21st Century Arms Race

Earlier this month, the National Bureau of Economic Research finally solidified the sentiments of many Americans when they inked the pages of history with the great recession of the 21st Century. Stemming from December 2007, the US economy has been on the declining slide. Unemployment rates have risen, spending has slowed to a quicksand crawl, and the almighty GDP has even been turning red. Even the Federal Reserve saw a 0.8% drop in household debt, the first drop for the in the history of reporting.

Yet despite the multiple variables impacting the US economy, one industry that has seemed to remain recession proof is Major League Baseball. Since most American households have thrown the emergency break into effect on spending, most teams seem to have focused on signing key off season players who will bolster both the win column and team revenues. It is true, Baseball teams generate funds. Essentially, the stadium is an ATM machine and each warm seat a deposit.

With that in mind, consider the New York Yankee’s the Major’s economic stimulus. The club continues to spend at a rate that no other franchise in sports could even muster a modest attempt to match. To look at the scenario through a different scope, consider the Yankee’s the United States of Defense spending while the closest contender is Tanzania. The Yankee’s 2008 Payroll exceed 207 million dollars; far and away the biggest in the game. And even though the Bronx have unloaded nearly $90 million in payroll moving into the 2009 season, they will surely spend a large portion of their savings.

The spending spree began last week when the pin stripes signed free agent powerhouse CC Sabathia to a 7 year-$161 million dollar deal that will become the new pinnacle on Mount Olympus for pitching power. Now in all fairness, Sabathia did perform to Zeus standards over the second half of the 2008 season with the Brewers. Over the course of 17 starts, the 6’ 7” lefty went 11-2 with 7 complete games and 3 shutouts. He fanned 128 batters in 130.7 innings while registering an ERA of 1.65. Through his efforts and pitching on short rest, he helped the Brewers slide into the playoffs for the first time in 26 years.

The signing of Sabathia is another example of Baseball teams paying escalating amount for their arms supplies. Though we have not seen a showdown in the likes of Cuban missile crisis, it is evident that a showdown is sure to ensue. Consider the fact that in the past 2 years, the 2 New York teams have paid in excess of 298 million for 13 years of pitching service. In 2007, the New York Mets paid 2-time CY Young winner Johann Santana 137.5 million for 6 years. And though statistical numbers do favor prosperous times ahead, it is also a major investment in one player who is touching the ball every 5 days.

The cost per win in a major league season has entered into the realm of disbelief. Sabathia’s contract is just another aggressive withdrawal from Hal’s trust fund. Looking at the financials, here are some interesting numbers to digest. Sabathia’s deal for $161 million over 7 years averages out to $23 million dollars a year. Take that annual salary against his career average for appearances in a season (34), and Sabathia will earn approximately $676,470 every time he takes the mound. Furthermore, take the $23 million divided by Sabathia’s average season win totals (15) and it will be found that the Yankee’s are paying $1.53 million dollars a win.

Now, admitting that this is a fantastic sum of money for the notch in the win column, Sabathia’s bank account should be contrasted against other premiere pictures over the past 10 years. For instance, Johann Santana signed a 6 yr/$137.5 million dollar deal in 2007. His performance for the first season of the contract was a 16-7 record with 206 Strikeouts in 234.4 innings pitched while maintaining a 2.53 ERA. On the heels of the Sabathia trade, the New York Mets signed free agent Francisco Rodriguez (K-rod) to a 3 year/$37 million deal to fill the injury vacuum created by Billy Wagner. Last season K-rod set a major league record with 62 saves, in addition to accumulating 77 Strikeouts in 68.3 innings. In 2006 Barry Zito was offered a 7 year contract worth $126 million. This has been one of the bigger signing disappointments in recent memory as Zito has performed to a 21-30 record in the first 2 seasons of the contract. The 21-30 record is the result of 251 Strikeouts in 376.7 innings and a 4.84 avg. ERA.

Arguably, the best pitching free agent singing in the last decade was the 1999 signing of Randy Johnson by the Arizona Diamondbacks. The Diamondback’s offer to land the Big Unit did not disappoint. In his first 4 seasons, Johnson amassed an 81-27 record. He recorded 1417 Strikeouts in 1,031.1 innings pitched with holding down a 2.48 avg. ERA. During this time span Johnson earned 4 consecutive CY Young awards and was Co-MVP of the 2001 World Series Champion Diamondbacks.

Though it is useful to see what other great free agent talent has produced in recent memory, it all comes down to any given day on the mound. Though pitching is a key post season ingredient in a World Series mix; run support, defense, and clutch hitting need to help elevate a team into a post season contender.

To offset any chance of rotation weakness, the Yankee’s also signed free agent A.J. Burnett to a 5 year, $82.5 million deal. Burnett achieved an 18-10 record with 231 Strikouts in 221.3 innings for Division Rival Toronto last season. And though these are winning caliber numbers, arm issues threatens his season longevity. However, the Yankee’s are hoping this will help improve a starting rotation consisting of Chien-Ming Wang, Joba Chamberlain, Sabathia and potentially one of the following: Andy Pettitte, Ben Sheets or Derek Lowe. Both Sheets and Lowe are available; it is just a matter of cost.

Now, is it reasonable that the Yankee’s have invested nearly a quarter of a billion dollars in 2 players? In most cases it is a resounding NO. That being said, you are talking about the Yankee’s and an 8 year drought from a championship. Since there pitching has been the Achilles heel of the team in there feeble playoff showings during the past few years, it was the dis-appearance from their 13 year post season showings that has spurred investments. On April 16, 2009 the Yankee’s will take the field in the new Yankee stadium. The new stadium, projected at $1.6 billion bill, will need a team equal in cost to help the cash happy front office to maintain debt payments by filling the seats. And though the pin stripes rarely have an issue selling out, nothing generates revenue like post season success.

So while the rest of us are fretting over holiday Christmas shopping budgets and staying on top of our bills, the Yankee’s have made this holiday season very memorable for 2 New York new comers. If one thing can be concluded from all of this, it is that even when everything else is changing, the Yankee’s spending habits have not.