Two Scandals Are Too Much for A-Rod
When Alex Rodriguez signed a 10-year, $275 million contract with the New York Yankees in 2007, sports economists hailed the deal as a "money-making marriage" that was sure to translate into wins on the field and on the balance sheet. Baseball analytics expert Vince Gennaro wrote that A-Rod's value would be derived from what he called "performance and marquee," generating revenue by adding wins to a perennial playoff contender and by banking on his image and celebrity. Six years later, it's easy to laugh (or cry) about just how wrong these predictions were.
Over the weekend, an arbitrator reduced A-Rod's suspension for using performance-enhancing drugs to 162 games, which means he'll miss the entire 2014 season and forfeit $25 million of his base salary. The relationship between team and player has been so strained that the Yankees might not even let him hang with the grownups at Spring Training and would rather he just disappear altogether. A-Rod's image is in tatters, as this latest scandal has taken away whatever marketability he might have had on his quest to reach baseball's most revered milestones.
That he remained marketable until recent years might come as a surprise to those of us who have long viewed A-Rod as an overpaid, underperforming diva with more than a few skeletons in his closet. In February 2009, less than two years after signing his second record-breaking contract, Rodriguez was forced to admit to using performance-enhancing drugs from 2001 to 2003 while a member of the Texas Rangers. It was an embarrassing ordeal for everyone involved, including the Yankees and Major League Baseball, who had hoped for a seemingly clean player to reclaim the home run record from Barry Bonds. But Rodriguez remained relatively marketable in the immediate aftermath of the announcement. In May 2009, he still had the sixth-highest-selling jersey and was ranked ninth in 2010. By the end of the 2011 season, his jersey dropped to 15th.
Perhaps speaking to his inherent lack of likability, Rodriguez never quite reached the level of sponsorship deals of other marquee athletes, earning $6 million in endorsements in 2009. Still, he remained signed with Nike after his 2009 PED admission, as the company chose not to immediately sever the partnership, as they would with Lance Armstrong, but rather wait for his contract to run out and not renew. As recently as 2011, A-Rod was still considered a viable celebrity sponsor by at least one company: Vita Coco, which signed him to an endorsement deal that June.
Rodriguez most likely sustained his marketability after his first PED scandal precisely because of what Gennaro had touted: the strength of the Yankees brand coupled with his performance on the field. In 2009, the Yankees were in a major campaign for the inaugural season of their new stadium. They also won the World Series, thanks in large part to an uncharacteristically clutch postseason by Rodriguez. Fans can be quite forgiving given enough on-field production, as we saw this past season when sales of Ryan Braun merchandise actually increased after his PED suspension.
But after years of disappointing play since that World Series, fans, potential sponsors and the Yankees all seem to be done with A-Rod and his brand. His jersey has dropped out of the top 20 sales in the past two seasons and his endorsements have shrunk to about $500,000. He has not one but two bad hips and played in just 44 forgettable games last season. He stands to make $61 million over the next three years, and could earn $30 million more in incentives -- he's six home runs away from 660, which would net him $6 million, and would earn another $6 million each if he reaches 714, 755, 762 and 763 -- but those odds look increasingly slim as the Yankees clearly want nothing to do with him and could very well end up eating the rest of his contract.
That contract will go down as one of the worst in baseball history, because of both the poor return on investment and the headaches it brought with it. Had Rodriguez managed to reach 800 home runs -- an obsession that reportedly motivated him to take PEDs in the first place -- economists could have argued that the contract and all the marketing hoopla around the milestone would have been worth it. Instead, Alex Rodriguez will go down in history as one of baseball's most tragic figures, whose uncapped ambition ultimately caused his downfall.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Kavitha A Davidson at email@example.com