Dodgers Sign Zack Greinke and Hyun-Jin Ryu

The Dodgers have now reportedly reached agreement with free agent RHP Zack Greinke for six years and $147 million also reached agreement with Korean star LHP Hyun-Jin Ryu for six years and $36 million.

Greinke’s contract amount is almost exactly in line with the recent contract extensions for Matt Cain (five years, $112.5 million) and Cole Hamels (six years, $144 million) and CC Sabathia’s free agent contract four years ago (seven years, $161 million).  Perhaps, Greinke as a free agent could have gotten more, but with the Yankees apparently not in on the bidding, he didn’t break new ground.  Needless to say, Greinke is set for life unless he is incredibly improvident with his finances in the future.

I have to give credit to Scott Boras on Ryu’s reported contract.  Given the amount of the Dodgers’ winning posting bid (a little over $25.7 million), a contract in the range of $26 million to $30 million was almost fore-ordained, based on previous signings of posted players, such as Diasuke Matsuzaka and Yu Darvish.  I personally thought $30 million for five seasons would be about right.

Instead, Boras not only got a sixth year guaranteed for a total contract price of $36 million, he also worked in a player option to void the contract after five seasons in case Ryu turns out to be as good (and stays healthy) as the Dodgers hope he will be.

These “Boras options” are just fantastic for the elite players who receive them.  Sabathia’s allowed him and Boras to turn the seven year $161 million contract into an eight year $191 contract, and Alex Rodriguez’s allowed him and Boras to turn a ten year $252 million contract into a 17 year (!?!) $460 million, when (surprise, surprise) superstars Sabathia and Rodriguez played well through age 31.  That’s an awful lot of compensation for two players who have exactly one World Series ring between them.

I’m a bit surprised the Dodgers didn’t drive a harder bargain once they had already successfully reached agreement with Greinke.  If Ryu had refused to sign for, say, five years and $30 million, the Dodgers would have gotten back every penny of their $25.7 million posting fee from the Hanwa Eagles.

Meanwhile, Ryu’s fall-back options were incredibly meager.  He could return to play for the Hanwa Eagles in 2013 and earned $500,000 or $600,000.  [The top paid player in Korea’s KBO makes a little over $700,000, and he has a lot more experience in KBO, not mention playing for years in Japan’s NPB.]  Ryu would have to risk hurting his arm playing for relative peanuts, and next off-season he’d be a year older.  In other words, there won’t be any future $25.7 million posting fees for Ryu.

Even if Hanwa were willing to sell Ryu to one of the wealthiest three Japanese NPB teams, the largest contract Ryu would likely receive is roughly two years and $9.5 million, the contract Dae Ho Lee received last off-season as a free agent, and that doesn’t even take into account whatever monies the NPB team would have to pay Hanwa to negotiate with Ryu in the first place.

In other words, Ryu and Boras had no leverage and still got, at a minimum $6 million more than they had a right to expect.  At the end of the day, I suspect Boras is simply smarter than many of the MLB executives with whom he negotiates.  That, and/or Boras is exceptionally good at seeing the future trends in MLB.

Ned Colletti could have put the facts set forth two and three paragraphs above to Boras and said five years and $30 million or six years and $36 million “take it or leave it.”  Ryu (but not Boras) would have been a fool to leave it.

However, what we know now, after the Greinke and Ryu signings, is that the Dodgers under their new ownership intend to be the next George Steinbrenner (Steinbrenners still own the Yankees, but they’re not George) of MLB.  The Dodgers’ new ownership realizes that playing in the second biggest market in MLB, they need to start winning to maximize their revenue and maximize the team’s value.

The Dodgers haven’t won or even been to the World Series since 1988.  That’s simply too long for a team with the potential revenue streams of the Los Angeles Dodgers.  Current Dodger ownership apparently realizes they need to get back to the post-season fast, they need to stay there, and no matter how much money they spend of free agents, foreign players and trades (the Red Sox massive salary dump/Dodgers’ massive salary assumption), it’s likely to be less than the increase in revenue if the Dodgers start winning again.

As a final note, there are going to be some bargains available on at least two of Ted Lilly, Chris Capuano and Aaron Harang.  The Dodgers have too many starters under contract now, and, as a result, they don’t have a lot of leverage.  The one I’d want, taking salaries into account, is Chris Capuano.

Explore posts in the same categories: Boston Red Sox, Los Angeles Dodgers, New York Yankees, Philadelphia Phillies, San Francisco Giants, Texas Rangers

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