By Jordan Kobritz
With one swipe of a pen, the Arizona Diamondbacks made a franchise altering move, one that also sent reverberations throughout the baseball industry.
One day after unveiling a new line of uniforms, Arizona shocked the baseball world by signing pitcher Zack Greinke to a six-year, $207 million contract. Greinke, this year’s runner up for the Cy Young award in the National League, spent the last three years with the Los Angeles Dodgers, amassing a 51-15 record. Greinke and teammate Clayton Kershaw, a three-time Cy Young winner, led the Dodgers to the playoffs in all three seasons. At the end of this season, Greinke exercised an opt-out clause in the six-year, $147 million contract he signed with the Dodgers in 2012.
While the total value of the contract is below the $217 million the Red Sox gave free agent David Price only hours earlier, the deal still gives Greinke bragging rights to the highest average annual salary in MLB history at $34.2 million per year. His new contract will pay him $10 million more per year and adds three more years to his old deal.
Greinke was expected to either resign with the Dodgers or move up the coast to join the San Francisco Giants. Hardly anyone in the baseball universe predicted that the D’backs would swoop in and pluck the star away from his other suitors. The move not only strengthens Arizona, which was desperate for an ace, but simultaneously weakens their Division rivals.
The Greinke signing was fueled by a number of factors. Last February the D’backs signed a new TV deal with Fox Sports Arizona that will pay the team $1.5 billion over 20 years and includes a stake in FSA. The club will receive approximately $80 million per year for the life of the deal. That figure pales in comparison to what a number of other teams rake in from their television contracts. The Dodgers, for example, will receive four times that amount each year for the next 25 years. But for the D’backs, who rank in the bottom 20% of MLB clubs in revenue, the new deal is $50 million per year more than they had been receiving.
After jettisoning payroll during the season, and reluctant to trade its bevy of prospects for pitching, the team was primed to make a run at a high profile free agent. In fact, Greinke was their second attempt at signing a starting pitcher. Earlier in the week the D’backs had been rebuffed by Johnny Cueto, who turned down the team’s six-year, $120 million offer.
The Price and Greinke deals are further evidence of the riches that abound in MLB. Commissioner Rob Manfred recently confirmed that the sport will generate almost $10 billion in revenue this year. Every MLB club will receive approximately $200 million from the league’s Central Fund which collects national TV revenues, licensing fees and internet revenues, then distributes the total equally among the 30 teams. The $6 billion Central Fund exceeds the sport’s estimated 2015 payroll of slightly more than $4 billion, including player benefits. MLB is similar to the NFL where Central Fund revenues cover player salaries leaving teams free to spend local revenues – from sales of tickets, sponsorships, concessions, media deals, parking and the like – on player development and other team expenses.
Price and Greinke were the second and third high profile free agent pitchers to come off the board this fall. Jordan Zimmermann was the first, signed by the Detroit Tigers for an economical – by comparison – $110 million for five years. They were the consensus top three starters on the market, leaving other pitching-starved teams to cull through the remnants of a strong class. After losing out on the Greinke sweepstakes, the Giants quickly signed Jeff Samardzija to a five-year, $90 million contract.
Still available are the aforementioned Cueto along with a list of 8-10 B-grade starters and Japanese free agent Kenta Maeda. With bundles of cash at their disposal, teams that are desperate to win will compete for their services. Expect them to open their checkbooks and overpay in the process.
Greinke’s contract will not only alter his family’s finances for generations, but the financial fortunes of a number of other pitchers and the teams that sign them. And for that they can all thank the Diamondbacks.
(Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor and the Chair of the Sport Management Department at SUNY Cortland. Jordan maintains the blog: http://sportsbeyondthelines.com and can be reached at firstname.lastname@example.org.)