Dec. 12 (Bloomberg) -- The new owners of the Los Angeles Dodgers are taking their cue from the free-spending late New York Yankees owner George Steinbrenner, and fans in both cities may get the bill.
The Dodgers yesterday introduced Zack Greinke after making him the highest-paid right-handed pitcher in Major League Baseball history with a six-year contract the Los Angeles Times said is worth $147 million. Come opening day, the Dodgers likely will have the highest major league payroll ever, topping the Yankees’ $209.1 million mark from 2008.
As Steinbrenner’s son, Hal Steinbrenner, tightens the reins on the Yankees’ spending to avoid luxury tax repercussions in 2014, the Dodgers have been on a $600 million player acquisition spree since their purchase by Guggenheim Baseball Management for $2.15 billion in March.
“We want to win,” Magic Johnson, a basketball Hall of Fame member and a minority partner in the Dodgers, said at Greinke’s news conference when asked why it seems that money suddenly is no object around a franchise that last won the World Series in 1988.
Following Time Warner Inc.’s $3 billion, 20-year agreement last year to telecast the Los Angeles Lakers’ basketball games, the Dodgers have discussed a $6 billion, 25-year deal with News Corp.’s Fox Sports.
Such TV deals enable teams like the Dodgers to spend, and raise questions about who will eventually pick up the check, said David Carter, executive director of the Sports Business Institute at the University of Southern California. DirecTV said it has added a $3 surcharge for new customers in some markets, including the two biggest, L.A. and New York, to help cover sports-network carriage fees.
“Fans are welcoming the investment in payroll and at the same time a lot of people are trying to figure out how it’s going to pencil out for whoever acquires those broadcast rights,” Carter said in a telephone interview. “It may have a positive impact on the Dodgers and their game-day experience, but I think it’s going to have a residual effect on this whole debate about what’s going on with cable sports.”
The Dodgers acquired pitcher Josh Beckett, first baseman Adrian Gonzalez and outfielder Carl Crawford -- the three highest-paid Boston Red Sox players -- during the 2012 season, then missed the playoffs with an 86-76 record. The Dodgers last reached the postseason in 2009.
Having signed South Korean pitcher Ryu Hyun-jin to a six-year, $36 million deal two days ago, the Dodgers now owe more than $220 million to their 2013 roster.
“It’s clearly all relative, and when you look at it in terms of proportionality, it may not be that out of whack,” Carter said.
Greinke, the 2009 American League Cy Young Award winner, was the top pitcher available in free agency. The 29-year-old had a 15-5 record with a 3.48 earned run average for the Milwaukee Brewers and Los Angeles Angels in 2012. Over the past two seasons, he’s 31-11 with a 3.63 ERA.
The roster additions have slashed the Dodgers’ odds of winning the World Series, making them the joint favorite at 17-2 with the Detroit Tigers and the Washington Nationals, according to online sportsbook Bovada.lv.
“The Dodgers have been taking the most money from the public even before signing Greinke, when they were 12-1,” Bovada.lv sports book manager Kevin Bradley said in an e-mail.
The Yankees, 27-time World Series champions, have had baseball’s highest opening day payroll every year since 1998, according to USA Today’s sports salary database. The team co-owns the YES Network, which began in 2002. The next year it raised its payroll by $27 million to $152.9 million and hasn’t been below $180 million since.
“The value attributable to the rights that the Dodgers are going to be getting financially might look and feel a little bit like the revenue and cache that the Yankees were able to pick up via the YES Network,” Carter said. “It does feel like the Yankees have moved to the West Coast.”
George Steinbrenner died in July 2010 after using free-agent spending to build teams that won five World Series championships from 1996 to 2009. Hal, a self-professed “finance geek,” is intent on taking the 2014 payroll below the $189 million mark, which would save the Yankees millions in luxury tax payments that can be as high as 50 percent of the overage and is distributed to other teams.
“I just feel that if you do well on the player-development side and you have a good farm system, you don’t need a $220 million payroll,” Hal Steinbrenner, the Yankees’ 43-year-old managing general partner, told reporters in March.
The last time the Yankees’ opening day payroll was less than $189 million was 2004, at $184.2 million.
“I’m looking at it as a goal, but my goals are normally considered a requirement,” Steinbrenner said.
The result has been the Yankees’ focus on one-year contracts, which were given to pitchers Mariano Rivera, Andy Pettitte and Hiroki Kuroda and outfielder Brett Gardner. Free-agent third baseman Kevin Youkilis and outfielder Ichiro Suzuki also have been offered one-year deals, according to MLB.com, and catcher Russell Martin left New York, signing a two-year, $17 million contract with the Pittsburgh Pirates.
The last time the Dodgers had baseball’s highest payroll was 1989, when their salaries totaled $21.6 million, according to USA Today. The Yankees’ Alex Rodriguez, Mark Teixeira and CC Sabathia each made more than that in 2012.
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