Cost Of Yankees Acquisition Examined

There appears to be no economic slowdown in the front office of baseball's New York Yankees. Earlier this week, it capped a $423.5 million spree by signing coveted first baseman Mark Teixiera. Sportswriter Stefan Fatsis says the Yankees reduced last year's payroll by more than $88 million, giving the team budget room. "They have massive cash flow," he says.

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ROBERT SIEGEL, host:

From NPR News, this is All Things Considered. I'm Robert Siegel. There is as yet no economic slowdown in one small corner of the nation's economy: the front office of baseball's New York Yankees. Earlier this week, the biggest spending team in sports capped a $423.5 million spree by signing coveted first baseman Mark Teixiera. Joining us, as he does most Fridays, to explain why we should not be shocked is sportswriter Stefan Fatsis. Hi, ya.

STEFAN FATSIS (Sportswriter and Author): Hey Robert.

SIEGEL: We've already discussed the signing of pitcher C.C. Sabathia to a 7-year, $161 million contract. Then they signed A.J. Burnett, five years at $82.5 million, then Teixiera, eight years at $180 million. How can one sports franchise afford all that?

FATSIS: Afford what? You mean the highest paid first baseman, third baseman, short stop, catcher, starting pitcher and reliever in the history of baseball? Is that what you're talking about? (Laughing)

SIEGEL: Yes, that's what I am talking about. Yes.

FATSIS: Look, the Yankees reduced last year's payroll by more than $88 million, so they had budget room. They own their own cable network. They're opening this new stadium in the spring that promises to increase revenue. They have massive cash flow. A commenter on the Webvsite Deadspin put it this way the other day - the Yankees dumped under-performing employees, replaced them with the best available talent on the market at a time when they're moving into new headquarters and they want to attract new customers. I think we can argue forever about whether this is right for baseball or proper in this economy, but it's beside the point, which is that the Yankees are an incredibly lucrative business that reinvests its income.

SIEGEL: They haven't won the World Series in eight years.

FATSIS: Right, to the great delight of fans of other teams. The Yankees didn't even make the playoffs this past season. I think you need to look at this in the context of that failure, if that's what it is. New York didn't make a splash in the free agent market a year ago. That was because they had put their trust in a highly-rated crop of young players. Some of those players didn't do well, other top prospects aren't doing the majors this year. Next year's free agent pool isn't looking very strong. So they went out and spent their money on two starting pitchers and a first baseman, which were absolute needs. And these guys - Sabathia and Teixiera - premiere players. No argument there. And that's in contrast to recent years, when the Yankees spend a lot of money on second-tier free agents who didn't do well.

SIEGEL: But when you hear about the Yankees spending almost half a billion dollars. I mean, I'm speaking now as an apostate, disillusioned, one-time lifelong Yankee's fan. It turns some people off, Stefan.

FATSIS: Yeah, I think it's partly generational. With all due respect, Robert, I think younger fans are used to this now. The Yankees just sign players who are at their peak market values. It doesn't mean they're going to get better performance out of these guys who are - or players that are younger or cheaper. But if you think it's a problem, if you want payroll balance in baseball and not just competitive on-field balance, which I think we do have now, baseball should change the system.

There's no salary cap in baseball. There's been a luxury tax for the past five years. Teams that exceed a spending threshold are taxed, the money is distributed to other teams with less revenue. Only four teams have ever exceeded the threshold. The Yankees have been assessed 90 percent of the total taxes. So this has worked to help other teams become more competitive, like Tampa Bay, which made the World Series on a payroll a fraction the size of New York's. But you could change the system, tweak it, make it more onerous. Consider market size for instance, when you begin taxing teams.

SIEGEL: Now, we would be remiss here if we didn't note that the Yankees are actually foregoing some easy money when they open the new Yankee stadium in April. They'll be selling bleachers seats for the same price as when the original stadium opened in 1923. I think those seats are in Westchester.

(Soundbite of laughter)

FATSIS: Twenty-five cents - you get what you pay for, Robert. Twenty-five cents and grandstand tickets are going to go for a $1.10. This is for two exhibition games with the Chicago Cubs on April 3rd and 4th. There is one catch, Robert. To get the throwback price, you have to wear a jacket, a tie, and a fedora.

(Soundbite of laughter)

SIEGEL: OK, might be worth it. Stefan, thanks. Have a great weekend.

FATSIS: Thanks Robert, you, too.

SIEGEL: Stefan Fatsis, who talks with us on Friday's about sports and the business of sports.

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