The Curse of Jerry Hairston, Jr./Eric Hinske:
 

Monday, September 24, 2007

On A-Rod, Ownership and Wild Rumors

UPDATE: As several commenters pointed out, both the NY Daily News and Rob Neyer have reported it would be a violation of MLB rules for a player to be promised either a stake a club or the chance to purchase a stake in the club. Therefore, the following is pretty well useless, except for the hypothetical. - SM

Its funny that A-Rod’s contract came up over the weekend, or at least ironic. See I had been kicking around a blog entry for a while on how best to retain the services of the game’s best player and came to the same conclusion that Deadspin’s Will Leitch reports the potential, maybe future owners of the Cubs came to: Give him the keys to the kingdom.

Now, let’s first look at Rodriguez’s deal…

If he doesn’t opt out, or more to the point, if New York extends him before he opts out, the Yankees are on the hook for $50.7 million for the next three seasons (2008-10) and the balance - $21.3 million - comes from Tom Hicks’ piggy bank. For a grand total of $27 million per season.

Now, its been widely reported that superagent Scott Boras sees A-Rod as a $30+ million player, which folks can debate if they want - but let’s be honest, he’s a good in a demand, or at least his skills are a good in demand so its not unreasonable to think he might get it.

So figuring the Yankees have to add more time to the deal - so another three to four years is not out of the question. Given that he’ll be 32 on Opening Day next season, adding three years gets him to 38. So if we use $32 million to make the math easy - that’s $192 million the Yankees need to come up with. Or to make our math going forward even easier, let’s round that up to $200 million.

So $200 million over six years - less the $21.3 million from Texas is roughly $180 million, or $30 million a season, a sum easily affordable by he most valuable franchise in sports.

Can anyone pick out the most important word there? Pat yourself on the back if you said “valuable.”

Earlier this year, Forbes listed the Yankees as far and away the most valuable property in baseball - placing the team’s worth at a whopping $1.2 billion. Or in layman’s terms - twice as valuable as the Chicago Cubs.

So let’s say rumors of the Cubs deal are true (a dubious assumption) and they promise him the 10-year, $30 million equivalent, with a right to buy let’s say, 5% of the team at the end. I say pisshaw. Quick, what’s 5% of $592 million? About $30 million. Chump change in the grand scheme of things.

What if the Yankees offered that six-year, $200 million extension - or for their purposes six-year $180 or so million - but then added to it a 5% stake in the team as a bonus, rather than a backloaded accounting trick? That’s $60 million worth of team, in present day dollars, and by doing it this way, the team essentially gives A-Rod a raise every year, rather than imprisoning A-Rod in a dungeon of inflation.

How you say?

Well, Forbes reported that the Yankees franchise appreciated in value 17% from 2006 to 2007. Currently, the consumer price index is running about 2% higher this year than last, making the Yankees franchise value increase 15% in terms of real dollars. So spin that out for the next decade - making the big assumption that the Yankees franchise value and inflation remain constant for purposes of making the math simple - and what do you get? Using a compound interest calculator, you get about $140 million.

So what do you think, would Boras and A-Rod sign on the line that is dotted for about $340 million over six years?

Cross-posted at BBTF’s Count the Rings

--Posted at 9:02 am by Sean McNally / 11 Comments | - (554)

Comments

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Isn’t it against the rules to offer an MLB player part ownership, or even the promise of the opportunity to obtain ownership at some point in the future?  I don’t know where this story came from, but I was not surprised to see Boras deny it emphatically, because, well, he knows the rules, too. As far as ARod staying or going, I’ve got a couple of different bullets:

- The way I like to think about the money from Texas is this way: the Yankees have a $21.3M head start on whatever ARod thinks he’s worth.  The only variable will be if he/Boras claim they are worth something way too high (IMO, $30M/season is probably just right). Cashman is not without leverage here, because in that 10 day window, Cashman’s main counterpoint will be whether or not ARod really is worth what he’s claiming. The operative word is ‘worth’, because when you’re talking about how much a player can make in the market, the Yankees not being involved in bidding on his services affects his worth moreso than any other teams lack of interest.

