1. Contracts 3:C - 1(17) Entertainment and Media: Markets and Economics Contracts Between Talent and Entertainment Producers Appendix: A-Rod Deal

2. Contracts 3:C - 2(17) The Texas Deal for Alex Rodriguez  2001Signing Bonus = 10M  200121  200221  200321  200421  200525  200625  200727  200827  200927  201027  Total:$252M ???

3. Contracts 3:C - 3(17) The Real Deal  YearSalaryBonusDeferred Salary  2001 2125 to 2011  20022124 to 2012  20032123 to 2013  20042124 to 2014  20052524 to 2015  200625 4 to 2016  200727 3 to 2017  2008273 to 2018  2009273 to 2019  2010275 to 2020  Deferrals accrue interest of 3% per year.

4. Contracts 3:C - 4(17) Costs  Insurance: About 10% of the contract per year  (Taxes: About 40% of the contract)  Some additional costs in revenue sharing revenues from the league (anticipated, about 17.5% of marginal benefits – uncertain)  Interest on deferred salary - $150,000 in first year, well over $1,000,000 in 2010.  (Reduction) $3M it would cost to have a different shortstop. (Nomar Garciaparra)

5. Contracts 3:C - 5(17) PDV  Using 8% discount factor  Accounting for all costs  Roughly $21M to $28M in each year from 2001 to 2010, then the deferred payments from 2010 to 2020  Total costs: About $165 Million in 2001

6. Contracts 3:C - 6(17) Benefits  More fans in the seats Gate – the major component Parking Merchandise Miscellaneous  Increased chance at playoffs and world series  Sponsorships  (Loss to revenue sharing)  Franchise value

7. Contracts 3:C - 7(17) How Many New Fans?  Projected 8 more wins per year.  What is the relationship between wins and attendance? Not known precisely Many empirical studies (The Journal of Sports Economics) My own study…

8. Contracts 3:C - 8(17) A Dynamic Model for Attendance

9. Contracts 3:C - 9(17) A Dynamic Model for Attendance

10. Contracts 3:C - 10(17) Baseball Data  31 teams, 17 years (1985-2001; fewer years for 6 teams)  Winning percentage: Wins = 162 * percentage  Rank  Average attendance. Attendance = 81*Average  Average team salary  Number of all stars  Manager years of experience  Percent of team that is rookies  Lineup changes  Mean player experience  Dummy variable for change in manager

11. Contracts 3:C - 11(17) Baseball Data

12. Contracts 3:C - 12(17) The Regression Model to Translate Wins into Attendance Loyalty effect i = team, t = year

13. Contracts 3:C - 13(17)

14. Contracts 3:C - 14(17) Translate Attendance into Revenue Marginal Value of One Win

15. Contracts 3:C - 15(17) Marginal Value of an A Rod  8 games * 63,734 fans = 509,878 fans  509,878 fans * $18 per ticket $2.50 parking etc. $1.80 stuff (hats, bobble head dolls,…)  $11.3 Million per year !!!!! It’s not close. (Marginal cost is at least $16.5M / year)  Increased probability of reaching playoffs times payoff of reaching 7.5% for League Championship * 10M 3.75% for World Series * 10M Total, about $1,000,000 (if they do it every year!!)

16. Contracts 3:C - 16(17)

17. Contracts 3:C - 17(17) The IPN Player  A-Rod and Yankees – The Iconic Performance Network Player Attendance rose to 4M in 2005, 4.3M in 2007 MVP in 2005 and 2007 Huge growth in the YES network Seemed certain to break Bonds’ HR record (Asterisk?) New deal: $275M over 10 years  Chicago Cubs offer included team ownership.  Drug Problems probably derailed this career path.