A-Rod's "Home Run" Contract: Do Yankees Get Their Money?
The New York Yankees contract with Alex Rodriguez will reportedly pay him $6 million for every home run milestone--for surpassing Willie Mays (660), Babe Ruth (714), Hank Aaron (755) and Barry Bonds (762) as well as an all-time home run leader bonus. So is $30 million a rational payment? I turned to the always reliable baseball financial consultant Vince Gennaro, author of "Diamond Dollars" to help us figure out if all this makes sense. Here's what Gennaro said:
"I've estimated the "milestones" to be worth about $20 million in revenue to the Yankees. There are five milestones reported to be in the contract and while some are clearly higher value (e.g., becoming the reigning all-time HR king vs. passing Willie Mays), I think they will each average drawing about 60,000 extra fans to the New Yankee Stadium (at significantly higher ticket prices than we see today) to watch/experience his pursuit."
"Keep in mind, if he earns his reported $30 million in bonuses, it costs the Yankees $42 million because of the 40% luxury tax. (I'm assuming this "marketing agreement" with A-Rod is still subject to luxury taxes, although MLB may have given the Yankees a break on this one.) The piece I haven't accounted for is how his pursuit impacts their YES Network ratings. While it certainly will help, I haven't attempted to quantify it."
As a side note, there has been mention of A-Rod, around the time of these milestones, giving the Yankees additional personal appearances and signing memorabilia.
Questions? Comments? SportsBiz@cnbc.com