Pondering Zack Greinke’s $147 Million Deal

Zack GreinkeAfter an endless stream of rumors pegging the Rangers as favorites to land Zack Greinke, the top free-agent pitcher on the market landed with the team we all should have expected — the bottomless-pocketed, spending-mad Los Angeles Dodgers.

Greinke’s six-year, $147 million contract is just the latest in a long line of huge deals doled out by the Dodgers in the 18 months since they filed for bankruptcy. The magnitude of the signing, the Dodgers’ unprecedented largesse, and the many events about to unfold leave us pondering the deal’s many implications. Fifteen of them, actually:

1. Whenever a deal of this magnitude gets made, we rush to compare it to other massive contracts. As it turns out, Greinke’s deal averages out to $24.5 million a year, barely edging the seven-year pact 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-hander.

All of these are simplistic calculations. For one thing, it ignores the basic concept of inflation. For another, it doesn’t account for baseball’s exploding revenue streams, and the surge in salaries that is already under way. For a dose of context, Greinke just got a deal that’s nearly identical to the one Cole Hamels signed five months ago. Only Hamels wasn’t a free agent, and Greinke is one — conditions that usually make a huge difference, given players’ tendencies to sign for less than full market value while still under team control. We can (and will!) debate Greinke’s ability and his projections over the next six years. But on its face, this isn’t an exorbitant contract for a top-of-market pitcher who can reasonably be described as good-to-very good, even by skeptics.

2. Over nine seasons and 1,492 innings pitched, Greinke owns a 3.77 ERA. Take all the pitchers with 650 innings pitched or more over that span (enough to knock all relief pitchers out of the mix), and that 3.77 ERA ranks 38th among the 160 pitchers with that many innings pitched. Take the past four seasons, and include Greinke’s out-of-this-world 2009 season, and his ERA’s 3.37, 19th among qualified major league starters. Using that metric alone, you get a good pitcher, but not a super elite one.

3. ERA be damned, Greinke and advanced stats are in the middle of a torrid love affair. Greinke’s 3.16 FIP over the past three seasons ranks sixth in all of baseball. If we include Greinke’s ’09 Cy Young-winning season, his four-year FIP drops to 2.93, tied with Justin Verlander and Roy Halladay and trailing only Cliff Lee and Clayton Kershaw.

4. So why the discrepancy? How does Greinke look like a superduperstar by one metric, but a merely good-to-very good pitcher by another? As Jason Collette noted in this piece, in 2012, opposing hitters’ batting average on balls in play rocketed 67 points when Greinke pitched with runners in scoring position, compared to the rest of the time. That was the biggest such spike for any qualified pitcher last season.

There are all kinds of reasons why such a spike could occur, ranging from how the defense positions itself to a pitcher faring worse when pitching from the stretch to getting flustered in such situations and giving in to hitters to pure random chance. In Greinke’s case, it’s not an isolated incident. He’s shown significant negative BABIP splits with runners in scoring position for the past three years, while playing for three different teams. That’s how you get a pitcher with fantastic peripheral stats like Greinke (strikeout-to-walk rate just under 4-to-1 over the past three seasons, for example) look relatively pedestrian by more traditional measures. If Greinke’s struggles with runners in scoring position continue, this deal will look much worse than it does on paper.

5. Here’s a fun little exercise:

2010-2012
Pitcher A: 8.7 K/9 IP, 2.3 BB/9 IP, 0.8 HR/9 IP, .309 BABIP, 3.83 ERA, 3.16 FIP
Pitcher B: 8.1 K/9 IP, 2.8 BB/9 IP, 0.8 HR/9 IP, .308 BABIP, 3.70 ERA, 3.40 FIP

Pitcher A is Greinke. Pitcher B is Anibal Sanchez. This isn’t necessarily a knock on Greinke so much as it’s asking why Sanchez might end up costing about half as much this offseason. Read this piece by SI.com’s Cliff Corcoran for more on Sanchez. Sure feels like there’s a bargain here waiting to be had.

6. One of my favorite baseball writers is Ron Shandler. If you’re not a roto hound, you might not recognize the name. Shandler has been using analytic concepts to make sense of baseball for more than a quarter-century — he just funnels those ideas into fantasy baseball coverage. Anyway, one of my favorite Shandlerisms is, “Once you display a skill, you own it.” Whatever version of Wins Above Replacement you want to use, Greinke’s topped out as about a 5-win pitcher during his nine-year career. The one exception was that ’09 season. That year, he pitched 229 ⅓ innings, striking out 242, walking just 51, allowing just 11 homers, leading the league in both ERA (2.16) and FIP (2.33), and bagging Cy Young honors despite winning just 16 games. Somewhere in their calculus, the Dodgers had to figure that Greinke still owns that level of skill, that there’s a chance he goes Greg Maddux on the league again. Especially in the NL West, especially pitching half his games in Dodger Stadium.

7. Using Wins Above Replacement has become a tried-and-true way to gauge long-term contracts. Take a reasonable projection for the coming season, build in some gradual regression with age, factor in the usual 5 percent inflation in salaries, and you get a quick-and-dirty measure of what a player should be worth over the life of a deal (here’s Dave Cameron’s take on last winter’s Jose Reyes signing, as an example). If you want to be generous with Greinke, you can project him as a 5-win pitcher in his age-29 season next year, project out another half-decade, and you’d call his $147 million deal a fair one, given the going rate for a win on the open market is somewhere around $5-$5.5 million right now (very blunt math: 5 wins x $5 million a win = $25 million per season).

