MADISON, January 16, 2014 — The Los Angeles Dodgers and Clayton Kershaw finally came to an agreement on a seven-year $215 million deal after coming close to an agreement during the 2013 season.
As long as baseball players have been getting paid there have been people complaining about how much those players are receiving for playing a game. Yesterday was no exception, as many pundits were up in arms at the Dodgers giving such a large deal, the highest AAV in baseball history, to a pitcher.
To answer that question there is context needed. Television money has changed the amount of money in baseball and the Dodgers have been one of the largest beneficiaries, as they will receive more than $7 billion over the next 25 years from Time Warner Cable. Some of this newfound financial muscle was used last year, but has now been reinforced as Kershaw becomes the Dodgers sixth player making at least $20 million per year.
While this is not a strategy that can be employed by the teams in Tampa Bay, Pittsburgh or Kansas City, the Dodgers’ TV deal, new owners and large fan base make this strategy, employed by the Yankees for years, feasible.
If the Dodgers also end up signing Masahiro Tanaka, the Dodgers will likely be looking at a payroll approaching $250 million. The Dodgers will also be a repeater under the luxury tax and will pay 30% tax on any payroll over $189 million. Many assume that this money is part of revenue sharing, but it is actually primarily used for player benefits.
Without this money being distributed there are likely to be teams that complain about the Dodgers hefty payroll. The simple fact, however, is that if the owners do not mind paying for the payroll and luxury tax, they are not breaking any of MLB’s rules.
Fangraphs.com speculated that based on projection, the Dodgers locked in a bargain as Kershaw is projected to be worth $243 million. Within Kershaw’s top ten similar pitchers through age 25 are Tom Seaver, Jim Palmer, Pedro Martinez, and Roger Clemens. Kershaw has already won two Cy Young Awards, led the NL in ERA and WHIP three times each and posted a career WAR of 32.2. For comparison Pedro Martinez contributed 86.6 WAR in his 18-year career and is considered a lock to be a first ballot Hall of Famer.
From Clayton Kershaw’s perspective, he accomplished a few things. First, Kershaw locked in his first really large payday and became the highest paid player in baseball by AAV. For at least the next five years, thanks to an opt-out clause, and possibly seven years, Kershaw will receive an average of $30.71 million per year, making him the first to break the $30 million barrier.
The other thing that Kershaw achieved is that he may have another chance for a similar payday. Kershaw has the ability to opt-out after five years when he will still be only 30 years old. Given the seven-year, $180 million contract extension that Justin Verlander received just last year and the way inflation has gone with MLB contracts Kershaw could receive a similar deal in 2019 if he stays healthy.