Surge Pricing

Given the history of huge pitcher contracts, MLB's recent deals seem nuts—until you understand the money flooding into the game
December 14, 2015

ALONG WITH THE yacht, the imported 12-cylinder automobile, the designer handbag and the unpronounceable bottle of wine with a layer of dust, add the free-agent starting pitcher to the roster of Veblen goods. Back in 1899, economist Thorstein Veblen gave eponymous notice to how Americans love their conspicuous consumptions, the luxury goods that are attractive because they are expensive—though 76 years before free agency, he didn't have in mind Boston Beaneaters pitcher Vic Willis and his league-high $1,800 salary that year.

Now the pitcher as Veblen good has become a common occurrence. In a six-day shopping spree last week that made Rodeo Drive look like a church rummage sale, major league teams shelled out $623 million to just four pitchers: David Price ($217 million, seven years by Boston), Zack Greinke ($206 million, six years by Arizona), Jordan Zimmermann ($110 million, five years by Detroit) and Jeff Samardzija ($90 million, five years by San Francisco). Eighteen of the 23 seasons those teams bought will pay the pitchers an average of $29 million when they are 32 and older—huge bucks for the clearly established decline years in today's game.

"There are exceptions to any rule," Red Sox owner John Henry said on the long-term outlook on Price, who could be 37 when Henry stops paying him. (Price can exercise an opt-out clause after three years.) It's a common tune. Each year teams plunk down more and more millions in the hope that their guy is the exception. Most will be wrong.

Thirteen pitchers previously signed contracts worth more than $120 million. So far five of them have pitched under those contracts at age 32 or older, and all five have been busts. Justin Verlander, Johan Santana, Barry Zito, CC Sabathia and Mike Hampton, in 14 combined seasons at age 32 or higher, are 74--88 with a 4.56 ERA.

Most pitchers these days, regardless of salary, fall off a cliff around age 32. Last year only two of the top 34 qualified ERAs (John Lackey and A.J. Burnett) belonged to pitchers 32 or older. Greatness leaves even the best pitchers in a hurry.

Knowing the obvious economic foolishness of signing aging pitchers, the Red Sox after the 2014 season let ace Jon Lester walk into the arms of the Cubs (at $155 million for ages 31 to 36). The Sox cobbled together a rotation without an ace and used players 30 and younger to start all but six of their 2015 games. Their prudence earned them the third-worst rotation in the AL and a last-place finish.

Quicker than you could say "Gucci," Boston reversed course. Price makes perfect sense, at least in the short term. He loves pitching in Fenway Park (6--1, 1.95 ERA in 11 starts), is battle-proven on the road in the AL East (25--3 as a visitor in Boston, New York, Toronto and Baltimore), has maintained his velocity while using his changeup more and has especially clean mechanics that have kept him free of any major arm injuries.

No sooner had Boston made Price the highest-paid pitcher in history than Arizona, finding its own exception, gave Greinke the highest average annual value of any player in history. Greinke had a 1.66 ERA last season, the fourth-lowest since the mound was lowered in 1969. He, too, will be 37 at the end of his record contract.

It's easy to mock the salaries being thrown at free-agent pitchers. Zimmermann, who turns 30 in May, is coming off his worst season while showing a decline in velocity. Samardzija, who pitches next year at 31, hit the jackpot despite giving up the most earned runs, hits and home runs in the AL last year.

So why do teams keep laying out so much for what they know the actuarial tables define as decline years? They like to spend the money as fast as it is coming in. The Diamondbacks, for instance, enriched Greinke nine months after they signed a 20-year local television deal worth over $1.5 billion, more than doubling their previous annual take. Even adjusted for inflation, revenues in baseball have grown 24% in five years, 56% in 10 years and 102% in 15 years.

Digital delivery in an increasingly sports-obsessed culture has been very good to baseball. Live content, the workaround to the DVR, is king, and baseball has 2,430 games and a postseason to sell every year to sponsors who actually want their ads seen. That's why we have to stop looking at mega-contracts in terms of rational year-by-year "value" and start looking at them as clubs do: luxury goods they can afford.

So what may have seemed an absurd, irrational week of spending actually said more about the robust financial health of baseball than it did the quirky market for pitching. After all, when it comes to the rich and their Veblen goods, the prestige is found not in the wisdom of value, but in the joy of ownership.

In six days MLB teams shelled out $623 million to just four pitchers.

Q&A

The Great One

22

Media Circus

Ball Dropped?

24

Extra Mustard

26

Faces in the Crowd

30

Dan Patrick

Brett Brown

32

The Case for

Jordan Spieth

34

GO FIGURE

43

Consecutive Premier League home games against newly promoted teams played by Chelsea without a loss—dating back to 2001—before it fell to Bournemouth 1--0 last Saturday.

1,303

Games played in Predators history before one of their defensemen scored a hat trick. Shea Weber scored three goals in a 5--4 overtime loss to the Red Wings last Saturday.

2

Points for the Saints after Stephone Anthony returned a blocked extra point for a score on Sunday against the Panthers. A new rule made returning such blocks legal this season; New Orleans is the first team to do it.

ILLUSTRATIONILLUSTRATION BY DARROW PHOTOKIRSTY WIGGLESWORTH/AP (CHELSEA) PHOTOKEVIN TERRELL/AP (ANTHONY) PHOTO

HOLE YARDS PAR R1 R2 R3 R4
OUT
HOLE YARDS PAR R1 R2 R3 R4
IN
Eagle (-2)
Birdie (-1)
Bogey (+1)
Double Bogey (+2)