Yankee Baseball

It Takes Money to Make Money:

Ok, yes it has been a while but hey it's supposedy the holiday season and I should be busy selling diamonds and watches (wake up people, its not too late to buy!!) I have also been making an effort not to put up any more "bad news" articles up on my blog, in particular, ones that deal with the economy because things have gotten so bad that we can all use some good news, or at the very least a distraction. And what better than Sports, or my favorite distraction, the business of sports.

Which brings me to all the wheeling and dealing that is now going on as a result of the Major League Baseball winter meetings in Vegas. Recession, depression, yeah right, not in baseball where the money is fast and plentiful. Nobody knows how to shmear the money around better than my beloved Yankees.

I am a die hard Yankee fan and one of the biggest belly aching cries I hear from all my jealous Yankee hater friends (and there are a lot of them out there, in particular those motley fans from Queens that are still holding on to memories that are over 22 years old, lol, even though the Mets have learned to play moneyball very well too) is that "sure the Yankees win, they out spend everyone in Major League baseball", meaning we use our money to put us in a better position to win (why is that wrong again?).

The cries were at a peak when the Yankees spent all that money to get A-Rod and have now returned in full blast after the Yankees signed pitcher CC Sabathia to a 161 million seven year deal that is the most ever paid to a Major League pitcher and the fourth highest ever in baseball for any player. Is it a huge amount? yes! Is it way too much for anyone to make, let alone an athlete? Maybe. Does it make sense for the Yankees to spend that kind of coin on him, Definitely YES! Now let me explain why...

The Yankee empire consists of the team, NY Yankees, and the YES Network, which shows most of the Yankee games and other programing throughout the year. Together, the estimated worth of the Yankee empire is about 4 billion dollars. Last year Forbes had the Yankees valued at about 1.3 Billion dollars and Goldman Sachs put a valuation or sale price on the YES Network for 3 billon dollars. The team will now be playing in a new stadium -palace that had a price tag of about 1.3 billion dollars.

Now it is common knowledge that the Yankees make no money, might even lose money if they do not make the post season. The team (not including the YES Network) states annual revenues of about 357 million dollars. Now, if the YES Network is worth 3x the team, lets assume they have annual revenues of about 900 million dollars. So total estimated revenues for the Yanks are about 1.2 Billion dollars or 7.5 million dollars a game. Now, lets assume that playoff games are worth at least double the regular season games in revenue (Forbes says they are) so that means that a playoff game is worth about 16 million per game to the Yankees. Not to mention all the added attention and excitement a good playoff race makes thereby increasing the amount YES can charge for advertising etc... So if the Yankees make the playoffs and have a good first round 5 game series they earn an additional 80 million dollars (and that is only for the first round, they clean up if they advance and make an absolute killing if they go to the World Series).

This year, as we all know, the Yankees did not make the playoffs for the first time in 13 years. The Yankees missed the playoffs by 8 games. Not much. If we recall, the Yankees had a chance to go after pitcher Johan Santana, who eventually went to the Mets. The Yankees did not want to spend the money nor did they want to give up some of what, at the time, they thought were top prospects like pitcher Ian Kennedy and pitcher Phil Hughes, who both combined last year had a grand total of ZERO wins. On the other hand Santana had 16 wins for the Mets and had he been a Yankee, we would have most likely made the playoffs since, as I mentioned we missed by about 8 games.

So now we know that missing the playoffs costs the Yankees a ton of money. We also guesstimate that the Yankees earn about 16 million per playoff game in revenue! So a 5 game division series nets them 80 million or half of the seven year contract being paid to CC Sabathia. If they advance to the next round and play a 6 or 7 game series (or even 5 games), they make back ALL of what they are paying Sabathia in one year. We wont even discuss the ridiculous money they make if they go to the World series (and G-d willing win).

With Sabathia, the Yankees now have arguably the best starting pitcher in baseball. He is younger than Johan Santana, and perceived as tougher. Together with him you have Ching Ming Wang , a proven ace starting pitcher, and Chamberlain who is also amazing. If they resign Petite and get Burnett or a similar ace pitcher (like Ben Sheets) they will undisputably have the best starting 5 pitching rotation in baseball poised to deliver a deep playoff run and lots and lots of playoff dollars (not to mention merchandising, increased brand worth, ever stronger ticket sales, etc...) No doubt, some of my own hard earned dollars will end up in the Yankee coffers as well.

So to sum up, spending 161 million over seven years on CC Sabathia is a great deal for the Yanks. He will get them into the post season and if he does that he will get them revenue equal to at least half if not all of his seven year salary in one season (maybe two, but we will be optimistic here!). Talk to me next October and I will tell you for sure if it was worth it or not, but I guess you got to spend it to make it!

Happy Holidays,

OSO.