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
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