But that figure ignores what’s happening in the industry. As Maury Brown notes, MLB revenues hit $7.5 billion this year, and could approach $9 billion in 2014. Industry-wide revenue will have roughly doubled over the past decade. Much of that’s thanks to the incredible growth of MLB Advanced Media. But the biggest driver now is television. The national TV deal that kicks in for 2014 will be twice as big as the one before it, with each team taking in an additional $25 million a year. Get as agitated as you like over, say, Boston’s $39 million deal for a fading Shane Victorino; that’s barely an overpay in this new, booming baseball environment. The contracts that’ll really blow your mind haven’t even arrived yet. They’ll be here soon.

8. When it comes to zooming TV revenue, the Dodgers are going to benefit exponentially more than many other teams. Reports of a potential 25-year/$6 billion deal for the Dodgers and Fox might be lowballing the situation. With Fox’s exclusive negotiating window expiring, it’s possible the Dodgers find an even bigger deal, whether from another outlet, or from Fox if a bidding war ensues.

9. Even those insane figures don’t come close to capturing the spending advantages that the Dodgers have on other teams. Its majority owner, global financial services firm Guggenheim Partners, has $160 billion in assets under management, not to mention a loaded staff fully equipped to take full advantage of tax loopholes and make preposterous deals for middle relievers irrelevant in the grand scheme. The biggest bombshell comes from a deal negotiated between Frank McCourt and MLB before McCourt’s ouster. Under the terms of that deal, only a portion of the first $84 million in local TV money would be subject to revenue sharing with other clubs, with that figure going up a small percentage every year thereafter. So if the new TV deal does net $6 billion (or more) over 25 years, the Dodgers could bring in about $150 million a year that would be untouchable by other clubs. In short, the Dodgers have absolutely no incentive to stop spending …

10. … not even the luxury tax, which has spooked the Yankees into acting like the Pirates, if the Pirates weren’t outbidding them for Russell Martin. A first-time offender pays a 17.5 percent penalty for every dollar spent above the $189 million threshold. That penalty rises to 30 percent in year two, 40 percent in year three, and 50 percent in year four. The Dodgers are going to be paying the luxury tax every year for the foreseeable future.

11. Their projected spending for 2013 drives home the point. Per the excellent (and excellently named) Dodgers blog “Mike Scioscia’s Tragic Illness,” the Dodgers’ total outlay for next season is already well above $260 million, counting the posting fee for Hyun-Jin Ryu, payments for players no longer with the club, and other outlays (more on these in a bit). The team’s base payroll should easily top $230 million, shattering the all-time record of $209 million set by the 2008 Yankees. Check out some of the team’s biggest salary commitments over the next few years:

SOURCE: ESPN Stats & Info

The Dodgers have already nearly violated the $189 million luxury tax limit for 2014, owing about $181 million that year for 10 players: Kemp, Greinke, Gonzalez, Crawford, Ethier, League, Beckett, Ramirez, Billingsley, and Ryu.

12. There are some lamentable names in the list above, from the $102.5 million owed to a rehabbing Crawford to the huge money that Ethier will collect, while blocking an outfield spot that could be spent on better players such as Josh Hamilton (and others, between now and 2017). At least all nine of these players are Dodgers property and figure to be on the big-league roster next year, though. Twenty-two-year-old Cuban signee Yasiel Puig is owed $42 million. He’s also nowhere near major-league-ready, and is yet another outfielder blocked by the team’s glut at that position. Puig might one day wear a Dodgers uniform, at least. The Dodgers will also pay a total of $7.4 million next year to … Manny Ramirez and Andruw Jones. Manny’s out of organized ball, while Jones can use the money for his sushi fund, now that he’s signed to play with the Rakuten Golden Eagles.

13. Yes, they are different markets with different owners and general managers operating under very different sets of rules. But given the weekend’s other big move came out of Tampa Bay, this struck me as an interesting bit of trivia: The Dodgers will pay 10 players at least $11 million next season. The Rays have never paid anyone that much in a single season.

14. One likely reason the Dodgers got the deal done with Greinke, other than offering gobs of money: an opt-out clause that could kick in after the 2015 season. Greinke also gets a $12 million signing bonus, a nice kicker that, if paid before the end of this year, offers some tax relief lest the federal government fail to avoid going over that fiscal cliff everyone’s talking about. Even with a much higher overall tax burden in California than in Texas, the up-front bonus and especially the Sabathia-like post-year-three opt-out gave Greinke some huge financial incentives, plus that whole playing in perpetual sunshine for a very good team thing.

15. The Dodgers almost certainly aren’t done. They have eight starting pitchers under contract for $6 million or more next year, for one thing, and would like to trade two of them, with Aaron Harang and Chris Capuano the two most likely to go after about $62 million got spent on Ryu between his posting fee and six-year, $36 million contract. Given Harang and Capuano are owed $13 million combined next year, it’s tough to see the Dodgers getting more than table scraps for their unwanted duo. R.A. Dickey’s on the trade market after winning the Cy Young award, and you can probably have his next three years for about $30 million, vs. $147 million for six years of Greinke. Meanwhile, the free-agent crop still includes everyone from Sanchez to Kyle Lohse, Ryan Dempster, and others. Actually, the Dodgers would do well just to avoid eating all or most of that $13 million owed to Harang and Capuano. Again, not that they’d care.

Oh, and there’s this: The Dodgers control Clayton Kershaw’s rights for two more seasons. Kershaw’s the best pitcher in the National League, and doesn’t turn 25 until March. Expect the bidding to start around infinity dollars.

Filed Under: Los Angeles Dodgers, MLB, Zack Greinke

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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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