Alex Rodriguez holds the most-burdensome contract to any team in U.S. sports history. Sports economists just aren’t sure which Rodriguez deal is the worst.
Rodriguez, a 14-time Major League Baseball All-Star, is the focus of a performance-enhancing drug investigation that may keep him out of the sport through next season or even end his career.
The 38-year-old third baseman is almost halfway through a 10-year, $275 million contract with the New York Yankees. Signed in December 2007, it replaced a 10-year, $252 million deal with the Texas Rangers. The first package produced three straight last-place finishes, a 2004 trade to New York and a 2010 bankruptcy that left Rodriguez as the Rangers’ biggest creditor. The Yankees deal preceded his admission of past doping -- spoiling a plan to celebrate his possible climb to the top of the all-time home run leaders -- and declining play marked by two hip operations.
“Ten, 20 years from now, if we’re sitting around talking about the worst contracts, those are the two that will immediately come to mind,” said Wayne McDonnell, an assistant professor of sports management at New York University. “Just in terms of dollars and cents, I think the two Alex Rodriguez deals will probably go down in history as being the worst.”
Including 2013, Rodriguez has $114 million remaining on the contract through 2017. How much he gets depends on baseball Commissioner Bud Selig, who is weighing the results of an investigation into Biogenesis of America LLC, a shuttered Florida anti-aging clinic linked to performance-enhancing drugs for ballplayers. The Yankees’ third baseman was among them, and Selig is considering a without-pay ban ranging from the 2013-14 seasons to lifetime, according to the Associated Press. The shorter of those would still leave Rodriguez with three years and $61 million.
Rodriguez has denied allegations that he received performance-enhancing drugs from Biogenesis. Ron Berkowitz, a spokesman for Rodriguez, didn’t return an e-mail seeking comment.
The Rangers agreed to pay $67 million of $179 million still owed to Rodriguez when they traded him to New York in February 2004 for Alfonso Soriano and Joaquin Arias. Having won an American League Most Valuable Player award with the last-place Rangers in 2003, he added MVPs with the Yankees in 2005 and 2007.
Rodriguez then chose to opt out of the contract rather than negotiate an extension with New York. The decision voided the initial Rangers’ deal, eliminating a $21 million subsidy the Yankees were receiving from Texas to pay Rodriguez.
Led by then-managing partner Hank Steinbrenner, the Yankees worked to re-sign Rodriguez anyway, eventually reaching the record $275 million deal, which included a $10 million signing bonus.
“I think Hank Steinbrenner had a little bit of his dad in him and realized the significance of star power,” McDonnell said in a telephone interview, comparing the son to his late father, George Steinbrenner. “I think Hank drove that engine too much and in the years that followed, he’s become nonexistent in the Yankee hierarchy.”
Alice McGillion, a spokeswoman for the Yankees through Rubenstein Public Relations Inc., declined to comment on Rodriguez’s contracts in an e-mail. Jason Zillo, a spokesman for the team, didn’t return an e-mail seeking comment on the packages.
With 518 home runs when he was re-signed, Rodriguez also received $30 million in milestone incentives -- $6 million each for matching career home-run totals of Willie Mays (660), Babe Ruth (714), Hank Aaron (755) and Barry Bonds (762), and when he set a new mark. Rodriguez is stuck on 647 home runs, No. 5 all time, and hasn’t played in the major leagues this season following January hip surgery.
“When the contract was signed, there was a lot of concern among not just Major League Baseball, but all sports for the dollars that were involved,” said Harvey Schiller, who was the chief executive officer of YankeeNets LLC, the team’s broadcast arm, when Rodriguez was acquired. “In terms of what was going on in the economy and everything else five or six years ago, it really changed the economics across all of sport in a pretty dramatic way. What’s the real value of a player?”
Schiller, chairman of New York-Based GlobalOptions Group Inc. (GLOI), said in a telephone interview that Rodriguez boosted television ratings when he joined the Yankees, and that ratings would rise if and when he returns. The team with a record 27 World Series championships is mired in next-to-last place in the AL East, and ratings on YES are down 39 percent through last week.
“Whether he’s given the true value in terms of marketing, I would say no, especially when you compare him to Derek Jeter or even the value you get out of guys like (Curtis) Granderson or (Mark) Teixeira,” Schiller said. “For the Yankees, you’d have to say that dollar for dollar, there was a better investment in the rest of them.”
