It is a strange era in the lives of baseball’s two foremost financial heavyweights.
After years of spending beyond the luxury tax threshold by both teams, the Red Sox and Yankees have entered a new phase. While both teams entered this season expecting to shell out well in excess of the $178 million needed to incur penalties this year (and, most likely, in 2013), the two teams also were operating with a goal of getting under the $189 million threshold in 2014, convinced by the incentives provided by the new Collective Bargaining Agreement to do so.
The result has been a changed operating model in which the two teams have made payroll choices rather than constantly adding more, more, more to bountiful payrolls. That became apparent this offseason, when the Red Sox traded Marco Scutaro in order to liberate the money to sign Cody Ross, while the Yankees dealt A.J. Burnett (picking up the tab for approximately $19 million of the remaining $31 million on his deal) so that they could sign players like Eric Chavez and Andruw Jones.
But that tweaked approach was a mere prelude to arguably the most dramatic and unprecedented move that either team has made in years, when the Red Sox dealt away their three most expensive players (by average annual value) in sending Adrian Gonzalez, Carl Crawford and Josh Beckett (along with Nick Punto) to the Dodgers on Aug. 24.
WHY THE SOX WANTED TO BE LIKE THE YANKEES
In many respects, the Sox made such a move because they wanted to start signing the kinds of deals that have paid off handsomely for the Yankees in recent years. While the Yankees have signed a few huge long-term deals (CC Sabathia, Mark Teixeira, A.J. Burnett -- all signed initially in the offseason of 2008-09), they’ve stuck to more conservative deals in the last few years.
That approach, combined with the fact that New York does still operate with a larger payroll than the Red Sox, has allowed the Yankees to keep enough financial flexibility to break open the piggy bank for some excellent short-term value signings at the end of recent offseasons. The most prominent recent examples took place this January.
While the Sox were scraping their payroll ceiling, the Yankees signed Hiroki Kuroda in January to a one-year, $10 million deal that has paid off in spectacular fashion, with the right-hander going 13-10 with a 3.14 ERA (best on the Yankees) in 189 1/3 innings (most on the Yankees). The team also dumped Burnett to land Chavez, who is hitting .282 with an .820 OPS and 13 homers in 99 games at the two infield corners and DH, and Jones, hitting .202 with a .697 OPS and 13 homers while playing the two outfield corners and serving as a DH.
Yankees GM Brian Cashman said that the approach of waiting out the free-agent market and going value hunting for short-term deals is very intentional, a byproduct of “getting burnt way too many times” in free agency, something that is in part a byproduct of the challenge of finding players who can excel in big markets.
The effort to find late-offseason values, however, does not occur in isolation. Cashman said that it was also necessary to have a demonstrated ability and commitment to cultivate homegrown players -- particularly pitchers -- in order to have credibility in establishing limits in negotiations.
“We've now broken in over the last number of years, a [Phil] Hughes, [Ivan] Nova, this year David Phelps is emerging,” Cashman noted recently. “The free-agent market has a lot to do with choices, first and foremost. What is legitimately available? The fact that I've seen some young kids that I can turn to and count on gives me a negotiating leverage point that I can play off of. If I didn't have that, you don't want to be desperate in the free agent market where you can get slaughtered and killed.
“It's very important to be in a position where you feel you might have something to turn to, even if it's unproven. You might be able to dream on it,” he continued. “It's important to have that to have power to wait the market out, get you in a position where you can negotiate contracts on your terms in January.”
That is an approach the Sox would have liked to have taken last offseason, but could not because they lacked the available resources to do so, their wallet nearly emptied and their roster fairly rigid thanks to long-term commitments to Gonzalez, Crawford and Beckett, among others.
Now, thanks to the Dodgers blockbuster, the Sox are in position to take a similar approach to rotation- and roster-building as the one that has proven effective for the Yankees, hunting for values in the late offseason market.
WHY THE YANKEES LIKELY WILL COME TO ENVY THE RED SOX
Here are Mark Teixeira’s lines (with age in parentheses) over the last five years:
2008 (28): 157 games, .308/.410/.552/.962, 33 HR
2009 (29): 156 games, .292/.383/.565/.948, 39 HR
2010 (30): 158 games, .256/.365/.481/.846, 33 HR
2011 (31): 156 games, .248/.341/.494/.835, 39 HR
2012 (32): 120 games, .255/.336/.478/.814, 23 HR
That’s four straight years of declining on-base percentages and OPSes. Teixeira remains a middle-of-the-order lineup threat, but for how much longer? He’s gone from one of the elite hitters in the game to one whose OPS is almost as good as that of other first basemen like Mitch Moreland and Mark Reynolds.
