Scott Boras Calls Back
For all the bad press that Scott Boras gets, he's still one of the smartest guys in the business. And I give him credit. Even if you come in believing he's making up bogus numbers in order to maximize his players' contracts, you'll be convinced he knows what he's talking about by the time he has you off the phone.
I had no idea how Scott Boras was going to tell me that his client, Alex Rodriguez, was worth $500 million to the YES Network over the next 10 years. Well, I just got off the phone with him and he actually makes a lot of sense.
Here's how he calculates something like that. Boras says that regional sports networks make two-thirds of their money through subscriptions and one-third of their money from advertising. Given that regional sports networks only have primarily one product, the subscription base and the ratings are extremely volatile, he reasons, meaning that signing a player like A-Rod is essential.
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.
As you might recall in my earlier post, Vince Gennaro told me that A-Rod not being on the team was probably a loss of $20 million a year over 10 years to the YES Network. Boras says that number must be multiplied 15 to 19 times to determine how that negative cash flow affects the overall asset value of YES, which was given an initial value of $850 million upon launch in 2001 and is now said to be worth about $3 billion. He also says that just because the Yankees only own 36 percent of YES doesn't mean that A-Rod's contribution to the overall network has to be diminished.
"The Yankees have a contract with YES for 15 years," Boras said. "If the guys at Goldman Sachs (which owns 40 percent and reportedly wants to sell its stake) were smart, they would help subsidize Alex's contract."
Questions? Comments? SportsBiz@cnbc.com