Sports biz: Preseason baseball 2014
If the Rockies are able to compete in the National League West this year, the team will have to pull off some serious Billy Beane magic by overachieving from a payroll standpoint.
That’s not because the Rox are skinflints. The projected 2014 payroll – around $90 million – would land the team near the midpoint of MLB spenders; but because of what’s happening in Los Angeles, where the L.A. Dodgers are shrugging off baseball’s luxury tax penalty and blowing like a 100-m.p.h. fastball past any fiscal reason.
If you missed it during the pre-Super Bowl mania, the Dodgers checked a big item from the to-do list by rewarding the sterling left hander Clayton Kershaw with a $215 million, seven-year contract, the largest ever handed to a pitcher. Kershaw, who fortuitously lives in Texas where there’s no state income tax, pocketed an $18 million upfront bonus and gets the rest in salary through 2020.
With the Kershaw signing, the Dodgers’ projected salary obligations for 2014 will top $225 million, and are likely to rise by another $10 million when the final piece-parts are assembled. Even with a possible trade of Matt Kemp or another top-dollar outfielder, the team will end up way over the $189 million salary ceiling that triggers a luxury tax payment of 22.5 percent to other MLB teams. As a result, the roster reads like an All-Star team: Ramirez, Gonzalez, Kershaw, Greinke, Crawford, Kemp. As the baseball writer Chuck Booth of MLBreports.com pointed out, the Dodgers now have five players whose contract values are among the top 25 ever – ever! – in baseball.
The Dodgers, for example, will spend:
• More than twice the amount the Rockies pay for player salaries in 2014
• An amount equivalent to about 7 percent of the entire (32-team) MLB payroll
• More on player salaries than the entire sum of annual revenue generated by New Belgium Brewing Co. of Fort Collins (just to sneak in a Colorado beer reference).
Baseball writers often point to the wealth of the Dodgers’ new ownership group as the instigator for the largesse, but the real economic driver behind the absurdity is television. Taking shrewd advantage of the way today’s pay-TV industry operates, the Dodgers formed a new regional sports network that will pipe live games and related content into the nation’s largest TV market over cable and satellite.
The brilliant stroke was to assign licensing rights to the channel to an intermediary, Time Warner Cable, in a deal that guarantees the team a reported $6 billion in revenue over 25 years. Time Warner Cable, in turn, is playing hardball for steep monthly carriage fees from the likes of DirecTV and area cable companies. Even assuming a chunk of the TV proceeds go into a revenue-sharing arrangement with Major League Baseball, the deal still provides plenty of cash to funnel into salaries.
The bummer for the Rockies is that this is all happening in the team’s home division. Nobody ever cries “surrender!” before opening day, and hope always springs eternal as teams report to pre-season camps in Arizona and Florida – and yes, we’ll all root for fiscal underdogs like the Rockies and Padres to whup up on the evil blue Dodgers. But this off-season made it clear that the dollar divide in the N.L. West is wide, deep and growing, and right now it’s hard to make a case that money won’t rule in an increasingly lopsided baseball economy.