It’s worth noting that his fantastic defense at first base still makes him a very good player. But there’s four years of likely post-prime offensive and defensive decline ahead for Teixeira, and this year suggests that his days as a lineup constant can no longer be taken for granted. Meanwhile, he’s owed $22.5 million in each of the next four years.
Still, Teixeira’s deal remains efficient in comparison with Alex Rodriguez’s. In 2007, at the age of 31 (typically the last or penultimate year of a position player’s prime), he blasted 54 homers with a career high 1.067 OPS. He opted out of his 10-year, $252 million deal (which had three years remaining) to re-sign for 10 years and $275 million.
Since signing, he has offered steadily diminishing production, defense and playing time. His last year of his first contract and first five years of the second:
2007 (31): 158 games (4 DH), .314/.422/.645/1.067, 54 HR
2008 (32): 138 games (7 DH), .302/.392/.573/.965, 35 HR
2009 (33): 124 games (9 DH), .286/.402/.532/.933, 30 HR
2010 (34): 137 games (12 DH), .270/.341/.506/.847, 30 HR
2011 (35): 99 games (10 DH), .276/.362/.461/.823, 16 HR
2012 (36): 101 games (30 DH), .278/.358/.460/.818, 17 HR
The trend lines are clear. He’s in his fifth straight year of diminished slugging percentage and OPS, with steadily diminishing playing time and steadily increasing time as a DH. Considered another way: As Rodriguez transitions to spending more and more time as a DH, if a team had the same amount of money to sign Rodriguez or David Ortiz (also in his age 36 season, a few months younger than Rodriguez) this offseason, in which player would it invest?
The answer seems fairly straightforward, even with Ortiz’s injury, given that he had the best OBP, slugging mark and OPS in the AL this year at the time of his Achilles strain. Yet Rodriguez has five more years (running through his age 41 season) and another $120 million owed to him (in salary and signing bonuses). Moreover, his contract counts for $27.5 million a year against the luxury tax threshold -- and when he reaches certain home run milestones (for instance, 660 career homers, a mark he’s likely to hit next year), he’ll get an additional $6 million.
If the Yankees are indeed hoping to get below the luxury tax threshold of $189 million in 2014, Rodriguez’s contract will be incredibly onerous despite ever-dwindling value to the team.
And then there is CC Sabathia, who is approaching the end of the first year of a five-year, $122 million deal that includes a vesting option for a sixth year. He’s owed an average of $24.75 million per year over the next four years. He counts for $24.2 million per year against the luxury tax threshold. And, after averaging a mind-blowing 240 innings a year over the past five seasons, he’s on pace to fall short of 200 innings, his 3.56 ERA is his highest since 2005 and after his four-seam fastball averaged 95 mph in every season from 2007-11, he’s working at 93 mph this year.
It is rather remarkable to think that three players in varying stages of (likely) decline are owed at least $309 million between now and 2016 -- considerably more than Adrian Gonzalez, Carl Crawford and Josh Beckett were owed on both an annual and total dollar basis at the time of the trade that sent them to the Dodgers.
It is important to point out that the Yankees have received considerably more production from their trio than the Sox did from their three most expensive players. Still, with $74.2 million locked up in those three players (in average annual value), if the Yankees do want to get under the luxury tax threshold of $189 million by 2014, they might find themselves hamstrung in the same way that the Sox were this past offseason.
New York will face challenges in trying to figure out whether or not to re-sign Robinson Cano and/or Curtis Granderson. In other words, as the Yankees pay handsomely for players in their likely career declines, at some point, they may not be in position to sign younger, more productive players to more efficient contracts -- unless they either revisit their plan not to pass the luxury tax threshold or they find their own version of the Dodgers, willing to absorb some of their most limiting deals.
And so, as the Sox moved to embrace a model built by the Yankees, the potential exists that, within a couple of years, New York could be envious of the flexibility of the Sox.
But that moment has yet to arrive. For now, as the two teams meet, the Yankees are trying to reassert their hold on first place, while the Sox are left to wonder whether they will finish in last. There is little question, for now, about who envies whom.