That’s a question that I commented on in today’s Wall Street Journal.
[Cliff Lee] would be worth $21 million or $22 million a year from an average major-league team, according to J.C. Bradbury, author of the book “The Baseball Economist” and a professor at Kennesaw State University in Georgia.
But over his eight career postseason starts, Mr. Lee is 7-0 with a 1.26 ERA, placing him among the most dominant October pitchers in major-league history.
So a big-market team that enters each season presuming it will reach the playoffs would be willing to dig deeper into its pockets to pay Mr. Lee, said Dr. Bradbury and Dan Rascher, a sports economist at the University of San Francisco.
Major League Baseball’s revenue grow by a rough average of 9% each year. Assuming that players’ salaries rise at the same rate, Dr. Bradbury said, Mr. Lee could command as much as $32 million in annual salary over a five-year contract from an elite franchise.
This estimate is based on Lee’s past performance during the regular season. His post-season performance might make him a little more valuable to an acquiring team due to his added star potential, but the main reason he’s going to get a big paycheck is that for the past three years he’s been good no matter when he’s pitched. The first number is based on his addition to an average club, the latter includes his added value to a winning club like the Yankees. The estimates are derived from the same method that I use in Chapter 7 of Hot Stove Economics to project C.C. Sabathia‘s worth at the time he signed his free-agent deal with the Yankees.
Many people feel that New York is Lee’s most likely destination; however, the Yankees face the hurdle of the luxury tax, excuse me “Competitive Balance” Tax.
If they do, the tax’s rate will be 40%. For every $20 million the Yankees might pay Mr. Lee, then, they’d actually be spending $28 million.
“Let’s say another team wants him and isn’t going to have to pay the luxury tax,” Dr. Bradbury said. “If they offer him a $22 million-a-year deal, they’re really paying less money out of their pocket than the Yankees. The Yankees [might] say, ‘To give you $22 million, we’re going to have to spend $30 million off our budget, so it’s not worth it.’ “