Originally posted on Fangraphs  |  Last updated 12/14/12
The Dodgers are rich. Very rich. After spending $2.15 billion to buy the team, the new owners have opened the checkbook again and again and again. First, in the trade with the Red Sox that netted Adrian Gonzalez, Josh Beckett, Carl Crawford and Nick Punto. Next with the winning bid for Korean pitcher Hyun-Jin Ryu. Then with the free-agent signings of Zack Greinke and Brandon League — and the contract for Ryu. Over on his blog, my colleague Mike Petriello estimates the Dodgers’ current commitments for 2013 at $246.9 million. That figure includes deferred payments still owed to Manny Ramirez, Andruw Jones and Hiroki Kuroda, but excludes Ryu’s $25.73 million posting fee. Salaries for A.J. Ellis and Ronald Belisario — who are entering their first year of arbitration — still need to be added. And perhaps the Dodgers make another small move here or there. But let’s not quibble over pennies. Instead, let’s assume the Dodgers’ Opening Day payroll is $250 million. A nice, big, round number. A quarter-of-a-billion dollars. Unprecedented, right? Blows anything the Yankees have ever done out of the water, correct? The most the Yankees ever spent on an Opening Day payroll was $209 million, back in 2008. But you can’t just compare $250 million spent in 2013 to $209 million spent in 2008 without adjusting for inflation. That’s not how money works. The value changes over time. Let’s take a look. Below is a chart listing the Yankees’ Opening Day payroll for each year from 2004 through 2012, as reported by the Associated Press. The right-hand column adjusts those figures for inflation to 2012 dollars, using this inflation calculator. Year Yankees Opening Day Payroll Adj. for Inflation (2012) 2004 $182,835,513 $223,890,748 2005 $205,938,439 $243,917,367 2006 $194,663,079 $223,357,536 2007 $189,639,045 $211,567,048 2008 $209,081,577 $224,632,834 2009 $201,449,289 $217,205,634 2010 $206,333,389 $221,797,817 2011 $201,689,030 $207,407,792 2012 $197,962,289 $197,962,289 Look at 2005. When the Yankees’ Opening Day payroll of nearly $206 million is adjusted for inflation to 2012 dollars, it amounts to nearly $244 million. That’s pretty darn close to the Dodgers’ expected 2013 Opening Day payroll. When inflation is accounted for, the Yankees actually spent more in 2005 than in 2008, even though everyone always points to 2008 as the high-water mark. So, yes, the Dodgers will spend a lot of money in 2013. It’s just that the amount won’t be unprecedented when adjusted for inflation. There’s another way to look at the Dodgers’ expected payroll, as compared to the Yankees: as a percentage of all revenue earned by Major League Baseball each year. Maury Brown, over at Biz of Baseball, recently reported that total MLB revenues in 2012 topped $7.5 billion and may reach $9 billion by 2014. Brown arrives at the $9 billion figure by adding in the new national TV contracts (valued at $788 million per year) and the annual value of the Dodgers’ expected local TV contract (between $240 million and $280 million per year). He has a nifty chart showing the growth in MLB revenues from 1995 to the present. Let’s assume total MLB revenues in 2013 reach $7.7 billion — modest growth over this year that doesn’t yet incorporate the new national TV or local Dodgers TV money. A $250 million Dodgers payroll would amount to 3.2% of total MLB revenue, give or take a million dollars. Did the Yankees ever have a payroll that amounted to 3.2 % of MLB revenues? They sure did. In 2008, the year they spent $209 million on payroll. But that was nothing compared to 2004 and 2005, when the Yankees’ payroll was more than 4% of MLB revenues. Here’s how the numbers break down: Year NYY Opening Day Payroll Total MLB Revenue NYY Payroll as a % of MLB Revenue 2004 $182,835,513 $4,500,000,000 4.10 2005 $205,938,439 $5,000,000,000 4.10 2006 $194,663,079 $5,600,000,000 3.50 2007 $189,639,045 $6,100,000,000 3.10 2008 $209,081,577 $6,500,000,000 3.20 2009 $201,449,289 $6,600,000,000 3.10 2010 $206,333,389 $7,000,000,000 2.90 2011 $201,689,030 $7,000,000,000 2.90 2012 $197,962,289 $7,500,000,000 2.60 It’s easy to get blinded by big numbers. And it’s easy to see the Dodgers’ payroll growing and then wondering how we could have gotten to this point. But, remember, we’ve been here before with the Yankees of the 2000s. Other teams played catch up, new revenue streams developed, and players and owners responded with a new Collective Bargaining Agreement aimed at reigning in the Yankees’ spending. Ten years later, we have the Yankees of the 2010s — a more measured, big-money team. Will the Dodgers follow that same path? We don’t know. You don’t know. And the Dodgers probably don’t know. For now, they’ve won the lottery and are buying a lot of shiny new toys. We’ll have to wait and see how those toys perform and age and whether they continue to give the Dodgers the pleasure they sought when they first bought them.
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