Ken Rosenthal and the deal

By: coachemup!

By Ken Rosenthal 

It’s easy to forget in the middle of a pandemic: At some point the baseball world will return to normal, or something close to normal, at least for revenue behemoths such as the Los Angeles Dodgers.

Playing without fans for at least the start of the 2020 season will hurt the Dodgers more than almost every other club, considering they have led the majors in attendance the past seven years. Playing a maximum of 60 games instead of 162 also will mean significantly less local TV revenue, at a time when only the Yankees will field a higher Opening Day payroll.

But remember, we’re talking strictly about 2020.

Dodgers fans likely will return in their usual droves once a vaccine for COVID-19 is available, perhaps in time for the ’21 season. The team’s record $8.5 billion TV deal with SportsNet LA, meanwhile, runs through 2038 — six years beyond the 12-year, $365 million extension the Dodgers awarded Mookie Betts on Wednesday. For a team deep in young talent, with zero guaranteed dollars committed beyond ’22, taking the long view made sense.

Of course, these things always look clearer in hindsight. Virtually no one in the game anticipated the Betts deal, and the news sent shock waves throughout the industry. Extensions often are announced before Opening Day, but Opening Day normally does not take place July 23 amid a national economic crisis. Rival executives, taken aback by the size of Betts’ contract, speculated that he and the Dodgers must have had an agreement before the game shut down in mid-March. Sources in both camps said such was not the case, explaining that while negotiations took place in spring training, they resumed only in the past week.

Perhaps a team such as the Mets, Giants or Rangers would have given Betts, 27, even bigger money as a free agent this offseason. But for Betts and his agents, Ed Cerulo and Steve Veltman, landing the second-largest contract in major-league history — in the summer of COVID-19, without the benefit of open bidding — was a clear triumph, particularly when L.A. is where Betts wanted to be.

Many on the players’ side viewed the deal as an indication the economic health of the industry is better than owners have portrayed. Could be, but Betts qualified as an outlier even among the other top potential free agents, Phillies catcher J.T. Realmuto, Astros outfielder George Springer and Athletics shortstop Marcus Semien. Likewise, the Dodgers and certain other high-revenue clubs also would appear to be outliers. Other teams will say they are in more tenuous financial positions, likely exacerbating recent trends in which less-than-elite players struggle in salary arbitration and free agency.

The Dodgers, aware such bargains might arise, discussed internally whether it would be better to use their payroll flexibility to exploit a depressed market rather than sign Betts. But under Andrew Friedman, president of baseball operations, the Dodgers have spent years maneuvering into position to sign a superstar. After they traded outfielder Alex Verdugo, infield prospect Jeter Downs and minor-league catcher Connor Wong for Betts and left-hander David Price in February, Mookie became their man.

The Betts contract stands as unique to this player and this team at this moment in time. The Dodgers, since the arrival of Friedman in October 2014, generally have preferred shorter deals. The financial strain created by the pandemic for 2020 and possibly ’21, however, made a lucrative short-term extension with Betts — say, two years, $90 million — far less appealing than it might have been before the game shut down in March.

Extending the term to 12 years allowed the Dodgers to keep Betts’ average annual value to $30.4 million, a big number, to be sure, but more than $5 million below Mike Trout’s AAV and even a few hundred thousand below Clayton Kershaw’s. The Dodgers almost certainly would have needed to go to a higher AAV if they had extended Betts in March; the Angels awarded third baseman Anthony Rendon a $35 million average in a seven-year free-agent deal last offseason. Betts’ lower AAV will benefit L.A. under the game’s current competitive-balance tax system, which might be altered in the next collective-bargaining agreement. Betts further eased the team’s burden by deferring $115 million of his $365 million, according to a source.

The deal, however, also worked to Betts’ advantage. The longer term enabled him to secure a higher guarantee even though both he and the Dodgers know he is unlikely to still be a major contributor when the contract expires after his age-39 season. Betts also benefited up front through a $65 million signing bonus, money that offers greater tax benefits for him as a non-California resident than regular salary and also helps protect him from the possible lingering effects of the pandemic in ’21 and threat of a lockout in ’22. His $17.5 million salaries in both those seasons will be far below his AAV, so he will have less to lose.

The deal does not include opt-outs, in part because the Dodgers did not want to be in position to renegotiate with Betts in three or four years when the game figures to be in a stronger financial position. Betts, like Bryce Harper, who did not negotiate opt-outs in his 13-year free-agent deal with the Phillies, also gains the peace of mind of knowing he likely will be in one place for the rest of his career.

Unlike the Phillies with Harper, the Dodgers did not award Betts a full no-trade clause, consistent with the longtime policy of their team president, Stan Kasten. Not to worry: Betts will gain full no-trade protection five years into the deal as a player with 10 years’ service, five straight with the same club. And if he is traded, his deferrals will be converted into present-day dollars, creating even greater financial value in the deal.

The Betts extension likely increases the pressure on the Phillies to sign Realmuto, but otherwise figures to stand alone. The Dodgers were confident enough in their long-term outlook to make a major investment in a superstar. Betts was valuable enough to command $365 million in the middle of a pandemic without hitting the open market.

Singular player. Singular team. Singular moment.

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