- I’d like to believe that ARod gets this extension and it basically makes him a Yankee for the rest of his career. If I’m him, I’ve got to believe that means a chance at the World Series ever year (since the Yankees are now widely viewed as a team with budding prospects instead of aging overpriced veterans), the highest recognition possible which will translate into All Star and MVP voting, a retired number and a plaque in Monument Park alongside all the usual suspects.  Furthermore, for all you Page 6-ers out there, if ARod really has some sort reason to prove that he’s better than Jeter, what better way to do it than to blow through HR records as a Yankee alongside Jeter who is showing his defensive decline moreso than ever.  I guess my point is: being thought of as a Yankee when you retire has value, and arguably more valuable than being thought of as a guy who went where the money was everytime.

- Cashman is quite honestly just not doing his homework if he thinks the Yankees can do without ARods production. It would take a monumental offseason with lots of risks to get anywhere close to replacing what ARod brings to this team, if it is even possible.  And even with the possibility of decline that every player faces when he ages, Cashman can at least pencil in ARod as a 1B or DH in those later years and force himself to resist the temptation to add guys to the roster who will need that spot as well (Giambi, etc.)

My one hope is that the meathead constituency of the Yankee fan base doesn’t show it’s true colors if ARod happens to have a tough time in the playoffs.  The “it only matters in October” catch phrases are already being uttered by the typical talking heads, and it’s 100% bullshit. The 2007 Yankees don’t make the playoffs, let alone have a shot at the division with 7 games left to play, without Alex Rodriguez.

I am constantly amazed at how good Scott Boras is at his job.  He’s a great salesman and does an unreal job of setting the market for his clients. 

My question is this: let’s say in an alternate universe ARod signed with Texas for 8 years and $160 million (instead of 10/$252).  As a true free agent this offseason, what sort of contract do you think he would get? 

My guess is (considering he’s going to be 32 at the start of next season) he would get something in the vicinity of 5/$130 ($26 million per).

By spreading rumors like the one above, Boras has “set the market” at a ridiculously high level.  Also, it obscures the fact that ARod is already getting paid to be the best player in baseball.  All of this brilliantly obscures the fact that (1) ARod likely has only two (or maybe three) peak years left and (2) there is not a lot of justification to pay him 50% more than any other player in the league is making.

He’s a great salesman and does an unreal job of setting the market for his clients. 

But this type of ‘speculation’ is only good for bullshit rumors and wasting time at work on Yankees blogs. If ARod opts out, the market is quite simply, the Angels, Cubs, Giants, Red Sox, Dodgers, and perhaps the White Sox.  How many of those teams can realistically afford and be willing to pay a player $30 for 7+ years?  Boras can do this all he wants, but I highly doubt one of those GM’s is pacing around his office today thinking “wow, I didn’t realize we’d have to pay THAT much for him!”

(1) ARod likely has only two (or maybe three) peak years left

i don’t know about this.

he is 32.  there are plenty of guys still raking at 36-37 and none of them are as athletic or good as A-Rod.

of course “peak” is a tricky word, b/c A-Rod’s peak is higher than most mortals.  so let’s use the word “great”. 

if we believe A-Rod only has 2-3 great years left, then shouldn’t the Yankees NOT resign Posada who turns 37 next season and is a catcher? 

i could easily see A-Rod having 5-6 more great seasons.

““But this type of ‘speculation’ is only good for bullshit rumors and wasting time at work on Yankees blogs. If ARod opts out, the market is quite simply, the Angels, Cubs, Giants, Red Sox, Dodgers, and perhaps the White Sox.  How many of those teams can realistically afford and be willing to pay a player $30 for 7+ years?  Boras can do this all he wants, but I highly doubt one of those GM’s is pacing around his office today thinking “wow, I didn’t realize we’d have to pay THAT much for him!””

Well, since tampering is illegal, Boras will have to come up with other ways to push the Yankees extension offer higher.  I’m sure he’s aware that the Yanks will make a strong offer to his client and it’s possible (albeit unlikely) that ARod has already told Boras that he’s staying with the Yankees no matter what. 

I think the past few years have shown that bullshit rumors and internet blogs are worth much more that you think if they are property manipulated.

(BTW, can someone let me know how to quote other posts in italics?  Can’t seem to figure it out- thanks)

I think the past few years have shown that bullshit rumors and internet blogs are worth much more that you think if they are property manipulated.

