A-Rod and the Yankees: A Contract Worth $350 Million?

The New York Yankees and third baseman Alex Rodriguez have agreed to a contract extension worth $350 million. The deal, which is the richest contract in baseball history, will keep Rodriguez in a Yankees uniform through the 2017 season.

Introduction

In 2007, the Yankees and Alex Rodriguez agreed to a 10-year, $275 million contract, which was the richest deal in baseball history at the time. The contract included a clause that allowed Rodriguez to opt out of the deal after the seventh year, and he did just that following the 2008 season. The Yankees then re-signed him to a new 10-year, $275 million deal. In 2017, Rodriguez announced his retirement from baseball. He will receive $21 million per year from the Yankees from 2018-2021 as part of his original contract.

A-Rod’s Previous Contracts

Rodriguez signed a 10-year, $252 million contract with the Texas Rangers after the 2000 season. That was the largest contract in baseball history at the time. He was traded to the Yankees in 2004 and his contract was renegotiated. The agreement added an opt-out clause after the 2007 season, which Rodriguez exercised, voiding the three years and $81 million that remained on his deal.

He then signed a new 10-year, $275 million contract with the Yankees. That pact included a provision allowing him to opt out after the seventh year, which he did following the 2007 season. In November 2007, he agreed to a new 10-year, $275 million contract with the Yankees that contained an opt-out clause after six years.

Under the terms of that contract, Rodriguez was set to earn $30 million in each of 2008 and 2009, $32 million in 2010, $33 million in 2011 and 2012 and $28 million from 2013 to 2017. If he had stayed with the Yankees through 2017, he would have earned an additional $3 million: $1 million each for reaching 3,500 hits and 600 home runs.

The Yankees’ Current Situation

The Yankees are currently in a bit of a bind. They are trying to get under the $189 million luxury tax threshold for the 2014 season, but they also have several key players who are eligible for free agency after the 2013 season. One of those players is All-Star third baseman Alex Rodriguez, who is owed $114 million over the next four years on his current contract.

The Yankees have already made it clear that they are not going to give A-Rod a raise on his current contract, so if they want to keep him, they are going to have to get creative. One option that has been floated is giving A-Rod an extension worth $350 million over five years. This would lower his annual salary for luxury tax purposes and also give the Yankees some much-needed flexibility in their quest to get under the threshold.

Is this a good move for the Yankees? Only time will tell, but it’s certainly an interesting situation to keep an eye on.

Why A-Rod is Worth $350 Million to the Yankees

The New York Yankees are said to be considering signing Alex Rodriguez to a contract extension worth $350 million. If they do so, it would make him the highest paid player in baseball history.

So why are the Yankees considering shelling out that much money for A-Rod?

First and foremost, Rodriguez is one of the best players in baseball. He’s a perennial All-Star and has won three MVP Awards. In his career, he’s batted .302 with 654 home runs and 1,975 RBI. He’s also been one of the more durable players in baseball, averaging 157 games played per season.

Secondly, Rodriguez is still in the prime of his career. He just turned 36 years old, but due to his advanced age, he’s already considered to be in decline. Nevertheless, he’s still a very good player and should be able to put up solid numbers for at least a few more years.

Thirdly, the Yankees believe that A-Rod will help them win championships. They’re already considered to be one of the best teams in baseball, but with A-Rod in the lineup, they believe they’ll have an even better chance of winning it all.

Lastly, the Yankees know that they can afford to pay A-Rod $350 million. The team is valued at around $3 billion and generates annual revenues of over $400 million. So while $350 million is a lot of money, it’s not going to break the bank for the Yankees.

Conclusion

The Yankees have a lot of money. They also have a lot of needs. So it would seem that signing A-Rod to a 10-year, $350 million contract is a no-brainer, right?

Wrong.

In fact, signing A-Rod to such a rich contract could very well be the worst thing the Yankees could do. Here’s why:

1. The Yankees are already paying too much for aging stars. With the exception of Mariano Rivera, the Yankees’ core players are all over 30 and in decline. Alex Rodriguez is just the latest example.

2. The $350 million would be better spent on other needs. The Yankees’ pitching staff is in dire need of an upgrade, and the team could also use some help in the outfield. With so many needs, spending $350 million on one player is a luxury the Yankees can’t afford.

3. The length of the contract is a risk. 10 years is a long time, and there’s no guarantee that A-Rod will still be productive at age 41. In fact, it’s more likely that he will have declined significantly by then.

4. There are cheaper options available. If the Yankees are looking for a third baseman, there are plenty of cheaper options available, including Chipper Jones and Eric Chavez. Spending $350 million on A-Rod when cheaper options are available doesn’t make sense from a business perspective.

In conclusion, signing A-Rod to a 10-year, $350 million contract would be a bad move for the New York Yankees.