Baseball Stunned by Shortstop’s $252-Million, 10-Year Contract

The Texas Rangers sent shock waves through baseball Monday by signing Seattle shortstop Alex Rodriguez to the largest contract in the history of sports: $252 million over 10 years. The deal threw another cloud over a sport already bracing for the possibility of a players strike at the end of the 2001 season.

The $252-million commitment to Rodriguez was more than the $250 million that Ranger owner Tom Hicks paid for the franchise he bought from a group that included George W. Bush in 1998. It was also more than double that of the previous richest sports contract: Kevin Garnett’s six-year, $126-million deal with the National Basketball Assn.’s Minnesota Timberwolves.

Late Monday, in still another mega-deal, the Boston Red Sox put outfielder Manny Ramirez into second place in the money derby with an eight-year, $160-million contract.

The Rodriguez deal is more than the individual value of 18 of baseball’s 30 franchises, including the Chicago Cubs, which Forbes magazine pegs at $242 million, and $72 million more than the combined value of the Minnesota Twins ($91 million) and Montreal Expos ($89 million).

Rodriguez commanded the enormous contract because he is one of baseball’s best all-around players, a gifted 25-year-old who is a superb defensive shortstop and an accomplished slugger. He is also somewhat of special case.

Most stars have access to free agency in their late 20s or early 30s, but Rodriguez is eligible now because he has already been in the big leagues for six years. He is expected to be a force for another eight to 10 years.

While huge contracts have for years been derided by the baseball establishment, this deal prompted especially apocalyptic reactions.

Complaints fell into three main areas: first, that it puts one player in a grossly excessive salary category; second, that it undermines the contentions of some owners that player wages are too high; and third, that it will exacerbate the disparity between rich teams and the so-called “small market” teams, thus leading to a competitive imbalance among teams.

The big-market, big-budget New York Yankees, for instance, have won four of the last five World Series, and only a handful of teams could afford to bid for Rodriguez.

“The message [of the Rodriguez contract] is that there are some crazies out there,” said Bill Stoneman, general manager of the Anaheim Angels. “The health of the game is changing, and not in a positive direction.

“There have been other deals, especially in the pitching market, that seem to be taking us in the wrong direction in terms of the competitive health of the game.”

Monday’s two big deals--for Rodriguez and Ramirez--both dwarf the $105-million contract that pitcher Kevin Brown signed just two winters ago, a deal that drew industry scorn upon the Dodgers because it broke the $100-million barrier.

Here’s how it breaks down for Rodriguez. He will get $170,270 per game and $45,487 per at-bat. Based on his 2000 season statistics, he will get $144,000 per hit, $614,634 per home run, and $190,909 per run-batted-in.

This kind of compensation also gives baseball concerns about turning off its fan base: average people earning average salaries. The average annual household income in the United States is $28,500, or 63% of what Rodriguez will get every time he steps into the batter’s box.

“It’s a shocking contract,” said David Carter, USC professor of sports business. “The average fan won’t believe the sport is in trouble if the market can sustain this kind of salary. But you’ve got to figure the owners are not happy with this, because so many small-market teams are languishing.”

Two of those small-market teams, the Kansas City Royals and the Twins, have smaller player payrolls than the average annual value, $25 million, of Rodriguez’s new contract.

Baseball’s eight-month strike of 1994-95, which wiped out the 1994 World Series, resulted in losses of $700 million. With baseball’s current labor agreement expiring after the 2001 season, the Rodriguez contract stirred up those memories Monday.

“I think it increases the chance of a strike, because it diminishes the owners’ contention that, financially, many teams are in trouble,” Carter said. “The owners say they’re going broke, and when the players and agents see this [contract], it gives them exhibit A in winning the public relations battle against the owners.

“But it gives small-market teams a real sense for concern. This reinforces their inability to compete from the beginning of the season.”

It is an imbalance that baseball may no longer be able to ignore.

“In spite of the rhetoric coming from major league baseball about addressing its problems, it’s clear that the insanity continues,” said Denver-based sports marketing consultant Dean Bonham. “MLB leadership either is going to change its direction or, during the next decade, the game won’t continue to be what it has been for the past century.”

It’s a problem of simple economics, said Bonham.

“It doesn’t take a college professor, an MBA or, for that matter, a rocket scientist,” Bonham said. “It’s really simple: Major league baseball first and foremost needs to enter into a collective bargaining agreement. And then baseball needs to enter a revenue-sharing agreement.

“The two healthiest professional sports leagues right now are the NFL and the NBA, both of which have collective bargaining and revenue sharing. There’s no way to balance the books now that baseball has allowed one player making $250 million to become the standard for future player contracts.”

Is any player, even one of Rodriguez’s caliber, worth it? And how can the Rangers and owner Hicks, who is the chairman of a Dallas-based investment firm and also owns the National Hockey League’s Dallas Stars, afford it?

“My question is, ‘Where is the money coming from to fund the operations of that club?’ ” said Stoneman, who has had to adhere to strict budget guidelines set by Walt Disney Co., owner of the Angels. “I don’t have the answer, but it’s worth asking.”

According to Forbes, the Rangers ranked eighth in baseball with $117.5 million in revenues in 1999, and their franchise is valued at $294 million. Carter estimates that if the Rangers draw 3 million in 2001, each fan will have to spend about $9 more per game to pay for Rodriguez.

The Rangers are selling naming rights to their stadium, a deal that could fetch more than $200 million, but spread over 25 to 30 years. Also, they will probably raise ticket prices above their $19.67 average, and increased interest in the team and corresponding improved television ratings could allow boosts in their advertising rates.

Few sports marketers begrudge Rodriguez’s ability to squeeze such a lucrative deal out of Hicks.

“I’m in no way opposed to the $250-million number in and of itself,” Bonham said. “It doesn’t bother me a bit if Harrison Ford makes $100 million for a movie--as long as the movie industry is healthy and Ford can argue his case that he deserves it. The problem with A-Rod’s contract is that the number is out of proportion to the relative economic health of the league.”

When asked at baseball’s winter meetings in Dallas how he’d respond to criticism of the Rodriguez contract and whether it would damage the game, Hicks said he was acting responsibly, and that he has every intention of making the Rangers profitable.

“A big part of owning a baseball team is how you manage your revenues and your costs,” Hicks said. “It’s a complicated issue . . . . In the meantime, we’re going to try to stay within our budget restraints and win the World Series.”

“This is symptomatic of major league baseball’s problem,” said Sandy Alderson, an executive vice president in the commissioner’s office and previously executive vice president of the Oakland A’s. “Either you change or you accept the fact that teams such as the Yankees will win four out of five World Series.

“In that case, we don’t have a sport. We are then officially the Harlem Globetrotters versus the Washington Generals.”

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Alex Rodriguez’s $252-million contract has heightened concerns about baseball. D1