SOUTH HILLS – Dodgers ace Clayton Kershaw signed the richest per-year deal in baseball history on Wednesday, agreeing to a seven-year, $215 million extension with the Dodgers. Small-market owners cringed. Scott Boras rejoiced.
The average annual value of of the deal – $30.7 million - broke Alex Rodriguez’s AAV of $27.5 million. Not only is Kershaw quite happy today, I imagine, but Mike Trout is smiling somewhere as is every young, talented pitcher in baseball. Let’s be real here: Gerrit Cole probably has six remaining years in Pittsburgh if he extrapolates and/or builds on his second-half then he’s off to join Trout or Bryce Harper with the Yankees.
Kershaw’s deal is the byproduct of the dollars the Dodgers are enjoying from their lucrative regional sports deal. And it’s another example of the growing divide between small- and large-market clubs. This is a problem for the sport.
Consider the annual average value of Kershaw’s deal is greater than the annual average value of the Pirates’ local cable deal. (It should be noted Pirates president Frank Coonelly disputes the reports valuing Pirates’ local cable deal as being worth $20 million per year but the Pirates have not released any details).
Whatever the Pirates are making from their deal with ROOT, it’s a tiny fraction of the $340 million per year the Dodgers are enjoying from their new television package.
Wrote Jonah Keri today for Grantland:
Yes, the Dodgers pay the standard 34 percent in revenue sharing on their TV money, as mandated by the most recent CBA. And yes, low-revenue teams occasionally rise up and crash the postseason: The Pirates and Indians did so in 2013, and the Rays have somehow managed to make the playoffs four times in the past six years despite going head-to-head with two of the biggest regional sports network beneficiaries in the Yankees and Red Sox.
When CBA negotiations resurface, however, the little guys will remember this Kershaw deal and the other mammoth contracts handed out by rich clubs like the Dodgers. They could argue that the rules of the game have changed, and that revenue sharing needs to become far more generous to small-revenue teams. Scott Boras has claimed that teams are playing elaborate shell games with their TV money in order to hide it from revenue-sharing distribution; if that’s accurate, the next round of bargaining could get downright nasty.
There’s no doubt one of the biggest changes since the last CBA agreement is the influx of regional television dollars and the new revenue divide it has created. This is going to make the 2016 labor talks interesting. Not only will you have players looking to gain more of baseball’s revenues, not only will you have owners attempting to take advantage of a union they see in a weakened position, but there also figures to be in-fighting between small- and large-market owners.
While sharing 34 percent of local media/TV dollars seems rather generous, more and more clubs are seeking equity stakes in regional television networks (See: Phillies), television capital which is not subject to revenue sharing.
Some modest, thinking-out-loud proposals for 2016:
*Equity stakes are somehow valued and included in the 34 percent revenue sharing structure…. OR the revenue sharing percentage increases. Should the Dodgers really benefit that much from their geography and market size? They didn’t exactly create their geography or market. A healthy Dodgers franchise is good for baseball but so is a leveling of the playing field.
*Players fight for a payroll floor. There’s no excuse for a team like the Astros to field a $30 million payroll with the amount of money in the game. I’d guess every owner in baseball would still profit comfortably with an $80 million payroll. The luxury tax should remain but there should also be a poverty tax in the game to compel owners to spend at a minimum level.
*One element I do like about the Kershaw signing transcends market size: a homegrown player is staying with the club that drafted and developed him. I think that’s generally good for baseball. But the Kershaw deal will make it more difficult for the Pirates to keep Gerrit Cole, for the Rays to keep David Price, for the Indians to keep Justin Masterson and for the A’s to resign Sonny Gray.
So how about replacing qualifying offers with baseball’s version of franchise tag. Instead of clubs being able to make unlimited qualifying offers to free agents, restricting their market places, a club has one franchise tag at its disposal at all times. A player tagged with a franchise offer is guaranteed a one-year deal, worth, say, the average of the top 30 contracts in baseball. If the player signs elsewhere, the club is compensated with the signing club’s next two first-round draft picks. The club also has the right to match any offer. While not perfect, it would keep more faces of the franchise with their original franchise. And there would be fewer QOs than franchise players, removing more restrictions from the market place.