 A-Rod's Contract, A Bargain?
Now that the details of the record-breaking 10 year/$275M (minimum) deal Alex Rodriguez formalized with the Yanks today are available, my first thought is that the Yanks didn't make out too badly.
Forget about the historical achievement bonuses for now, and take a look at the year-by-year breakdown of the deal (including signing bonus) 2008: $29M 2009: $33M 2010: $33M 2011: $32M 2012: $30M 2013: $29M 2014: $28M 2015: $21M 2016: $20M 2017: $20M This deal makes sense. A-Rod will be paid like the best player in the game for the next 7 years or so. If all goes according to plan, he'll also play like the best player in baseball over that period of time. His salary tapers off dramatically at the end of the contract, when his production will most-likely taper off. The numbers may seem staggering, but look at it this way, the Rangers signed A-Rod to a 10-year, $252M deal in 2000. Without the historical achievement bonuses, this contract represents a 9% increase over the deal Texas gave him. As a point of comparison, a gallon of gas cost $1.51 in 2000, today the national average is twice that. Here's what A-Rod said about opting out:
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I posted this on a message board that my friend runs...thought you might find it interesting:
It seems like almost all sports contracts are "back-loaded", in that the salary starts small, and gets progressively larger, so the highest annual salary is in the last year of the contract. But in this case, A-Rod will be getting paid according to his approximate contributions to the team...as his talent diminishes with age, so will his salary.
Now, you might be saying "Well, he'll still be making $20 million in the last year of his contract, that's not too shabby". Well no, it's not shabby at all. But consider that that is 10 years in the future. When you take inflation and growth in MLB salaries into account, that $20 million looks liek a lot less.
In the years 1995-2006 (the post-strike years), MLB salaries rose at an annual rate of 4.8%. That means that if salaries keep rising at that rate, A-Rod's $20 million in 2017 will be the equivalent of $12.5 million today, which is quite reasonable
Just to take it a step further, if you "discount" each year's salary by the average growth in salaries, these are the annual salaries:
2008: $27.665M
2009: $30.031M
2010: $28.648M
2011: $26.500M
2012: $23.700M
2013: $21.855M
2014: $20.130M
2015: $14.402M
2016: $13.084M
2017: $12.482M
Bringing the total value of the contract in "today's dollars" to $218.496M
Yup, I'm a nerd...
Tom,
I think this contract really is a concession on A-Rod's part. The Yanks aren't going to have a 42 year-old albatross around their necks in 2017, they're going to have a reasonably priced legend. His historic incentives will probably kick in right when the yearly salaries drop significantly (2011-2013/4), so the Yanks will keep their costs pretty static even if he's breaking the records then.
I like the deal for the Yanks, I really think they did recoup the $21M they lost when he opted out.
On that note, how do you think Texas is going to spend that found money?