Ok I’ll give you that. But we’re talking about GM’s for teams that are going to have to shell out $200M plus for 1 player. I’m sure they’re going to do they’re homework, be shrewd and get it done, although I can’t speak for the inner works of the upper level management of other teams, and I can definitely remember a time where it seemed like Steinbrenner and the Tampa crew were only interested in bad contracts.. so, who knows.  I guess a good point to back up what you’re saying is the Red Sox ridiculous bid for Matsuzaka which basically just demonstrated their misreading of the market.  In the end, they probably got the money back, and I would submit that if Boras was the one who drove that price up, it wasn’t a smart move, because it meant less money in his clients (and thus his) pocket.

BTW - Italics is “less than sign” i “greater than sign” to open and “less than sing”/i"greater than sign to close”.  I think all of the HTML tags work.

Cashman is quite honestly just not doing his homework if he thinks the Yankees can do without ARods production.

Is anyone really naïve enough to think that Cashman’s that dumb at this point?

What Cashman actually said was that, if A-Rod opted out, the Yankees wouldn’t pursue him on the open market. Which was exactly the right thing to say because, if it gets to the stage where A-Rod has opted out, it means that the Yankees have spent ten days negotiating with Scott Boras and not come to a deal for an extension.

I have every confidence that Cashman will do everything in his power, and maybe a few things out of his power, during the ten days following the end of the World Series to keep A-Rod in pinstripes.

if we believe A-Rod only has 2-3 great years left, then shouldn’t the Yankees NOT resign Posada who turns 37 next season and is a catcher?

I don’t think it would be wise for the Yankees, or any organization, to follow this logic.  The number of “great years” (likely) remaining in a player’s career is only one of MANY variables that will enter into the contract negotiations for these two players.  Posada clearly figures to have fewer “great years” left, but he also figures to cost MUCH LESS than ARod, over a MUCH SHORTER term, and he may be harder to replace in some ways.  I’d hope that the Yankees will do a careful and separate cost-benefit analysis for each player.

I also think it goes a little far to think that the Yankees would or should offer ARod an ownership stake in the team.  He’s been great, and I want him to remain a Yankee and win championships and break records and bring fans to the ballpark for years to come, but his value to the Yankees is not limitless.  Remember, the Yankees would be “buying high” off one of his greatest seasons.  Just as it was rash to boo him in his bad years, it would be rash to give him and Boras a blank check off of one of his good years.

Cashman is quite honestly just not doing his homework if he thinks the Yankees can do without ARods production.

This statement is incomplete.  The question for Cashman is whether or not the Yankees can do without ARod’s production GIVEN THE COST OF RETAINING HIM.  There is a point where the Yankees would be better off allocating the resources necessary to extend ARod somewhere else, and Scott Boras will be most assuredly pushing that envelope.

Let’s say ARod wants $35M per year.  Is that the best allocation of resources for the Yankees?  $35M per year might be able to buy Johan Santana AND a power hitting corner infielder.

I think Cashman’s “homework” is much more complicated than some of you here are giving it credit for…

I don’t think it would be wise for the Yankees, or any organization, to follow this logic.  The number of “great years” (likely) remaining in a player’s career is only one of MANY variables that will enter into the contract negotiations for these two players.  Posada clearly figures to have fewer “great years” left, but he also figures to cost MUCH LESS than ARod, over a MUCH SHORTER term, and he may be harder to replace in some ways.  I’d hope that the Yankees will do a careful and separate cost-benefit analysis for each player.

of course.  i was merely objecting to the notion that it is a given that A-Rod only has 2-3 great seasons left. 

what is that based on?

what is that based on?

This is the key question, no?  This is the major part of Cashman’s homework, in my estimation.

Sabermetric research tells us that a player’s peak generally comes somewhere in his age 26-29 seasons.  But it SEEMS like great players have longer, extended peaks, as ARod’s 2007 demonstrates (I’d bet this has been researched somewhere).  But how long can a superstar realistically expect to sustain peak or near-peak performance?  Beyond this, how much should the Yankees (or any interested team) weigh his 2005/2007 MVP seasons vs. his 2004/2006 seasons, in terms of projecting his performance going forward?  How much have PED’s clouded the data on the performances of recent superstars?  Can we expect ARod to be as effective into his late 30’s as Bonds has been?  Does the answer to this question depend on whether or not baseball starts testing for HGH?  These are big, difficult questions given the amount of money that’s at stake, and I’ve yet to see a careful analysis of these issues.  What can we expect from ARod going forward, and how much is that worth?

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