Aug 24,2001


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Spare the Cash, Spoil the Rod

A Q&A on the implications of Alex Rodriguez's new deal with the Texas Rangers

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by Neil deMause

I had a lovely column all planned for this week, with musings on the Chicago Bears' new stadium and New York's Olympic bid and the intricacies of municipal bonding and tax increment financing. Then Alex Rodriguez went and signed with the Texas Rangers for $252 million over ten years, and now that's all anyone wants to talk about.

Far be it from me to thwart the will of the people. So, forthwith, here's everything you wanted to know about A-Rod's new contract, its impact on the baseball industry, and on your wallet, but were afraid to ask -- in handy-dandy Q&A format:

Q. $252 MILLION????

A. First off, it's not really $252 million. It's a ten-year contract, starting at $21 million a year and rising to $27 million by the year 2011 -- and much of that is deferred to the end of the contract. A promise to pay money ten years from now is not the same as cash up front. (If you disagree, I've got a no-interest savings account I'd like to sell you...)

So forget all those stories of how Rodriguez is getting paid more than Tom Hicks paid for the whole Rangers team. Though if he invests carefully and saves his pennies, he can probably pick up the Montreal Expos or something once he's done playing.

Q. Yeah, but... $252 MILLION????

A. Well, yeah. Any way you slice it, this is what economists like to call "a buttload of money."

The problem is that denying Rodriguez his dough isn't going to help the bottom line of Joe and Mary Schoolteacher. The man cutting A-Rod's checks, mergers-and-acquisitions baron Tom Hicks, doubtless raked in a lot more than a measly $21 mil this year -- and he can't even hit a curveball.

There are really only two ways to keep people from getting filthy rich off sports: Keep the money out of the sports industry at the inflow end, or extract it once it's already there. If you're interested in doing the former, stop buying tickets, stop watching games on TV (a large chunk of A-Rod's salary will be floated by local and national TV advertisers), stop watching TV after games (you "Malcolm in the Middle" viewers, you're the ones to blame for the mammoth NFL TV contract), and stop voting for politicians who push public stadium subsidies, which enable teams to spend luxury box revenue on players instead of on actually building luxury boxes.

That's the complicated way. The easy way is to just raise the top tax rate, simultaneously pumping money back into the public's pocket (criticize the federal government all you want, it's a no-brainer that the more taxes they squeeze out of someone else, the less they need from you) and reducing the incentive to earn obscene salaries, since much of it would go straight to Uncle Sam. Under Jimmy Carter -- hell, under Richard Nixon -- A-Rod would be kicking back an extra $6 million or so a year to the public via federal income taxes.

I'd be down with that, but somehow I think a certain former Texas Rangers owner thinks otherwise.

Q. Okay, but why A-Rod? Can he possibly be worth that much money? Can anyone?

A. One of the most unintentionally funny things I've heard in recent weeks came from ESPN's Tim Kurkjian, who opined after the Red Sox inked Manny Ramirez: "Ramirez is more like a 14, 15 million dollar player, but in this market, he gets 20 million." Right, Tim -- just like a gallon of gas is really only worth a dollar, but in this market it costs a buck-fifty.

In the end, a player's worth to his team is equal to how much extra revenue he can pull in. And at least one economist believes that, yeah, A-Rod sure can bring the Rangers an extra 21 million simoleons a year. Dallas-Fort Worth may not be much larger than Seattle in terms of population, notes Washington State University sports economist Rod Fort, but the Rangers have a larger untapped TV market. "What I think you'll see happen there is the local TV contract will jump," he says. "And remember that Hicks has a wealth function -- the Rangers are one component in his asset portfolio." Even losing money on A-Rod, in other words, could be worth it if it helps raise the profile of Hicks' other business interests.

Of course, it's always possible that Hicks is just treating himself to a damn-the-torpedoes drive for a championship, and has no illusions about ever getting his investment back. In which case, more power to him -- though he might have wanted to sign a pitcher or two before loading up on pricey 40-year-old first basemen.

Next page: Sky-high ticket prices?


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