The Dodgers and Baseball's New Economy
Two weeks ago I got a text message late in the evening from one of my friends, a life-long Dodger fan. In fact, he’s a former season ticket holder. But in recent years I’ve gone to more games at Dodger Stadium than he has, as he got fed up with Frank McCourt’s off-the-field corruption and and on-the-field cheapness.
His message was short but jubilant. “McCourt agrees to sell Dodgers to Magic Johnson for 2 billion!”
My response was equally short, but far less celebratory. “Someone ought to tackle Magic. He could be overpaying by double.”
But as the news spread the following morning, it was clear that most Dodger fans weren’t concerned about the exorbitant price tag for their team–they were just elated to be free of Frank McCourt*. It was as if Dodger fans everywhere joined hands in a rousing chorus of “Ding Dong The Witch is Dead,” not concerned that it took a $2 billion dollar mansion to squash their villain.
*Even though they’re not really free from him. McCourt retains an interest in the massive parking lot that surrounds Dodger Stadium, and has some say in any further development in Chavez Ravine. For McCourt, it always comes down to parking lots.
And while the ownership changeover has encouraged many disenfranchised Dodger fans to once again “THINK BLUE,” I wonder how and how soon that insane price tag will start to effect them. Every fan hopes their owner will be like Mark Cuban–so wealthy that he’s able to reinvest all the money his team brings in (and more) back into the team**. Unfortunately, there aren’t many owners like Mark Cuban (at least in that regard). Sooner or later, even billionaires grow restless and want to see a better return on their investment. Dodger fans should brace themselves now for soaring ticket and concession prices, and any other creative ways Magic and Co. can recoup their money***.
**That’s the primary reason so many Cubs fans were eager for Cuban to buy the team from the Tribune Co., and why they’re hoping the Ricketts family will follow Cuban’s model.
***Optimistic Dodger fans point to the $3 billion TV deal the Angels signed this offseason as a sign that these new owners have already (hypothetically) made back their money. However, that’s a relatively small return for a deal that would tie up the lucrative TV rights for at least a decade. Today the real money to be made is in starting your own network for your team, like the Yankees with the YES network or the Red Sox with NESN (when the Cubs’ TV deals run out in a couple years, look for them to launch their own network, too). The problem is, starting up a Dodgers network could cost anywhere between $600-$800 million more, which only increases the likelihood that the massive financial weight lands on the shoulders of Dodger fans.
And while it will be interesting to see how the sale of the Dodgers impacts and changes the organization, both on the field and in the stands, I think the far more pertinent storyline is the ripple effect the sale has had throughout the league.
No one has ever spent that kind of money on an American sports team before–not even close. The Cubs sale established the previous MLB record at $845 million. Even in the more popular and lucrative NFL, the Jacksonville Jaguars changed hands last November for only about $750-$800 million. In fact, you have to go to the Wild West of European soccer to find apt comparisons, and even then the numbers aren’t close.
Those unfathomably deep pockets have shifted the economy of baseball. Within a week, San Francisco extended Matt Cain for five years for more than $112 million–the richest contract ever for a right-handed pitcher. Cain was set to be the prize of the upcoming free agent market. But with the Dodgers new owners and their unprecedented checkbook, the Giants weren’t willing to risk losing Cain to an organization that is seemingly unconcerned about overspending.
Days later the Reds went a step further with Joey Votto, locking him up into his 40’s with a ten year, $225 million extension. What made Votto’s deal a surprise was that he was two whole years out from free agency–meaning there was no urgency for the team to get a deal done. Despite that, they gave the one-time MVP a deal only slightly less valuable than the one Albert Pujols just signed with the Angels, and more valuable than Prince Fielder’s contract with the Tigers.
But the Reds weren’t done there. Just yesterday they gave Brandon Phillips a six year extension for more than $72 million. In less than a week, Cincinnati has spent more than $300 million on the right side of their infield.
And while Phillips and Votto are both premier players in the league, I’m not sure either would be considered elite. Cain is, but he’s not even the ace on his own team. All three of them would have demanded high prices in free agency, but what we’ve seen over the last few weeks is teams paying big to buy out that free agency. That’s happened before, but never at the record prices the Giants and Reds paid out.
I believe they were willing to pay so much to keep their players because of the Dodgers new owners, who have proven the will massively overspend to get what they want. Even the famously deep-pocketed Steinbrenners wouldn’t overpay by a billion dollars–Magic Johnson and Co. have set fire to money in a way that (potentially) scares the rest of the league. We won’t know the full ramifications until free agency hits again after the season, but expect the MLB market to be less of the meritocracy it once was, and more of a free-wheeling auction, where value is primarily determined by what a team is willing to pay. And when that team is the Dodgers, all bets are off.
So what’s my point in all of this? Why should this matter to the Cubs or their fans, who probably won’t look to make a splash in the free agent market for at least a few more years?
Simple. Right around the time the contract extension pinata exploded over Cain, Votto, and Phillip’s heads, Matt Garza’s value and his price tag shot up. Teams who hinted at trading for him in the offseason will be that much more anxious to lock him up before he hits the market, and potentially willing to pay more to the Cubs to obtain him. At the same time, he moved into the second position behind Zack Greinke as the premier, soon-to-be free agent pitchers (third position if the Phillies let Cole Hamels slip through their fingers). Garza wanted $12.5 million from the Cubs in arbitration. Expect his asking price to skyrocket when it comes to a long term deal. If it looked iffy for the Cubs to extend his deal before, it looks downright improbable now. (Update: upon review, Garza has one more year of arbitration, so while it slows down the clock on everything I said above, it doesn’t change the end result.)
Yesterday as I was pulling together some information for this post, I sent a question to Jonah Keri on Twitter****. I asked him at what point does Garza become more valuable as trade bait than as a building block for the Cubs? He said either decision was defensible. I wrote back that Cain’s deal probably drove up Garza’s price tag, and asked him which righty he’d rather spend big on: Garza or Greinke. He said Greinke.
****Keri is really great about answering fans on Twitter, so don’t hesitate to send a question his way (@jonahkeri).
While it’s too soon to say for sure if the Cubs will spend big on a pitcher this offseason, expect them to get the best possible value out of the players they currently have. In Garza’ case in this new baseball economy, I think that means they trade him.