Why are the Los Angeles Dodgers on Such a Ridiculous Spending Spree?


Just 18 months ago the Los Angeles Dodgers filed for bankruptcy and it seemed like the solvency of the storied franchise was in question. Think back to the 2011 MLB season when pundits were speculating that it was possible that neither the Mets or Dodgers would be able to survive their financial perils. The McCourt divorce almost took down the Dodger franchise forcing Commissioner Bud Selig to step in and appoint a trustee to run the affairs of the team. Enter Guggenheim Baseball Management, a group that includes former Los Angeles Lakers star Magic Johnson.

The $2 billion sale of the Dodgers was finalized just as the 2012 MLB season begun and it’s been a nonstop check writing party ever since. In the last seven months the Dodgers have transformed their roster more than any team not named the Miami Marlins. During the past few months the Marlins have gotten rid of just about anyone fans would come to see except for Giancarlo Stanton while the Dodgers have added just about everyone fans want to see including the guy most synonymous with the Marlins, Hanley Ramirez.

West Coast Yankees

The Los Angeles Dodgers, not the New York Yankees will now have the highest payroll in baseball. With hefty luxury taxes looming and George Steinbrenner no longer in the picture, the Yankees now appear to be showing some fiscal restraint. For the first time in a generation, the Bronx Bombers actually appear conscious of the amount of their payroll; this primarily because of MLB’s luxury tax. That’s not an easy thing to do considering the fact that the Yankees are planning on celebrating old-timers day every day at the stadium this year. Consider the bizaro fact the Yanks were outbid for the services of Russell Martin by the Pittsburgh Pirates and you know all you need to know about the Yankees being concerned about their total payroll. For those of you not familiar with the luxury tax, a first-time offender pays a 17.5% penalty for every dollar spent above the $189 million threshold. That penalty rises to 30 percent in year two, 40% in year three, and 50% in year four. Ouch, ouch and ouch.

On the other hand, with the signing of Zack Greinke to a six-year $147 million contract, it’s clear now that the Dodgers are going to be paying the luxury tax every year for as far as the eye can see. Greinke’s deal averages out to $24.5 million a year. That’s slightly more than the seven-year deal signed by CC Sabathia in 2009 for the highest average annual value of all time. Greinke’s deal is also the second-largest contract ever given to a pitcher (behind Sabathia’s) and the biggest ever for a right-handed pitcher.

TV Revenue = Spend Money

Forget about the fact that the global financial services firm Guggenheim Partners has over $160 billion in assets under management. The Dodgers are going to benefit more than any other team (perhaps even the Yankees) from their new TV deal. Reports of a potential 25-year / $6 billion deal between the Dodgers and Fox might actually be underestimating potential rights fees. Fox’s exclusive negotiating window is expiring and it’s quite possible the Dodgers can land an even bigger deal with another media partner or from Fox if a bidding war ensues.

With a seemingly never ending cash flow, the Dodgers can now simply outspend everyone for talent, and they appear to be doing just that. Including the $27.7 million posting fee (a fee paid just for the rights to negotiate with a player) just paid for Korean pitcher Hyun-Jin Ryu (btw – that has nothing to do with his six year $36 million salary), the Dodgers total outlay for next season appears to already be above $260 million. The team’s base payroll will easily top $230 million, shattering the all-time record of $209 million set by the 2008 Yankees.

Forget the $189 million luxury tax limit for 2014, because the Dodgers have already committed $181 million for just 10 players. Granted it’s not like the Mets still paying Bobby Bonilla, but the Dodgers are still paying Manny Ramirez and Andrew Jones. They also owe 22-year-old Cuban signee Yasiel Puig $42 million. Puig is not major league ready, but even if he were, there really is no where to put him as the Dodgers have an excess of outfielders blocking him.

Lost in the fact that the Dodgers are throwing money all over the place is the fact that they control Clayton Kershaw’s rights for two more seasons. Kershaw is arguably the best pitcher in the National League, and doesn’t turn 25 until March. Kershaw currently comes at the bargain price of just $11 million in 2013 but that won’t last for long. Expect the Dodgers to sign a long term extension with Kershaw that looks Greinke’s record breaking contract look like a bargain.

Random Musings

With eight starting pitchers on the current roster with a salary of $6 million or more, the Dodgers clearly aren’t done yet. Hey, how would R. A. Dickey look in Dodger blue? If the Dodgers give Dickey $10 million for three years (what the heck, they handing it out to everyone else) the Mets would probably trade him for Chris Capuano and Aaron Harang and their $13 million. Why would the Mets do that? Because they are the Mets! Does anyone doubt that the Mets would look at this as that they would save $17 million and add two MLB veteran starters to their AAAA team? DOH!

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