Did the Yanks really get a $275-million deal?

Yanks, A-Rod agree on contract outline
Rivera holds out for fourth year; Yanks take heat over offer

Earlier this evening, my dad and I were discussing the A-Rod contract, and just a short while ago in the comments here, Eli voiced what we had all been thinking: Did the Yankees really get a good deal for A-Rod? Does a 10-year, $275-million contract really represent a bargain?

Here’s Eli’s full question:

How badly did we overpay? What was our pre opt out offer? 5 year extension at $30 less the Texas discount on the remaining 3 for $81? Total $230 over 8, $28.75 per?

Now were paying $275 over 10. $27.5 per. How are we getting a discount?!?! Seems like were rewarding him for this nonsense. Giving him two extra years I doubt he could get anywhere else for what? A 40 + year old DH at $27.5 per??

To answer this question, we’re going to have rely a little bit on conjecture and a little bit on the confusing terms of A-Rod’s old contract. First up, A-Rod’s old contract. According to the indispensable Cot’s Baseball Contracts, A-Rod was due at least $27 million a year over the next three season for a base total of $81 million.

But he could void the deal after 2008 or 2009 if his club didn’t increase his 2009-2010 salary by $5 million a year. He could have made up to $91 million over those three years, and it’s hard to believe he wouldn’t have held the Yankees up for that money had he kept the terms of his old contract. The Rangers were on the hook for $21 million of that total. So that leaves the Yanks’ contribution at a potential $70 million.

Now, the conjecture. When the Yankees threw out an offer to A-Rod and Boras in October, the numbers included five years and $150 million. Remember though that this was simply their initial offer. It’s my belief that the Yanks were willing to go seven and $210 million. At that point, their total contributions would have been at about $280 million over ten years.

So they saved a whopping $5 million.

Considering the stratospheric numbers we’re talking about here, it doesn’t sound like those $5 million will make a huge difference in the grand scheme of the Yankees. But I don’t think that’s the point.

Rather, the Yankees, by maintaining a hard line in the negotiations, proved that, while the Boss’ days may be numbered, Hank and Hal are just as much a force behind this team as George was. They broke the Scott Borus stranglehold over baseball, and welcomed back A-Rod on their terms instead of on his.

After A-Rod opted out, I told my friends that I would still be more surprised if A-Rod weren’t the Opening Day third baseman come 2008 than if he were simply because, when push came to shove, no other team was going to shell out the money the Yanks had available to them for A-Rod. I realized that well before the season ended; it took a colossal mistake on the part of Boras and A-Rod for them to realize it.

In the end, in all honesty, the Yankees aren’t getting a great deal. They’re not overpaying, but they’re not underpaying either. They’re simply paying A-Rod what they would have given him in the first place. But they’re doing it on their terms, and that edge makes all the difference.

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Yanks, A-Rod agree on contract outline
Rivera holds out for fourth year; Yanks take heat over offer
  • eli

    Thanks Ben!
    Seems to me that although paying anyone- even A rod 25+ mil at 40+ when in all likelihood hell be dh-ing, (hoping here for him being able to play some 1b) seems a little obscene, but in yankee world money really isnt that big a deal. between the new stadium and the home run chase Im sure yankee number crunchers have figure it will pay for itself. The biggest thing for me is that this turns our off season from a potential disaster during which we could have lost posada, rivera and a-rod and then compounded that by trading valuable young pitching for a mediocre or even worse fat, party loving 3bman. Now, even though we overpayed for all three we probably keep pettite, and keep valuable pieces like sanchez and ohlendorf who would have almost definitely gone in trades even if we had kept the big three. Now they will be able to learn by mo’s side. We can now concentrate attention on plugging minor holes as opposed to trying to find an entire offense and a closer. Finally I think its worth noting as far as finances that were about to get giambi and damon off the books and we still have our core in arbitration years that saves a bunch of money. Cashman steadies the boat!

  • Mark

    I really don’t get what the big deal is about the contract. He was signed for at least 27+ mil for the next 3 years… so basically all he did was extend it for 7 years. Remember how salaries increase about 10% every year. Even using 5% his value by 2017 is 14Mil.
    Look at it this way…. in 1998 Gary Sheffield had a salary of 15M, which set the record for the highest paid player in a season I believe. About 12 players in 2007 had a 15+M salary.
    The way baseball has grown in revenue the past few years, what makes you think salaries will decease? Arod was and is worth 27 mil now. His decline will be offset by market values.

