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Almost Famous

The Dodgers Make It Rain

When you throw every fiscal strategy of the past decade out the window, are you crazy … or a genius?

The Los Angeles Dodgers and Boston Red Sox consummated one of the wildest trades in baseball history, one of the biggest swaps of contracts in baseball history, and the biggest waiver deal of all time.

The trade of Adrian Gonzalez, Carl Crawford, Josh Beckett, and Nick Punto and $11 million for James Loney, Ivan De Jesus Jr., Jerry Sands, Rubby De La Rosa, and Allen Webster radically alters Boston’s roster, ushering in a major overhaul. All the Dodgers did was completely rethink the way baseball teams spend money, and thus run their business.

Until now, every team in baseball has operated with a budget. The Yankees ($198 million this year) might be in a different universe from the Padres ($55 million), but both those teams set spending limits, then do their best to adhere to those limits. In taking on the gigantic contracts of Carl Crawford and Josh Beckett along with Adrian Gonzalez’s massive deal, the Dodgers have hinted that budget might not matter all that much to them. The ensuing press conference that the Dodgers brass held on Saturday made the team’s position even clearer.

“The value of this franchise is represented in the price we paid — that doesn’t go up or down with one or two players’ salaries,” said Mark Walter, the Dodgers’ principal owner and chairman. Walter was then asked if the Dodgers have a spending ceiling. “Somewhere, I suppose,” came his oblique reply. Then, the coup de grace. Someone asked Dodgers president and CEO Stan Kasten about the possibility of butting up against MLB’s very punitive luxury tax. “Mark and Magic don’t even ask me about that,” he said of his bosses’ instructions, or lack thereof.

Just like that, the Dodgers became the most dangerous team in baseball. Dangerous to other clubs in their ability to outspend the competition anytime they want. And dangerous to owners of baseball’s richest teams as well as the commissioner’s office, who risk having their excellent and wildly profitable scam exposed.

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At some point in the past decade — maybe right after the publication of Moneyball, maybe later than that — the baseball world became obsessed with efficiency. The sabermetrically savvy A’s and the scouting-adept Twins got very good while spending less than nearly every other team. The Rays followed suit. Those on-the-cheap wins caused other teams’ philosophies, and the way the media cover the sport, to change. The sharpest baseball analysts began using metrics such as marginal dollars per marginal win as a measure of front office acumen, and by extension, team success. Later, dollars per Win Above Replacement became the gold standard for everything from contract analysis to trade analysis to team analysis. General managers might not frame the discussion in exactly those terms. But as team owners started tapping a new wave of economically prudent GMs to run the show, they delivered a clear message to their new hires: If those guys can do it, so can we.

It’s a simple idea, really. Until now, every team has put a cap on its spending. For most clubs, the reason is obvious. You don’t want to spend more money than your revenue streams will allow, so you try to get the most bang for your buck. If you’re the Pirates, you watch the bottom line and do your best to spend wisely, because there’s no other way to succeed financially and still put a competitive product on the field.

For a very select group of teams, capping spending and getting everyone talking about budgets, the luxury tax, and efficiency carries an ulterior motive. Take the Yankees. Every team reaps big money from MLB’s central fund, with revenue pouring in from national TV deals, MLB Advanced Media, merchandise sales, and other sources. On top of all that, the Yanks pull in gobs of local revenue. According to Forbes‘s annual “The Business of Baseball” report, the Yankees banked $319 million in gate receipts in 2009. That figure might be the tip of an enormous iceberg. The Yankees are co-owners of the YES Network, the most-watched regional sports network in the country. Also in ’09, YES paid the team $84 million in rights fees. The partnership further yielded more than $100 million in dividend checks. But the Yankees aren’t required to divulge all the financial particulars of their relationship with YES (nor with anything else to do with their operations).1 It’s a mortal lock they’re making way more than what’s been made public.

Which is why it’s hilarious to see the Yankees making it known they plan to slip under the $189 million luxury tax threshold in time for 2014. As Jayson Stark’s informative piece on the new collective bargaining agreement explained back in January, there are real, significant financial reasons to start getting frugal: The top luxury-tax rate for four-time repeat offenders is rising to 50 percent from 40 percent; a team that slices payroll below the $189 million mark by 2014 resets its count and gets taxed at just 17.5 percent, as if it were a first-time offender; and a team that avoids going over the luxury-tax threshold becomes eligible to get money back from its revenue-sharing payout. As Stark explains, all of those savings could add up to $40 million a year for the Yankees.