Determining the worst sports contract depends on whose perspective you are taking and at what point you are taking it, according to Andrew Zimbalist, an economist at Smith College in Northampton, Massachusetts, who has written a dozen books on the business of sports.
In looking at the most problematic U.S. sports deals from the vantage point of the day they were signed, “I’d say A-Rod’s was on top,” Zimbalist said of the Yankees’ contract.
From the perspective of how the signing helped build a franchise, the Rangers’ contract was worse, according to Andy Dolich, who has held operations-management positions in all four major U.S. sports leagues.
“You’re always going to look for a player to build the team around and increase net value,” Dolich, a sports business consultant for the London-based executive search firm Odgers Berndtson, said in a telephone interview. “I don’t think you could say he necessarily did that with the Rangers, and whatever the ultimate payout is going to be here at the end of these negotiations, it will really be a correcting error in the Yankees’ overall financial structure.”
The issue with both Rodriguez deals is their length, Zimbalist said. The maximum length of National Basketball Association contracts is five years and the National Hockey League is eight years. Since much of the money in National Football League contracts is not guaranteed, there is no limit.
“It’s really problematic whenever you sign a player for 10 years,” Zimbalist said. “If A-Rod didn’t prove that, Albert Pujols is proving it now.”
Pujols, who won three National League MVP awards with the St. Louis Cardinals, signed a 10-year, $240 million contract in December 2011 with the Los Angeles Angels, a deal that also pays him $3 million if he gets 3,000 hits and $7 million if he passes Bonds in home runs.
In the first season of the contract, Pujols batted .285 with 30 homers in 154 games, both lows for his 13-year career. The 33-year-old first baseman and designated hitter hit .258 with 17 homers and 64 runs batted in over 99 games this year before a season-ending foot injury.
“I thought the Albert Pujols contract was a really good one at the time,” said J.C. Bradbury, a professor in the department of exercise science and sport management at Kennesaw State University in Kennesaw, Georgia. “This guy has fallen unexpectedly. It’s bizarre.”
Bradbury, who’s analyzed contract values and written books including “Hot Stove Economics: Understanding Baseball’s Second Season,” said statistically Rodriguez’s deal in 2009, when the Yankees won their most recent World Series, was the worst in baseball.
In a Los Angeles Times online poll this week asking readers which team was stuck with the worse contract between Rodriguez and Pujols, 56 percent of the 2,338 respondents said the Yankees and 44 percent said the Angels.
Others often cited as bad baseball contracts include Ryan Howard’s with the Philadelphia Phillies -- $125 million for five years from 2012 to 2016. The 33-year-old first baseman, the NL home-run leader in 2006 and 2008, played 71 games in 2012, batting .219 with 14 homers. After knee surgery last month, he probably will miss six to eight weeks and is batting .266 with 11 home runs in 2013.
Mike Hampton’s eight-year, $121 million contract with the Colorado Rockies was among the worst deals, said Bradbury. In its first year, 2001, he went 14-13 with a 5.41 earned run average. He went 7-15 the next season before being traded.
The New York Mets paid Bobby Bonilla $1.2 million on July 1 and will owe him that sum every year through 2035 because they deferred a $5.9 million payment before buying him out before the 2000 season, according to CBS Sports. Having retired in 2001, he’ll be 72 when the payments end. Mets spokesman Jay Horwitz declined to comment.
Before the NHL limited contract lengths, the New York Islanders gave goalie Rick DiPietro a 15-year, $67.5 million contract. DiPietro ended his Islanders’ career with a 130-136 record after being limited to 50 games over the past five seasons due to injuries. The team bought out his contract last month and will pay him $1.5 million each year through 2029.
Bad NBA contracts often cited include the one Rashard Lewis signed for six years and $118 million to join the Orlando Magic in 2007. He was averaging 13.5 points per game when the team traded him in 2010.
Allan Houston burdened the New York Knicks with a six-year, $100 million contract in 2001. He was still getting paid in 2007, two years after knee problems ended his playing days.
The NFL’s Albert Haynesworth signed a seven-year deal with the Washington Redskins in 2009 worth $100 million, including $41 million guaranteed. He was suspended for the final games of the 2010 season for conduct detrimental to the team and traded during the offseason.
None of those deals are as onerous to the team as A-Rod’s is to the Yankees, said McDonnell, who created the “Business of Baseball” course at NYU.
“There were certain numbers in this contract that made your knees buckle,” he said.
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