Friday, July 13, 2007

Baseball – the BIGGER picture (Marlins, A-Rod and Globalization)

On a day when Florida Marlins president David Samson believes that giving Ichiro $20 million a year is a sign that the Apocalypse is upon the baseball industry, Alex Rodriguez’s agent Scott Boras suggested his client could earn more than $30 million annually – once again baseball (at least if you ask David Samson) has once again reached the edge of the financial abyss. The globalization of the sport continues with the major beneficiaries, at least initially being baseball’s bigger market franchises.

“I would say it's the end of the world as we know it. If Ichiro's worth 20 million a year, I am speechless by that contract; I'm hoping that that report is false. Because there's no chance that a top of the lineup, forget that, there's no chance anybody's worth that. And Ichiro, who's led his team to zero? Nothing?” Marlins president Samson offered Wednesday on Miami’s 790 AM (an all-sports radio station).

Appearing on the Dan Le Batard show, a beleaguered Samson offered his end-of-days overview after learning from Le Batard the Seattle Mariners are set to sign Ichiro to a five-year $100 million contract.

“It'll take the sport down, that contract. Right back to the ridiculous contracts. It can't be. Well, sign Ichiro to a 20 million a year for five years it's a joke, it's inexcusable, it's complete mismanagement. It can't be true.”

Well it is so – Mr. Samson. The Mariners who watched Alex Rodriguez and Ken Griffey Jr. leave Seattle as free agents and Randy Johnson traded away, apparently the Mariners have had enough losing (at least when it comes to players departing for greener pastures). First broken by The Seattle Times – the Mariners reportedly are ready to make Ichiro Suzuki baseball’s next $20 million a year man when they announce Ichiro’s contract Friday.

One concern Samson had – when the 2008 season rolls around the first of Ichiro’s five year contract the talented outfielder will be well past his 34th birthday.

Speaking of the reported contract extension in the works for Ichiro, Mariners manager John McLaren told The Seattle Times, "I read on the computer what everyone was saying. I'd love to see him end his career in Seattle, get 3,000 hits and go into the Hall of Fame as a Mariner.

"It's very rare for a player nowadays to play his whole career with one organization. I love that. Edgar [Martinez] did it ... Of course, Ted Williams and some of the Yankee greats. I hope everything gets worked out so he can finish his career here."

Not once but twice has David Samson been at the center of two baseball fire sales. First as the President of the Montreal Expos and more recently in the same role with the Florida Marlins after the Marlins won the 2003 World Series, along with his step-father Jeffrey Loria have been compared to Lucifer coming alive. What Samson doesn’t appreciate – how Seattle Mariners management reacted to losing key baseball players who could have made the Mariners contenders annually as opposed to a franchise still regretting they couldn’t retain players they had developed.

Samson suggested while the Marlins may benefit from more revenue sharing (money in his pocket), believes the Ichiro isn’t worth $100 million. Samson accused the Mariners of complete mismanagement and the signing of a $100 million contract would be a “complete joke”. Let’s remember Ichiro represent a marketing – money making machine to the Mariners. Seattle has a large Asian population – Ichiro Suzuki has been money in the bank for the Mariners since he joined the franchise just before the start of the 2001 season. Here’s a better question – do the Mariners have a better handle on how to manage their business and make money than the Marlins? The Mariners have been in the top half financially generating baseball franchises since Ichiro arrived. Samson and Loria have spearheaded two of the bottom feeders, two MLB franchises that were economic blights, taking and never giving.

If Samson isn’t amused by the Mariners doing what they believe they have to do to protect their franchise he must be ready to give up after hearing Thursday Scott Boras (are there any Scott Boras clients playing for the Marlins) believes Alex Rodriguez is worth more than $30 million a year. If Ichiro is worth $20 million a year, A-Rod has to be worth more than $30 million a year. His agent Scott Boras simply wants what’s best for his client; the best player in the game deserves the biggest contract in the game. Rodriguez signed a ten-year $252 million contract with the Texas Rangers (leaving the Seattle Mariners) before the 2001 season. A clause in his contract allows A-Rod to opt-out of his contract after the 2007 (current) season.

According to Rodriguez is owed $24 million in each of the next three seasons by the Yankees, with Texas offsetting much of the money by paying New York $8,116,000 next year, $7,101,500 in 2009 and $6,087,000 in 2010.