  • LiveFromNewYork

    I agree. I think that Hank and Hal have demonstrated some business acumen which is very important as they lead the team. They also have shown that they are all about the Yankees. Despite the Torre furor and losing Mattingly, I like the decisions they’ve been making and the offers.

    It is PHENOMENOL that Arod came back ON THEIR TERMS. All they asked for, originally, was a sit down without Boras, and he walked before that was possible. They got what they wanted.

    Boras almost blew his hand and he knows that and Arod knows that.

    It’s not a terrible contract for either side. All Yankee haters are saying they deserve each other and maybe by pounding out this deal, which seems to have the approval of most Yankee fans, they do.

    I’m happy with it.

  • bart

    inflation — this is terrific economics

  • Andrew

    Don’t forget that the deal is most likely backloaded…A-Rod will probably be making over $30 million in the last few years of the deal.

  • brxbmrs

    Yanks needed A-Rod – both sides win – A-Rod and Boras moreso.

    On another note – Molina according to the Daily News is accepting a 2 year 4 mil contract – now that’s a bargain – I’m hoping Girardi uses him more to rest Jorge.

    Yanks also were admonished yesterday for offering Mo so much money – raising the salary for top relievers – also in the Daily News.

  • kanst

    The biggest things I want to see is no no-trade clause and no opt out BS. If neither of those are in the contract then I will be fine with it

    • Keith

      Arod qualifies as a 10/5 player i believe after this season, so a no-trade automatically kicks in. i’m sure that BC wouldnt include any opt outs, though.

  • nmc

    I think you’ve also got to think of this:

    If you’re going to give a 10-year contract, into his 40s, for ANY player, ever, I’d say that you’ve got to give it to A-Rod (maybe Pete Rose or Cal Ripken or Carlton Fisk). The guy is ridiculously durable, has the BEST conditioning of any player in the bigs, and produces.

    I’d say that if anyone could make this contract make sense, its Alex. I think it’s a gamble, but he’s got the best odds of making it.

  • Cam

    Thanks Ben, good article! It’s nice to see that it was the Yanks that figuratively slapped Boras across the face. As much as Hank has made some of us nervous this offseason, my favorite comment has to be “He showed us he wanted to be a Yankee. That’s all I wanted” or something like that. I couldn’t find the original quote for some reason.

  • G Man

    Is anyone as disgusted about this as i am? The whole thing, the amount of money, the greed, the way he opted out, and the ridiculous amount of coverage it gets. The way the Yankees said they wont deal with him and then turn around and throw 275 million in his lap. The economics of baseball are a joke, financially the competition is non-existant and nothing shows this more then the A-Rod signing.

    G Man

    • http://yankeesetc.blogspot.com/ Travis G.

      i’m disgusted because i believe Boras had a lot to do with this scheme, the Yanks are NOT getting much of a bargain, and the ridiculous HR-record incentive. what’s to stop him from swinging for the fences all the time?

  • http://yankeesetc.blogspot.com/ Travis G.

    just to reiterate, this has ‘huge risk’ written all over it. Arod (and Posada) are coming off contract/career years. haven’t we learned anything?

  • http://tomcabbagesportstalk.blogspot.com/ Tom

    I still don’t understand how you can say the Yankees didn’t overpay. What was the market for A-Rod? Was it $350M? I don’t think so. That value was clearly a Scott Boras fabrication, yet the media bought it, and so did the Yankees. Was there a team that was willing to even come close to that, let alone what the Yankees were going to offer? Granted, we can rationalize it as this is what the Yankees were going to give him, but that doesn’t mean Yankees didn’t overpay.

    Can they afford it? Sure. Were they gonna offer that away? Sure. But it appears that the Yankees were bidding against themselves, just like Tom Hicks did.

  • Kevin23

    I think the fear of bad press will be the over-arching theme of this off-season. That’s why they’ll outbid themselves for Mo. That’s why they’ll throw a lot of money at Lowell to be a short term fix at 1st base. I foresee a Yankees near future rife with over-paid DH’s. But either way, the real question will be the pitching staff. And closers are over-rated in general (even though I’ll admit that their musical entrances ala Rick “Wild Thing” Vaughn are entertaining).

  • http://fakearod.blogspot.com Fake A-Rod

    fakearod.blogspot.com coming at you Scott Boras, watch out!