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Friday, October 12, 2007

A-ROD LOOKING AT 500 MILLION OVER 10 YEARS ?

TAKEN FROM FASTCOMPANY.COM

Well, that didn't take long. When the New York Yankees were eliminated from the playoffs Monday night, the baseball season, for all intents and purposes, ended.

Forget the battle between Arizona and Colorado, in an NLCS that promises to draw about twelve viewers east of the Rockies. Not to mention those upstart Indians -- who took down the Yanks -- or a Red Sox team that seems the clear favorite to win its second World Series in four seasons.

No, the story in baseball is now all about one man. One agent, to be exact, who seems to believe he is the first in history to represent a deity.

Scott Boras, the high-powered agent for several stars including Yankees third-baseman Alex Rodriguez, is already pushing up his asking price should A-Rod decide to opt out of his contract.

As CNBC's Darren Rovell reported yesterday on his sports business blog, Boras believes A-Rod is worth at least $500 million over the next 10 years. That's almost double his current $252 million deal, which was signed after the 2000 season and remains the most expensive in baseball history.

My initial reaction was that Boras must be out of his mind. But Rovell got him on the phone later in the day and came away impressed by his logic. Basically, he says, team-owned regional sports networks have changed baseball's economic landscape:

Before A-Rod, the YES Network never did better than a 3.2 rating. Since A-Rod came to the team, the network has seen its ratings rise to a record 4.7 this season. Since no significant position player has been acquired since Rodriguez joined the Yankees in 2004, Boras says he can contribute the ratings rise -- as well as the turnstile rise, by the way -- to his client being on the team…

…YES, which was given an initial value of $850 million upon launch in 2001 is now said to be worth about $3 billion.

While I remain dubious that A-Rod is the sole reason for the network's growth -- afterall, YES had only existed for two seasons when A-Rod arrived in New York -- Boras makes a compelling argument. If one marquee player can have a dramatic impact on an RSN's ratings, then isn't he worth whatever the ratings boost brings in advertising revenues? From a purely economic perspective, I can't say that he's not.

That said, I don't like the implications of Boras' logic. Team-owned regional sports networks should generate revenue to help support a winning team, not the other way around. And despite the potential to grow an RSN, signing A-Rod to an earth-shattering deal isn't the best way to put a successful product on the field.

Just look at the Yankees. They lost because they couldn't pitch; their go-to guy, Chien-Ming Wang, lasted exactly one inning in Monday's season-ending loss. Now consider that the four teams still alive in the playoffs have five pitchers between them who won at least 17 games this season, and that those five guys made a total of $21,054,167 in 2007 -- even less than A-Rod ($27 million) in his current deal. As far as wins and losses go, especially come playoff time, there are clearly better ways for a team to spend its money.

In the end, Scott Boras has always valued the biggest deal over championships. But A-Rod already has the biggest deal in history. If he really wants a ring to cement his place as the Greatest Of All-Time, he should be careful about how high he lets his agent go.

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