Jan
24

Does A-Rod’s presence really translate to big bucks?

By

Scott Boras – at least in the pre-opt-out days – loved to talk about his client’s overall value. Forget the .300/.400/.600 MVP seasons that A-Rod produces on a routine basis. His real value comes from his mere presence on the team.

With A-Rod around, Boras argues, the Yankees see year-to-year increases in their record-setting attendance levels, a sustained spike in their YES Network ratings, enjoy increased merchandise sales and generally have a steady stream of revenue due solely to the fact that Alex Rodriguez is a great player and on the Yankees. The same argument, proponents of the deal have said, could apply to Johan Santana as well. But is it true?

In an interesting thought piece on the Biz of Baseball site, Maury Brown goes in depth and determines that Boras’ claims aren’t totally accurate. They may not be inaccurate, but it’s just too hard to tell. Allow me to quote at length:

Ratings for Yankee games have increase 47 percent since he arrived in pinstripes. Now, is that because of A-Rod? The return of Clemens? The fact that the Yankees are the Yankees? Or, winning? It is, of course, all of the above…

It’s not as if the day Alex Rodriguez was resigned with the Yankees..that an increase in ratings immediately translates to big bucks based on the deal for carriage. One would certainly see an uptick in terms of advertisement, but in terms of the television deal, by itself, the player would not impact it. That revenue comes by way of subscriber fees from cable operators that carry the RSN. In the case of YES, according to the SBJ, YES pulls in about “about $2.25 per subscriber per month from operators.” For YES, that means that rate is locked in over the next 7 years. To try and determine how much a player’s value is worth in 7 years would mean trying to dissect that single player out of the winning and losing of the team, the cycling in and out of other possible players with star draw, and factoring brand draw, as but a few examples.

As I said, it’s all this background noise that makes claims of being able to define a distinct value to a player’s worth, outside of their win values on the field, anything but a way to sell books and articles. In some senses, you’re double counting. If the player is adding wins (which increases interest in the team), and has marquee draw, then how do you define whether it was the player’s win value, or marquee draw? Could be both. Could be one or the other.

Brown’s piece is interesting in that it doesn’t come down on one side of the debate or another because we just can’t know. Baseball teams enjoy revenue streams from all over the place, and many of those streams are subject to stringent revenue-sharing deals. MLB.com takes in merchandising revenue from their sales; teams enjoy exclusivity in merchandising deals up to a certain distance from their home ballpark; cable deals are convoluted; and revenue sharing leads to a divvying up of resources.

So when Scott Boras or some other agent starts talking about a player’s perceived value, it’s well worth it raise an eyebrow. There’s no doubt that A-Rod puts fans into the seats and draws eyeballs to the screen, but beware the exaggerating agent. It’s doubtful that A-Rod is worth $500 million to the Yankees over the course of his deal. But right now, we just don’t know.

Categories : Analysis

4 Comments»

  1. Steve S says:

    I didn’t read the article so I don’t know if this was even mentioned. However, the Arod re-negotiation was facilitated by the Goldman guys. Those guys have an understanding of what creates revenue and what keeps things profitable. I would take their word for it.

  2. Count Zero says:

    I think this is precisely why Boras uses this pitch — because if you’re a GM or owner, you just don’t know how it impacts your revenue. i.e., it’s a fear factor — if we don’t re-sign A-Rod, what do we lose? Since there is no real accountability on this issue, it’s safe to play it because no one can prove you wrong.

    This is akin to the old advertising adage: Half of all the money you spend on advertising is completely wasted — the problem is, you don’t know which half. :-)

  3. Rich M. says:

    According to rosenthal the yanks are close to signing Cano for 4 years.

    http://msn.foxsports.com/mlb/s.....2?MSNHPHMA

  4. Tom G says:

    The increase in fans and attendance has a lot more to do with demographics than anything the Yankees or Alex Rodriguez are doing. The city has fundamentally changed in the past 15 years and the Yankees and Rodriguez are just riding the wave.

    The same is true for baseball as a whole. There is a staggering amount of statistical information available on the internet, which lends itself perfectly to this game, more so than any other professional sport. The nature of the game is what’s increasing its popularity, not the star players, teams, or commissioner.

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