Rodriguez Loses Far More Than $25 Million Salary in MLB Ban

Alex Rodriguez will forfeit $25 million in base salary while suspended from Major League Baseball for the 2014 season. The longest drug-related ban in the sport’s history will cost him more than that in missed bonuses and lost endorsements, sports marketers said.

An arbitration panel two days ago reduced Rodriguez’s original 211-game suspension on appeal, yet the New York Yankees’ third baseman will still sit out this year’s full 162-game regular season -- plus any playoff games -- for violating baseball’s performance-enhancing drug policy. Rodriguez sued MLB over the ruling, according to a filing today in Manhattan federal court.

The discipline will keep the three-time American League Most Valuable Player off the field until the 2015 season, when he will turn 40. It may also derail Rodriguez’s chances to collect most of the remaining $30 million in bonuses included in his contract as he pursues Barry Bonds’s career record of 762 home runs, and make him a pariah for sponsors.

“For the foreseeable future, A-Rod’s marketing and merchandising opportunities are going to be scant, made more so by the fact that he is unlikely to attain any of the records many thought he was on pace to challenge,” David Carter, executive director of the Sports Business Institute at the University of Southern California, said in an e-mail.

Baseball’s Drug War

“Until or unless he demonstrates contrition, and this is met by the passage of time and fans’ historic ability to forgive and remember, he will be thought of as just another high-profile athlete that squandered his opportunity for greatness,” Carter added.

Yankees’ Statement

Baseball and the Yankees said over the weekend in separate statements that they respect the arbitrator’s decision. The MLB Players Association said while it disagreed with the ruling, it would not seek to have it overturned.

Rodriguez, 38, said in a statement that the evidence was “not put before a fair and impartial jury.”

Paul Haagen, a professor of sports and contract law at the Duke University School of Law in Durham, North Carolina, said the grounds on which a party can challenge an arbitrator’s decision are extremely limited.

“It is conceivable, but just barely, that a court might agree to hear what sounds like A-Rod’s claim that the arbitrator demonstrated evident bias,” Haagen said by e-mail. “The almost certain result, however, would be that the court will dismiss the claim on the pleadings.”

Rodriguez will lose his entire salary for the 2014 season, when he was scheduled to make $25 million, according to payroll figures compiled by baseball-reference.com. That will help the Yankees reduce payroll below $189 million next year, a goal the team set in an attempt to avoid luxury taxes that can be as high as 50 percent of any amount over that threshold.

Upcoming Bonus

Rodriguez, who signed a record 10-year, $275 million deal with the Yankees in December 2007, is scheduled to receive a $3 million signing bonus in two days. That payment won’t be affected by the suspension, the New York Daily News reported.

Rodriguez will now be hard-pressed, however, to collect the five $6 million bonuses tied to his pursuit of the home run record. With 654 homers, he’s 108 behind Bonds. Rodriguez would get $6 million for passing Willie Mays, who ranks fourth in MLB history with 660 homers, and the same amount for surpassing Babe Ruth (714) and Hank Aaron (755). He stands to get another $6 million each for tying and passing Bonds’s record.

‘Clean Slugger’

However, those $30 million in bonuses pale in comparison to what Rodriguez could have made in endorsements as a “clean slugger” passing Bonds, said George Belch, sports marketing professor at San Diego State University. Bonds was identified as a steroid user in former U.S. Senator George Mitchell’s 2007 investigation into the sport and was convicted in April 2010 by a federal jury in San Francisco of obstructing a U.S. probe of drug use by professional athletes.

Belch said Rodriguez’s ties to performance-enhancing drugs ultimately will cost him hundreds of millions in endorsement income linked to the home run record.

Rodriguez, a 14-time All-Star, was initially suspended in August after MLB Commissioner Bud Selig said he used testosterone and human growth hormone over multiple years and tried to obstruct its investigation of Biogenesis of America LLC, a now-closed anti-aging clinic in Coral Gables, Florida. Rodriguez received banned substances from Anthony Bosch, the founder of Biogenesis, according to MLB.

In an interview with CBS’s “60 Minutes” that aired last night, Bosch said Rodriguez wanted to become the first player to hit 800 home runs.

No Asterisk

“If you look at the endorsement deals he could have had had he done this without the drugs, people were sitting there, hoping someone clean would break that record,” Belch said in a telephone interview. “So you’d have someone breaking that record without the asterisk involved, showing that it could be done on athletic ability and skill alone, rather than the use of performance-enhancing drugs. Plus playing in New York, with a relatively good image, he would have had massive endorsement contracts, no doubt about it.”

The season-long suspension was just “another nail in the coffin” of Rodriguez’s marketability, said Jim Andrews, senior vice president for content strategy at the sponsorship consultant IEG.

“His brand is tainted and there is nothing to be gained in associating with him, even if he does come back,” Andrews said by e-mail. “Even in the best-case scenario that he someday proves he did not use PEDs, there would be little to no upside being linked to him.”

Missed Opportunities

Belch said while the ban won’t negatively impact the Yankees’ brand, there is an “opportunity cost” for the record 27-time World Series champions, who will miss out on marketing opportunities that would have come with Rodriguez’s untainted pursuit of the home run record.

Rodriguez, who admitted five years ago to using banned substances from 2001-03 as a member of the Texas Rangers, never failed a drug test in connection with Biogenesis and has denied use of performance-enhancing drugs since joining the Yankees.

Rodriguez filed an appeal against the ban on Aug. 6, one day after baseball’s 211-game suspension was handed down. He was allowed to play during the process and hit .244 in 44 games with seven home runs and 19 runs batted in after missing the first 110 games of the 2013 season while recovering from offseason hip surgery and then a mild quadriceps strain.

Initial Lawsuit

Rodriguez last year sued MLB and Selig for attempting to destroy his reputation and career, claiming MLB investigators bought stolen documents and leaked information to the media. Those lawsuits could be consolidated with the player’s attempt to fight the arbitrator’s weekend ruling, said Mark Conrad, head of the sports business program at Fordham University’s Gabelli School of Business. Selig and baseball officials have denied Rodriguez’s accusations, which included investigators impersonating law-enforcement officers to get evidence.

“No player should have to go through what I have been dealing with,” Rodriguez said. “I am exhausting all options to ensure not only that I get justice, but that players’ contracts and rights are protected through the next round of bargaining, and that the MLB investigation and arbitration process cannot be used against others in the future the way it is currently being used to unjustly punish me.”

To contact the reporters on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net; Eben Novy-Williams in New York at enovywilliam@bloomberg.net; Mason Levinson in New York at mlevinson@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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