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A-Rod deal: Rich getting poorer
Deal to bring A-Rod to rich Yanks actually a sign poorer teams now have better shot at top players.
February 18, 2004: 3:01 PM EST
A weekly column by Chris Isidore, CNN/Money Senior Writer

NEW YORK (CNN/Money) - The trade of Alex Rodriguez, baseball's best-paid and maybe best player, to its richest team -- the New York Yankees -- is good news for fans of low-revenue teams and those who want greater competitive balance in the sport.

That's right. It's not the sign of the end of Western civilization as we know it, or a guarantee that the Yanks bought this year's World Series trophy in February.

Instead the deal is another vivid sign that the economics of baseball are moving in the direction that Bud Selig and the fans of low-revenue teams would like it to move ... not necessarily in the direction that helps my favorite team, the aforementioned and much-hated Yankees.

A-Rod going to the Yanks is actually a sign that the economics of the game are turning against, not towards, the big dollar teams.  
A-Rod going to the Yanks is actually a sign that the economics of the game are turning against, not towards, the big dollar teams.

This deal, along with dozens of lower-profile player moves this off-season, shows that the salaries of the game's top players are in full retreat for the second straight year.

Free agency used to be the way to greater fortune -- a player could sell his services to the highest bidding team. A-Rod used free agency to score his record contract three years ago.

Today free agency is more likely to result in a pay cut this off-season, the same as it did last year. Figures from SportsBusiness Journal show that of more than 150 signings through mid-January, free agents took an average of a 26.6 percent pay cut, which cost them $796,000 a year on average.

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A-Rod doesn't have to take a pay cut. The players union made sure that the economic value of his record $252 million, 10-year deal stayed in place, rejecting a previously negotiated deal that would have sent A-Rod to the Yanks' rival Boston Red Sox, another large-revenue (if less successful) franchise.

But the Yankees, the team in desperate need of his services with the greatest resources to spend, was unwilling to pay even two-thirds of the average remaining cost of his contract. His former team, the Texas Rangers, agreed to give the Yankees a reported $67 million to shed the contract, an amount that allows the Yankees to pay A-Rod a relative bargain price of $16 million a year, less than two other members of their current infield. (Nevertheless, A-Rod will still get $25 million a year from the Yankees and Rangers combined).

So it's safe to assume that the best player in baseball is worth about $9 million less a year in today's market than he was three years ago. When the best players cost less, it means more teams can afford them.

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The new market for top talent has allowed many of the small market teams to sign former all stars as free agents this winter. The Kansas City Royals signed A-Rod's 2003 teammate Juan Gonzalez, to a one-year, $4.5 million deal, a two-thirds cut in annual average pay from his last contract. Even baseball's welfare case, the Montreal Expos, signed two former all stars for well less than half their former average pay.

None of these players need to have a charitable foundation set up to make their Porsche or mansion payments. But it is clear that the 2002 labor agreement, with an increase in revenue sharing paid by the richest teams, and a financial penalty for teams that exceed a preset payroll limit, has accomplished the owners' goal of rolling back the players' top pay.

Some would argue that only the richest teams, like the Yankees, can still afford the best players, like A-Rod. But at "only" $16 million a year, most teams could afford a player like A-Rod, due to the extra ticket sales and in some cases broadcast money they could expect to see. The smaller teams might even cover his pay more easily than the Yankees will.

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A low-revenue team would see far greater increases in ticket sales and revenue than would the Yanks, whose ability to see additional revenue from this deal is limited by their past success. The Royals, who saw a ticket-buying spree by fans when they signed Gonzalez, may well have been able to cover A-Rod's salary with additional revenue if they had called Texas before the Yankees did, particularly if his arrival in Kansas City propelled them to the post-season they narrowly missed last year.

A-Rod in pinstripes isn't an primarily an example of the rich getting richer -- it's a sign that the rich players are going to be poorer in the years to come. That means Yankees will face far more competition from the current have-nots in the future, making it tougher for New York to win it all. Of course that won't make it any tougher for other teams' fans to whine about the Yanks' "unfair" advantage when their team isn't the one that triumphs.  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.