a second Tommy John is 40%-50%.  To me, that’s also a success rate of 50%-60% — but we don’t know what Hudson will be like when he returns, if he will experience any significant setbacks, or if he will be a relief pitcher for the rest of his career.

Hudson’s chances of contributing in 2014 are not very high, but they are greater than zero.  Even if he looks strong, he will be broken in as a reliever, particularly considering the timing of his June surgery.  What are the chances he’s able to contribute in a meaningful way as a reliever next year, at an above-replacement level, if not above-average?  I’m going to say it is at least a 30% chance of pitching for more than a month, but less than 10% that he’d pitch for more than two.  Since he’d spend most of the time on the 60-day DL, he wouldn’t create 40-man roster issues in the meantime, unless he needed longer for a rehab assignment than rules permit.  So the question of his 2014 value is really financial.

What is Daniel Hudson worth for 2014?  Probably not $1.1M, especially for a cost-conscious team.  Consider that Andrew Bailey had about as dicey a procedure as Hudson (shoulder surgery is dicey by definition), and is expected to miss at least half of 2014.  Bailey’s active roster time (and performance) are likely to be greater for 2014 than Hudson’s — but they’re not so different.  Due for a salary in the $4.3M range, Bailey was not tendered a contract.  Apparently that was a close call, however — as late as Sunday, the word was that Bailey would be tendered a contract.

Ultimately, the Red Sox did not tender Bailey a contract by last night’s deadline.  So let’s say Bailey’s value for 2014 is probably in the $3M, conservatively (from the club perspective).  Hudson isn’t worth that, and maybe he’s not quite worth $1.1M.  But he’s not worth $500k as an insurance option for late season?  Back of the envelope, I’ll stick with $500k.

There is one other serious difference between Bailey and Hudson, though — years of club control remaining.  While the Diamondbacks could have had Hudson for 2015 and 2016 on a cost-controlled basis, 2014 was to be Bailey’s final arbitration year.  Where the Bailey decision was only about 2014 value, we also have to consider the value to the D-backs of having the opportunity to tender Hudson contracts for 2015 and 2016.

That’s where the scales tip, I think.  That 50%-60% success rate we referenced earlier?  Those are the numbers we can use for the chances that Hudson could contribute in 2015.  Maybe they would insist on keeping him in the bullpen — that would be the team’s prerogative.  Let’s call it a 25% chance that Hudson is a productive starter in 2015, and a 30% chance that he’s a helpful reliever that year.  I’m sorry, but baseball doesn’t offer very many guarantees, and the fact that Hudson is riskier than most established pitchers doesn’t mean he has no present-day value.  If Arizona can give $1.235M to Aaron Blair on the hope that he can be a productive major league pitcher someday (albeit for a longer period of time), then I think it’s worth at least $500k now to get the chance to keep Hudson for 2015 at a cost-controlled rate.  Bump it up to $1M in present-day value, then.

We can perform the same exercise for 2016, although players are less valuable as assets for their final year of arbitration, as salaries often come pretty close to what’s a market rate in free agency (on an AAV basis, not for a one-year deal).  At this point, all we need is to assign $200k in value to that 2016 opportunity to make tendering Hudson a contract last night a good idea.

Still, it’s a pretty close call, and if the D-backs want to limit their risk, there’s no big cause for fans to complain.  I think we all know what happened here.  Towers got Matt Reynolds signed up to a brilliant contract in similar circumstances — Reynolds went below projection for 2014 with a $550k salary, but got the benefit of a guaranteed paycheck and support during the rehab process.  In return for the club’s investment in Reynolds’s recovery, the club got a very cheap $600k option for 2015 with just a $50k buyout.

The hangup in the Hudson negotiations was probably about 2015, not about 2016.  I suspect club and player were pretty much on the same page about a 2014 salary (maybe in the $1M range), but that the club was insisting on a 2015 option, and that the parties were apart on the dollar figure for the option.  After the Reynolds deal, you might not blame Arizona for insisting on a 2015 option in the $1.2M range — but if he pitches at all next season (and maybe even if he doesn’t), Hudson would probably be projected at closer to $3M for 2015.

Here’s hoping that Hudson gets brought back on a deal that works for everyone.  Still, given some teams’ penchant for contingency plans (Boston in particular), Hudson could be headed elsewhere — maybe to a team with a full 40-man roster that wants to add more talent without cutting anyone.

Update: In a conference call this afternoon (as reported by MLBTR), Towers said the club “kind of ran out of time” in the Hudson negotiations.  He described their progress as being “at the five yard line or inside of that,” and expressed a desire that they could still finish things up.  I feel pretty good about the team’s chances of signing him, but it might not be at a great deal.  Losing exclusivity harmed the negotiating position — either Hudson will get a better deal elsewhere, or Hudson will be valued higher by Arizona than by the other 29 clubs.  Generally, the latter situation is not a recipe for success.