Yankees Teixeira, Yankees new stadium
Tony Dejak/AP
Mark Teixeira

Teixeira Signing Raises Questions About Yankees’ Recession-Defying Finances

December 24, 2008 12:33 PM
by Josh Katz
Mark Teixeira’s new contract has brought new criticism to the team’s free spending. Where does the money come from? And is the spending that outrageous?

Yankees Add Texeira for $180 Million

Tuesday’s acquisition of free-agent first baseman Mark Teixeira reinforces the fears of many other teams and baseball fans that the New York Yankees are an uncontrollable spending behemoth, and the belief that the team’s buying, especially during such economic times, represents the worst of baseball.

The $180 million, eight-year contract with Teixeira
comes after the $161 million, seven-year deal with pitcher C.C. Sabathia and the $82.5 million, five-year contract with pitcher A.J. Burnett. In other words, “While the recession has many teams cautious about spending, the Yankees remain in a Gilded Age, dropping more than $400 million on high-profile free agents,” the Associated Press writes.

Such startling numbers accompany the fact that the Yankees have boasted the highest average salary in Major League Baseball for the past 10 seasons. The contrast to some other teams makes the numbers all the more stark: “This year’s $223 million final payroll, according to the commissioner’s office, was more than double the $96 million MLB average and more than eight times Florida’s $27 million,” according to the AP.

But the 2009 Yankee payroll is not unusually exorbitant; in fact it is at or below the team’s standard. Jesse Spector of the New York Daily News points out that the Yankees’ 2009 payroll for their 25-man roster would come out to about $192 million, assuming they cut the players they were planning to cut. The team is parting with Jason Giambi, Mike Mussina, Bobby Abreu, and Carl Pavano, while Andy Pettitte’s future remains up in the air. Spector goes even further to say that the Yankees could pick up Manny Ramirez, the final superstar free agent on the market, and still have “a payroll that’s $20 million lower than what they paid in 2008” if they dump Pettitte and outfielder Hideki Matsui.

Background: Where’s the money coming from?

Regardless of what the team’s final 2009 payroll works out to be, the Yankees have demonstrated that they have plenty of money during the economic crisis and they’re willing to spend it. This raises the question: where’s all the cash coming from?

The team’s new stadium, opening for the 2009 season, provides a big part of the answer. The $1.3 billion stadium provides the team with a substantial monetary boost, as it is expected to double the team’s stadium revenue. It will accomplish this with additional luxury boxes that are priced much higher than in the old stadium, and an expected boost in attendance—and, along with it, concessions—should also contribute a hefty sum to the team’s coffer. The Yankees will also generate more money from leasing out the stadium for events like concerts.

“The new Yankee Stadium will change the economics of all baseball,” says Robert Boland, a sports agent and a professor at New York University’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management, according to an August article from The article projected the Yankees 2009 seat and suite revenues to hit about $312 million.

The Yankees have kept the extent of its stadium cash-infusion on the mum, and for good reason. The team has asked the government for tax-exempt bonds to pay for expenses such as a new scoreboard and security, as well as litigation costs. Generally, only public agencies like schools and fire departments receive the benefit of such tax exemptions.

According to, “the new revenues will be so large that Hank and Hal Steinbrenner’s team—which has lost money every year since 2004, according to Forbes—could easily push its payroll much higher than the $200 million level that for years has vastly exceeded the figure for any other team.”

The Yankees are making sure to protect their investment as well. At the end of October, the Yankees and the Dallas Cowboys, their affluent neighbor from the National Football League, partnered with Goldman Sachs Group and private equity firm CIC Partners to establish Legends Hospitality Management. The company concerns itself with concessions and merchandising and providing the highest luxury and value to patrons of the new Yankee and Cowboy billion-dollar stadiums. The teams’ owners hope the company could help entice wealthy customers to the new luxury seating of the stadiums during such difficult economic times.

And of course, the Yankees will continue to make money from their lucrative deal with the YES Network, and through merchandising.

Related Topic: Yankees offer Babe Ruth-era ticket prices

On Tuesday, the day of the Teixeira sigining, the Yankees also announced that for the first two games at the new Yankee Stadium, exhibitions against the Chicago Cubs on April 3 and 4, the team will be holding a special promotion. The team will cut ticket prices to 1923 levels, charging 25 cents for bleacher seats and $1.10 for grandstand tickets; those are the prices that fans paid to see Babe Ruth at the first game at the original Yankee Stadium on April 18, 1923, Reuters reports. However, when the regular season begins at home on April 16 against the Cleveland Indians, top tickets will run fans up to $2,500.

Opinion & Analysis: Should we hate the Yankees?

Phil Sheridan of the Philadelphia Inquirer expresses the spite shared by many other baseball fans regarding the Yankees and the Teixeira deal. “Consider the times. Cornerstone industries are faltering, taxpayers are being asked to bail out mismanaged financial institutions and their overpaid CEOs, and decent, hard-working men and women are being laid off or worrying that they could be next,” he writes. “Baseball economics always have been bad for competitive balance, but this Yankees spree is the worst ever because of real-world economics. It just smells bad.”

But Dayn Perry of Fox Sports says that such anger toward the Yankees is not completely warranted, especially when the Teixeira agreement is placed in context.  According to Perry, “the Yankees can’t be blamed for baseball’s structural inequities. The Steinbrenners’ obligations are to win games and make money. That Major League Baseball provides them so much latitude to do so is the fault of MLB, not the Yankees.” He also notes that the pricey acquisitions will not amount to a pay increase when matched with the contracts that the Yankees dropped for 2009, such as Giambi and Abreu. But if those details are not enough to assuage the malice of Yankee-haters, they can take solace in the fact that the Steinbrenner team “will probably just crap out in the ALDS once again,” he says.

Reference: 2008 MLB team payrolls


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