Even devalued, A-Rod will get his millions

Thursday, November 8, 2007

After seeing Scott Boras refuse to let the Yankees meet with his top client and free agent, Alex Rodriguez, without an offer of at least 10 years and $350 million, I reacted the way anyone familiar with the economics of baseball would: with a chuckle. It defies logic to think an owner would willingly pay a single player that much money. Still, it might not be as crazy as we think. Alex Rodriguez will be baseball’s first $300 million man and here’s why.

Talk about a mismatch: Uber-agent Scott Boras against Major League Baseball general managers. GMs are the most insecure people on earth, capable of doing just about anything if it means winning a few more games and saving their job for another year. Last offseason, team after team signed free agents to deals that made no sense before hindsight. The San Francisco Giants made Barry Zito the richest pitcher in baseball history in return for 11 wins and an ERA above the league average at 4.53. The Blue Jays shelled out $126 million for Vernon Wells, who hit .245 this past season. The Cubs thought enough of Alfonso Soriano’s career .327 on base percentage to give him $136 million in return for 70 RBI in 2007. The Boston Red Sox gave $106 million combined to J.D. Drew and Julio Lugo, who “rewarded” them with play barely above replacement level. You get the point.

Meanwhile, Scott Boras is among the smartest people in baseball, and he has the best player in the game to market in a historically weak free agent class. He’ll call A-Rod a revenue machine and the future all-time home run king in the prime of his career. He’ll point out Alex’s career achievements, such as the three MVP awards he has won, the 10 straight seasons with 35 home runs and his being the youngest player to hit 500 home runs in history. He’ll point out that Alex can single-handedly turn a team into a contender. Think of Scott Boras as the kid from Disney’s “Blank Check,” except he’ll insert a number a lot bigger than $1 million.

Next, owners have money to spend because the game is drowning in money. No, not like, Mark-Wahlberg-in-“The Perfect Storm” drowning. Not even Rudy-Giuliani-waterboard drowning. I’m talking about the good kind of drowning.

In an Oct. 19 Milwaukee Journal Sentinel article, it was reported that Major League Baseball passed the $6 billion mark in revenues for the first time in 2007 and is primed to surpass the NFL as the U.S.’s top revenue-generator in sports. The Web site, along with an increase in online ticket sales, satellite radio broadcasts, out-of-market television packages and international growth has made owners richer than ever. If teams don’t pay above-market values for free agents, all they’ll do is pocket more profits. That’s a good thing in business, but often not the priority of owners who already have hundreds of millions, if not billions, of dollars.

Finally, there’s inflation and the weak dollar – $350 million just ain’t what it used to be. Just ask supermodel Giselle, who refuses to be paid in U.S. currency, how weak the dollar is. If A-Rod signed a 10-year, $350 million contract with someone today, it would be worth about $297 million when he signed his 10-year, $250 million contract with Texas back in 2001. While the current market would dictate that a top-five player should make $20-$23 million per season, the market hasn’t properly adjusted to an increase in revenue and a decrease in the value of the dollar. If Vernon Wells is worth $18 million per season with a career OPS of .809, then clearly with his vastly superior talent, versatility and all the records he is going to break, Rodriguez is worth a lot more than that.

A-Rod is as insecure and melodramatic as any superstar I’ve ever seen. He’ll frustrate you by expanding the strike zone and chasing pitches in pressure situations. He’ll confuse you with his controversial comments. Still, A-Rod is a once-in-a-generation type talent, and between a league full of foolish GMs, a smart agent, wealthy owners and the decreased value of the dollar, someone will be happy to pay A-Rod a lot of money.

Tom Trudeau ’09 likes to pretend he is an economist. Gold is up two points.

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