He is guaranteed an additional $3 million annually by the Rangers, the original deferred money in his contract that was converted to an assignment bonus at the time of his trade to the Yankees.

As great a 2007 season as A-Rod is having on the field, unforgiving Yankee fans have never really appreciated how great a baseball player A-Rod is. With all the hullabaloo surrounding Barry Bonds approaching Hank Aaron’s 755 career home run record before he retires A-Rod will likely hit well over 800 home runs. The media circus that is New York has offered A-Rod an opportunity to experience life under a microscope. Rodriguez’s wife attended a recent game at Yankees Stadium wearing a profanity laced tank-top. With four daily papers, two local all-sports radio stations and more than 20 million people who love talking about the Yankees, it makes perfect sense for A-Rod to be looking elsewhere.

Thursday Yankees brass suggested they would ready to negotiate a contract extension with Rodriguez and his agent now, something A-Rod downplayed Thursday.

"I think it would be selfish on my part to talk about my contract status when our team desperately needs wins," Rodriguez said, responding to the reports that the Yankees would like to begin extension talks with him. "My goal is to win as any games as we can, focus on my teammates and really play at a real high level in the second half."

"The one thing I want to focus on is getting a win tonight and play baseball," Rodriguez added. "That sort of thing I leave to the people upstairs. My only concern is to play baseball and play at a high level."

Does that mean that no matter what, he will not negotiate before the season ends?

"Correct," Rodriguez said.

ESPN The Magazine's Buster Olney reported that the Yankees were prepared to sit down with Rodriguez and Boras as long as he agrees not to opt out of his current contract after this season and that he agrees to tack on any extension to that deal, which expires after the 2010 season.

A report in Thursday’s New York Post added more confusion as to the status of A-Rod’s current contract. According to the published report: the language in Rodriguez's record-breaking contract says that for the 2009 and 2010 seasons, A-Rod will receive $27 million plus the higher of $5 million or $1 million greater than the annual average value of the non-pitcher with the largest annual average value package. Thus, Boras explained, even if Rodriguez does the minimum and agrees to give up his free-agent rights to stay with the Yankees for the next three seasons, he would be guaranteed $32 million in each of the final two of those years. So Boras had the ultimate insider information when he recently told Los Angeles Magazine he anticipates the first-ever $30 million player coming soon.

"The way the provision operates, he either gets that or he can become a free agent after any of those seasons again," Boras told The New York Post.

Once the World Series ends Rodriguez has ten days to inform the Yankees if he’s going to opt-out of his current contract and become a free agent. One point Boras made clear to the Post – A-Rod has no interest in negotiating during the current baseball season.

"We are not going to be negotiating during the season," Boras said. Boras insisted he could see no way that strategy will change, saying "This is Alex's decision. This has been his policy, and I fully expect this to continue to be his policy."

Boras the best in the business negotiated a similar opt-out clause in J.D. Drew’s previous contract with the Los Angeles Dodgers. Drew opted out and signed a five-year $70 million contract with the Boston Red Sox. Boras is correct in assuming baseball’s first $30 million contract is around the corner and that player (Boras didn’t say who it would be) will be Alex Rodriguez.

Ironically there are only three or four franchises that could seriously consider a $30 million contract for one player. Remember not only would a team have to assume a multi-year contract likely in the area of five-years and $150 million but in all probability the resulting luxury tax – an additional 40 percent surcharge. A-Rod’s contract could cost a MLB franchise as least $42 million a year (taxes included). The Yankees and Mets both moving into new stadiums at the start of the 2009 season would look at signing A-Rod, as would both the Los Angeles Dodgers and Los Angeles Angels. It would be next to impossible for any other team to even consider signing A-Rod; it would be a terrible business decision for any other team to consider, including the Boston Red Sox.

Whatever gap exists between the Yankees and every other MLB franchise in overall revenue will only get wider when the new Yankee Stadium opens in 2009. Some industry insiders estimate the Yankees will make an additional $50 million-$100 million annually.

Asked whether the new Yankee Stadium could force Boston's ownership to forgo improvements at Fenway in favor of a new ballpark, Sox CEO Larry Lucchino told The Boston Globe, "A new ballpark is not in the cards. But the new behemoth Yankee Stadium in 2009 does militate in favor of us doing everything possible to make Fenway Park a bit bigger, better, and more revenue-producing in the near future."

