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Alex Rodriguez: Is he worth the money?
Nov 16, 2007
Unusual Middleman in A-Rod’s Reported $270M DealMatt Egan
FOXBusiness
The media is buzzing about the reported $270 million deal that will keep Alex Rodriguez in pinstripes, and at first glance it doesn’t look anything like sports business as usual.
Instead of the typical way these mega-deals get hammered out (the norm is for sports agents to negotiate trading offers with team execs), A-Rod’s deal went through Wall Street investment bank Goldman Sachs (GS: 220.54, +0.00, +0.00%).
Goldman Sachs didn’t finance the deal with corporate mergers, as it typically does. Instead, managing directors John Mallory and Gerald Cardinale served as intermediaries between the two sides after formal negotiations fell apart, according to various reports.
As a result, A-Rod’s super-agent, Scott Boras, played a lesser role in this deal than he typically does.
“There is no question that it is an unusual situation. But to think that Scott Boras is not involved here would be a little bit naïve,” said Steve Rosner, who has dealt with marketing and contracts for athletes like Kobe Bryant, Steve Young and Cal Ripken Jr.
It’s important to note that Goldman Sachs is an outside investor in YES, the Yankees television network, and was a player in launching the lucrative network.
The Goldman directors didn’t just put the two sides back in communication, but actual offers were traded through about a dozen phone calls between A-Rod and the team via Mallory and Cardinale, according to the Associated Press.
The decision to go through mutual friends at Goldman came after the Yankees said they would no longer bid on A-Rod because he was testing free agency.
By testing the market, Rodriguez became even more expensive for the team to try to keep.
After the original contract was broken, the Yankees were put on the hook for a portion of his contract that had previously been covered by his former team, the Texas Rangers.
The Yankees’ new stadium, which is slated to open in 2009, may have played a role in the team’s decision to retain their star third baseman.
“For teams building new ballparks, like the Yankees, his signing communicates to fans, especially corporate fans who will be spending heavily, that the new era of Yankee leadership is committed to winning,” said David Carter, executive director of at the USC Sports Business Institute.
After the sticker shock from seeing the potential $270 million ten-year deal, many are asking: Is he worth it?
“I am not surprised by the size of the deal,” said Rosner. He said that in today’s sports world, it’s hard to relate to the salaries of star players.
“I don’t think you can comprehend any of these numbers that they pay these athletes these days,” said Rosner.
However, he pointed out that A-Rod’s previous 10-year deal for $252 million paid him only several million less in base salary.
“I would say that that’s a pretty nice increase but I think he has earned it,” said Rosner.
How could he be worth it?
A-Rod, who many sports analysts contend is on his way to picking up another Most Valuable Player award, this year led his team into the playoffs for the 12th consecutive time. Those same analysts say he can be thanked for record attendance, and solid ratings for the team’s regional sports channel, the YES Network.
From a marketing exec’s standpoint, A-Rod’s star power makes him more than just a ball player.
“A-Rod has become a brand and he’s going to become a bigger brand as he chases that homerun record,” said Mark Winneker, vice president of Millsport, a sports marketing company.
The stats show A-Rod is on pace to break the all-time homerun record, which was set earlier this season by San Francisco Giants slugger Barry Bonds. And it’s been reported that A-Rod’s contract may allow him to share in the revenue that the potential homerun chase would give the team -- in the form of television money, ticket sales and merchandising.
Winneker said that marketing companies evaluate the value of stars like A-Rod through not only on-field performance, but also attributes such as being a trend-setter, influence and overall appeal.
While many argue A-Rod is worth more than what his stats say, Winneker said he believes the deal pays him too much and will ultimately drive up the cost of baseball.
He said that highly-inflated salaries could even push the cost of attending a game higher, not only for the Yankees, but also smaller market teams just trying to compete.
“It’s going to give ammunition to players of his caliber to go after that kind of money,” said Winneker.
