Entertainment is a tough business. Alex Rodriguez is a third baseman for the NY Yankees. Baseball pays by contract. He earns approximately $25 million a year currently. But that is not his market value, at least according to his agent. And that is why entertainment is a tough business. Right now, according to an article written by Chris Isidore on CNNMoney called A-Rod: A Bargain at $300 Million, Rodriguez will increase the value of the baseball team that signs him. Some teams benefit more than others. Why he is valuable is mostly tied to leverage. It is perceived and argued in the column both ways, that the top player attracts more fans and media attention. Controlling that media attention is vital. Controlling the fans wallet is vital too. So you get paid by those wanting to be entertained and those that would like to indirectly benefit from the brand and the focused attention.
So does Rodriguez really make a team more valuable by improving the brand? Does he excite people enough to pay premiums?
My answer is NO.
Baseball is suffering from exuberance that is unlikely to continue over the next cycle, financial that is. Baseball is currently up, but it will come down. People aren’t paying to see Rodriguez exclusively, they are paying regardless of who is out there. The money coming in would come in either way. When the sport down shifts because it hits the limit of consumer spending (as a result limit the interest), Rodriguez would still get paid, but no one will blame him for the downturn in interest. He will simply be a member of the club that gets paid too much money to do something so nonessential. Fans will turn to something else more affordable and accessible.
Just some fun numbers:
$25 million is $68,493.15 a day. Many families live off that, or less, a year.
$30 million is $82,191.78 a day. A decent raise for most people in a year.
If you factor in taxes and other payroll deductions equally 40%, then it is only (jk) $49,315.07 – a day.