Bud Selig talked at great length during the All-Star break his vision for the globalization of the sport. The Mariners can in part rationalize Ichiro’s contract because of the dollars Ichiro has generated outside of America for the Mariners. The Red Sox believed it was a great business decision to invest more than $100 million Daisuke Matsuzaka – again at least in part because of the connections Fenway Sports (the Red Sox parent company) can make to the Far East.

The Red Sox used July 4 to announce a strategic alliance with the Chiba Lotte Marines of Nippon Professional Baseball.

"This is an historic day for the Boston Red Sox," commented team President/CEO Larry Lucchino. "This alliance is part of the continuing effort of this organization to expand its influence from both a baseball and business perspective into Japan and the Pacific Rim."

"The international scouting initiatives of the Red Sox are a vital component in our ability to compete at the major league level," said Executive Vice President/General Manager Theo Epstein. "Craig Shipley and Jon Deeble have done an outstanding job at increasing the Red Sox' presence in Japan and the Pacific Rim, and this alliance is another important part of that process."

The partnership between the Marines and Red Sox will result in a collaboration of scouting information, statistical analysis, and other aspects that will assist the Boston organization in its evaluation of players in Japan and other Pacific Rim countries. There will also be an on-field element as staff from both organizations will attend and observe each other's spring training and fall programs.

"The Red Sox want to thank the Chiba Lotte Marines and particularly Shun Kakazu and Bobby Valentine, for their efforts in coming together on this strategic alliance," explained Shipley. "Bobby's extensive experience in both Nippon Professional Baseball and Major League Baseball brings a unique perspective to the evaluation process, and we look forward to working with him and the entire Marines organization."

In the last few weeks the Yankees announced the signing of two Chinese players to minor league contracts -- Left-hander Kai Liu and catcher Zhenwang Zhang, both 19, are the first players from China to sign with a Major League team with approval from the Chinese Baseball Association. Yankees representatives saw both Liu and Zhang in international tournaments and games in China before inking the pair on June 18. The Yankees announced the signings last Friday.

After the Yankees had signed Liu and Zhang (but before they officially announced the signings) the Yankees became the first Major League club to enter into a sponsorship agreement with a company from the People's Republic of China, announcing an agreement with China's largest dairy company, the Yili Group, to advertise within the Yankees' local territory.
As part of the agreement, Yili will receive advertising exposure at Yankee Stadium and in Yankees Magazine, the official game program of the New York Yankees. Yili will receive prominent branding visibility on July 6 when the Yankees introduce left handed pitcher Kai Liu and catcher Zhenwang Zhang. Earlier this year the Yankees and the Chinese Baseball Association entered into an historic working agreement.

Randy Levine, President of the Yankees, said, "We are very pleased to welcome Yili to the Yankees family as our first sponsor based in China. The Yankees have always been committed to international baseball and international business and China is very important to us. This agreement with Yili is yet another example of how far-reaching the Yankees brand has become and how dedicated we are to growing baseball, and the business of baseball, in China."

Michael Tusiani, Yankees Senior Vice President of Corporate Sales and Sponsorships said, "Securing a sponsorship with Yili Group is a very unique and exciting opportunity for the Yankees organization. Moreover, we hope to continue to generate sponsorship interest from global-based companies, including those based throughout Asia."

The Yili Group is the leading dairy industry enterprise in China. In 2005, Yili products became the official dairy products of the 2008 Beijing Olympic Games with Yili becoming the first food brand supporter of the Beijing Olympics. Yili Group was recognized with the 2005 CCTV Best Employers of China award and the 2005 China Best Corporate Citizen Acts award.

Womei Beijing Advertising, one of China's leading advertising agencies, represented Yili Group while Sportscorp China assisted the Yankees in securing the sponsorship.

In the case of both the Red Sox and the Yankees is all about their ability as marquee MLB franchises to maximize their abilities to generate dollars and put themselves in a position to be “in the ballpark” when opportunities to sign the games best players opens up. David Samson can say whatever he’d like to about a MLB version of “Apocalypse Now” but at the end of the day baseball teams’ owned by Jeffrey Loria and managed by David Samson can’t financially compete with the New York Yankees, Boston Red Sox and other so called big market franchises.

For SportsBusinessNews this is Howard Bloom. Sources cited and used in this Insider Report:, The Settle Times, The New York Post and The Boston Globe

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