All of which is great, except for this: The Yankees would almost certainly turn a huge profit even if they didn’t save that $40 million, even after paying out the $100 million-plus a year they already dole out in revenue sharing … hell, even if they carried a $300 million payroll.2 Ask The Lords of the Realm, and they’ll claim that the luxury tax is a way to keep the richest teams from spending too much, thus aiding competitive balance.3 This is total bullshit. The luxury tax exists to save owners from themselves, and to provide a convenient excuse for teams that could easily spend more to pocket the money instead.

Again, very few teams spend enough money to make the luxury tax a major threat. Fewer still can even begin to rival the Yankees’ local TV money. The Texas Rangers stand to make $1.6 billion from their new deal … but haven’t put forth anywhere near what the biggest-spending clubs have dished out, coming in at an all-time high of $120.5 million in 2012. Knowing they had $3 billion in new TV money coming, the Angels went on an exorbitant spending spree last offseason … but they still shelled out a relatively modest $154.5 million in salaries this year, just the fourth-highest mark in baseball.

No, the team that comes closest to the Yankees in highlighting the absurdity of luxury-tax maneuvering is the same team that’s already spent the second-most on luxury-tax fines. It’s the same team that also owns its own, incredibly profitable regional sports network, rather than having to negotiate for rights fees with a big media company. It’s the same team that, until recently, seemed poised to go toe-to-toe with the Yankees in the standings, to turn what was one of pro sports’ most one-sided matchups into a true rivalry, one that would see both teams exchanging pennants for years to come. It’s the same team that just took a hard look at its roster, decided it wasn’t good enough, and ditched one of the best hitters of the previous three years because trading him would enable the saving of piles and piles of money, a commodity that wasn’t likely to ever become scarce, no matter how much posturing ownership tried to do.

The Red Sox and their brain trust are being hailed as geniuses, because they unloaded more than $260 million in player salaries on the Dodgers, letting everyone know they were getting back to their version of smart baseball, which involves building from within and spending big bucks only when absolutely necessary. But the fact of the matter is they’ve made themselves worse for now, even though they had more than enough to pay those players, and plenty more on top of that.

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The Dodgers don’t give a rat’s ass about supposedly smart versus supposedly dumb ways to build a roster. They’re perfectly cool with losing the dollars-per-WAR championship. And if actions and words are any indications, they don’t care about any damn luxury tax either. They want to win, they have money, and they’re going to spend it.

The new ownership group took control of the team exactly five months ago. Since then, with the new owners’ blessing, GM Ned Colletti has done the following:

• Signed Andre Ethier to a five-year, $85 million contract extension. Ethier is 30 years old and owns a career .360 wOBA, and this year will mark the first time he’ll have ever topped 3.5 WAR.

Traded for Hanley Ramirez, thus picking up about $37 million for 2⅓ seasons of a player who peaked three years ago (though he’s certainly produced in L.A., hitting .286/.348/.513 in 30 games with the Dodgers).

• Traded for Brandon League, thus picking up nearly $2 million for two months of a relief pitcher who’d even been lousy pitching in the hitter’s wasteland that is Safeco Field. He’s posted a 6.75 ERA in 10 appearances with the Dodgers.

• Traded for Shane Victorino, thus picking up about $3 million for two months of a player who’d seen his OPS drop 123 points from last year’s career high. Victorino’s three hits Sunday finally popped his Dodgers OBP above .300, but he’s hit for zero power since coming to L.A.

• Traded for Joe Blanton, thus picking up nearly $3 million for two months of a starting pitcher who’d posted an incredible 5-to-1 strikeout-to-walk rate with the Phillies this season, but also led the league in home runs allowed. I’m not going to post Blanton’s Dodgers stats here, because they’ll make you seasick. He’s pitching at Coors Field this week. Take the over. No matter what it is.

• Made the first trade in baseball history in which two players owed more than $100 million got shipped to the same team.

Add all those salary obligations together, along with the $160 million the Dodgers agreed to give Matt Kemp last November and the copious cash owed to waiver-wire-level veterans like Juan Uribe and Matt Guerrier, and the Dodgers are on the hook for an incomprehensible $192.6 million in 2013. And that’s assuming the Dodgers let Victorino, Blanton, League, and several complementary players leave via free agency. It also doesn’t include starting catcher A.J. Ellis’s pending arbitration award, a potential new deal for ace Clayton Kershaw, or any free-agent signings. The Dodgers currently owe a somewhat more reasonable $133.7 million for 2014, well below the $189 million luxury-tax threshold for that season. But the likelihood of any team ostensibly standing pat for two years, let alone a team with such naked ambition and wanton disregard for financial constraints as the Dodgers, is basically nil.

