December 23, 2008
For the Yankees, It's Dollars and Sense
By Jeff NeumanThree players, $423.5 million.
The big, bad Yankees are back. The Evil Empire is doing its dastardly best.
Not content to grab the top two pitchers on the open market, the brothers Steinbrenner have taken a page from the family handbook and signed the best everyday player available as well.
When Papa George was turning the Yankees into the symbol of excess in the nascent free agent era, his strategy was simple: Sign the best players, pay what it takes. No one can say it was unsuccessful on the field, with five division titles and four World Series appearances from 1976-81. No one can say it was bad for the balance sheet, as the Yankees went from being a profitable big-city team to a global brand with its own television network and a new billion-dollar stadium. The clubs that struggled with free agency were the ones that signed players who were not quite as good to contracts for not quite as much.
What made sense then makes sense for the Yankees now. Their investment in the new stadium provides a deduction from the revenue calculation in determining their luxury tax costs. As holders of their own television stream, they will profit directly from any increased ad revenues and ratings. The new park features a ticket scale appropriate to a once-in-a-while splurge rather than an everyday sport; luxury box sales at housing-boom prices were well underway before the economic downturn. The club stands to profit more than any other would from an investment of this size; its economic model only works if the team is making a run at winning it all.
But is the spending really so wild? The Yankees will benefit in 2009 from the expired contracts of Jason Giambi, Bobby Abreu, Carl Pavano, and Andy Pettitte (who may yet be resigned for less money), as well as the retirement of Mike Mussina; those five salaries ran to around $77 million in 2008. C.C. Sabathia, A.J. Burnett, and Mark Teixeira will cost $62 million in 2009; the Yankees may not be done spending this winter. Looking beyond next season, they can anticipate the end of Johnny Damon’s and Hideki Matsui’s contracts in ’09, and the megadeals for Mariano Rivera and Derek Jeter in 2010.
In this context, the extravagant signings look downright prudent. In their overall circumstances, moving into a new stadium priced for boom times, the Yankees were wise to judge that it was time to make some dramatic moves.
Does the Teixeira signing now make New York the prohibitive favorite to win the pennant? Even with the addition of Sabathia and Burnett, their pitching is probably the third-best in their division, behind Tampa Bay and Boston. Teixeira fits beautifully into the patient mode of Yankees hitters (as he would have in Boston), but the lineup model has usually included a big dose of left-handed power, which he will now be asked to provide. He joins with A-Rod to provide MVP-level talent at the corners; the team’s weakness is still up the middle, where Jorge Posada in ’08 proved he is not immune to age, and Melky Cabrera showed why the Yankees are resistant to youth movements. The New Yorkers have definitely taken a bold step forward, but the AL champion Rays are young and getting better, and the Red Sox have an emerging stud in #3 starter Jon Lester and players who finished first and third in the 2008 MVP race, neither of whom is called Manny or Papi.
There will be much gnashing of teeth and rending of garments across the nation over this latest Powerball-level contract handed out in the Bronx. Say what you will about the Steinbrenners, but they’ve never treated their franchise as a cash machine; they put their money into the team on the field, and reap the benefits when those investments pay off in wins. Being in New York provides an advantage, but not everyone in their position would have maximized that edge as well as they have. The numbers are large, but the spending spree was the right thing to do.