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So was this trade worth that kind of commitment?

The linchpin of the deal is Adrian Gonzalez, or as Dodgers fans have already taken to calling him, “Not James Loney.” From 2009 through 2011, Gonzalez ranked as the 10th-best hitter in the majors by wOBA (.396) and the seventh-most valuable position player by WAR (18.0), which is what led the Red Sox to trade two top prospects for him, then sign him to a $154 million contract. Since June 23, Gonzalez is hitting .352/.382/.574 (not counting his two-for-four performance Sunday). In his first at-bat as a Dodger on Saturday, he launched a three-run homer, prompting a slew of Dodger fan victory laps and plenty of teeth-gnashing from jilted Sox fans.

But here’s the thing: There’s an excellent chance we’ve already seen the best of Adrian Gonzalez. His power has been off, to start. With 16 homers and just 34 games left until season’s end, Gonzalez is on pace to produce his lowest home run total for any full season in his career, including his years toiling in the pitcher’s haven of Petco Park. That might not be all of it. According to ESPN Stats & Info, of the 18 homers Gonzalez hit at Fenway Park since the start of the 2011 season, just six of those would have gone out at Dodger Stadium (11 of those 18 were hit into the shallow and inviting Green Monster seats in left field). Gonzalez has suddenly stopped walking too. In 537 plate appearances this year, he’s drawn just 28 unintentional walks (versus 54 in 2011, 58 in 2010, and 97 in 2009). That Gonzalez had better hitters behind him with the Red Sox than he did in San Diego surely helped reduce his walk totals, both intentional and unintentional. But when a 30-year-old, slow-as-molasses first baseman stops walking, that’s a bad omen for his on-base skills, given the batting-average risk of a player with that profile, even one with the kind of strong hand-eye coordination that Gonzalez possesses.

Even a diminished Gonzalez still constitutes an enormous upgrade over the punchless, sub-replacement-level Loney and his no-hit pals …

… but that’s damning with faint praise.

There’s a reason so many teams declined a waiver claim on Beckett, a former ace and World Series MVP: He might never be all that good again. There are durability issues, with Beckett struggling with injuries for much of the year (and making just 21 starts in 2010). There are command issues, with the normally precise right-hander striking out 38 batters and walking 21 in his past nine starts (with seven homers allowed and a 6.98 ERA over those 49 innings). Then there’s the most serious long-term concern: Beckett’s plunge in fastball velocity. According to FanGraphs, his heater checks in at 91.6 miles per hour this year, down nearly 3 mph from his 2009 figure of 94.3. Beckett has a chance to put up better numbers now that he’s out of the killer AL East and Fenway Park’s bandbox, pitching in the NL West and pitcher-friendly Dodger Stadium. Plus his arrival comes at a good time, with Chad Billingsley hitting the disabled list. But with about $34 million left on his deal over the next two-plus seasons, it’s tough to project any kind of Beckett profit, at least not based on the metrics typically used to measure such things.

There’s no point in even trying to analyze Crawford’s numbers since joining the Red Sox; he played in 130 games last year but was hampered by injuries for much of the season, and managed just 31 games this year before shutting it down for Tommy John surgery. It’s been argued that Crawford wasn’t the right fit for Boston, that Fenway wasn’t configured right to take advantage of his slashing hitting style and speed, that the park’s shallow left field didn’t allow the Red Sox to fully benefit from Crawford’s rangy defense, even that whatever supposed intangibles a player needs to succeed with the Sox weren’t evident in Crawford. Though he’s 31 and very possibly past his prime, several teams were very interested in giving him a long-term deal for major bucks as recently as two years ago. And the Red Sox didn’t fully warm up to the trade idea until John Lackey’s name was excised from talks and Crawford’s was subbed in.4 Still, there’s about $106 million in future Crawford earnings on the table here. Even in a best-case scenario, it’s hard to see Crawford fully earning his keep.

As for Nick Punto … he is kind to strangers, and puppies.

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If all the Dodgers are spending isn’t likely to earn the 45 wins it should by the dollars-to-WAR model (and might end up earning a lot less), the question becomes, why did they make this trade?

The Dodgers’ new owners have been pushing the idea that they want to win at all costs, pretty much since day one. Magic Johnson, a minority partner with no major decision-making responsibilities who’s nonetheless become the public face for the ownership group, flexed that bit of PR at Saturday’s presser.

“We understand that you have to spend money to be good in this league,” he told the breathless masses. And, “We did this for our fans. Of course we want to win now.”

The idea is to make the very act of spending money seem like an inherent good, no matter what’s being bought. Even if you grant that spending trumped all, though, why use $260 million-plus for these players? Is this really the best use of a quarter-billion dollars?

They did it because they’re in the thick of a pennant race, and first base was the single worst position on the entire roster.

They did it because elite players rarely become available either in trade or on the open market, as teams move aggressively to lock up their stars before they can test free agency. And the Dodgers are willing to look past the cracks in Gonzalez’s game and believe he is still an elite player.

They did it because the flurry of signings by other teams means this offseason’s crop of first baseman is headed by the solid but unspectacular Adam LaRoche, and Paul Konerko, who turns 37 in March.

They did it because new regimes usually make big changes before too long, meaning those who survive the first round of firings must do something extraordinary to curry the new guys’ favor. That’s not to say that Colletti doesn’t believe in the trade, or that he’s purposely trying to hinder the Dodgers’ long-term future. Only that there are short-term priorities to consider, and other variables usually get shoved to the back burner when that happens.

Most important, they did it because no one in the Dodgers front office, at any point this season, has ever uttered the words “opportunity cost.” If there’s no limit to how much you can and will spend on salaries, then you needn’t worry about the $260 million you just absorbed, nor feel the need to turn down other buying opportunities. If what Kasten is saying is true, and ownership doesn’t care at all about luxury-tax implications or really capping spending in any way, then what the hell, why not go nuts? Kershaw wants a monster deal to top Matt Cain’s five-year, $112.5 million pact? Give it to him. Zack Greinke’s the best pitcher on the coming free-agent market? Pay the man. Want still more pitching? Raid your farm system again and try to trade for Josh Johnson. Not convinced Dee Gordon can hack it at short long-term? Buy Stephen Drew a fleet of Bel Air mansions. A little concerned about Crawford’s injury rehab? Surely someone can dig up another $200 mil for Josh Hamilton. OK, the Hamilton part’s probably not going to happen. But there’s no reason to declare any of those other options off-limits when your budget is roughly infinity dollars.

Most right-minded analysts and observers have declared this trade a big win for the Red Sox. Rightly so. The Sox dump more than $260 million in payroll, money they can use to re-sign Jacoby Ellsbury, spend on fresh talent via trade or free agency, add more improvements to Fenway Park, wage history’s most bitchin’ money fight, or just save for a rainy day. They acquire a promising collection of young players, with hard-throwing, just-recovered-from-TJ-surgery Rubby De La Rosa and 22-year-old Double-A prospect Allen Webster the big catches in the deal. They get to wipe Theo Epstein’s slate (mostly) clean and start over with a nucleus of their choice. They take a step toward hopefully defusing a clubhouse catastrophe that pitted Bobby Valentine against a group of supposed malcontents who might prefer to play for someone else.5 And they get to turn the page on an ugly period in recent team history, one that saw them go from the best record in the majors exactly one year before the trade to the biggest collapse in baseball history,6 followed by a colossally disappointing season.

But all of that assumes the old rules of engagement are in play, in which even teams as loaded as the Red Sox tie their own hands in the name of greater profit and keeping up the illusion of fiscal parity.7 The Dodgers, apparently, have no interest in playing by those old rules. The Red Sox shouldn’t count on signing any of the marquee free agents this offseason to fill their multiple needs, simply because the Dodgers might just decide to take ‘em for themselves. Maybe one day the Dodgers will go the way of the Orioles and Mets, teams that tried to spend big and make a splash, found themselves not winning as much as they’d hoped, then rushed to dump as many big contracts as possible before finally starting to rebuild in earnest. Maybe one day all of the Dodgers’ current bravado will turn to remorse.

But that day is not today. The Dodgers are now officially the National League’s answer to the Yankees, only more willing to accept smaller profit margins and thumb their noses at artificial spending limits. Baseball’s new financial superpower is reckless. And maybe a lot smarter than we’d like to admit.

Filed Under: MLB

jonah_keri

Jonah Keri is a staff writer for Grantland. His book, The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team From Worst to First, is a national best seller. His new book Up, Up, and Away, on the history of the Montreal Expos, is now available.

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