Assessing the salaries of today’s sports stars

27 Oct

When assessing the salaries of todays professional athletes it is important to remember one thing. This is their job. Yes they are playing a game, but this is a competitive game which in some cases is generating billions of dollars annually. Just as the cost of living has increased over the years the cost of attaining and retaining athletes has increased as well. We as fans say it’s crazy they make the money they do, and it is, but which one of us in their shoes would turn it down?

Prior to free agency players were basically locked into one team for their career in all sports not just baseball. They did not have the ability to choose to explore the option of playing for another franchise. The team owners exploited this and used it to grossly underpay their star athletes. Imagine a player in todays game on a year to year contract winning the triple crown in baseball yet receiving what amounts to only a five percent increase in salary. His only option was to take it or retire. While this did actually happen to Ted Williams it would never happen today. Perhaps skyrocketing salaries have something to do with a little thing called karma.

As the game has evolved into not just a big money business but a huge money business the demands on the athletes have changed as well. Athletes are expected to workout year round to report to training camps already in shape. With this advent it is impossible for them to have off season jobs as was the standard until the early 1970’s. Athletes are expected to run faster, hit harder, jump higher, and withstand rigorous travel schedules. With this demand for more the risk of injury increases as well. It only takes one injury to change the fortunes of an athlete forever.

Sports is riddled with athletes left by the wayside due to injury. Tony Conigliaro, Sam Bowie, Trent Green, Daryl Stingley, and Rich Gannon are a small sampling of players that suffered some form of career ending injuries. The problem doesn’t end there however. For many athletes these injuries aren’t just career ending but life altering, especially in cases like Stingley whom is paralyzed. There is no price tag that can be put on health and that has to be considered when any contract is drawn up in this era.

Consider that in 2007 both baseball and football had revenue in excess of six billion dollars. Take away the money for overhead outside of player and coach salaries and the earnings of teams is staggering. It is most pronounced in baseball which boasts the largest per capita long term (Five years or more) multimillion dollar contracts of any sport. A losing team like the Florida Marlins with the smallest payroll and worst attendance will still stand to net their owner Jeff Loria an estimated forty plus million dollars this year. A team like the Yankees with all the frills, baseballs highest payroll, and best attendance of over four million per year will still make about sixty five million before considering the revenue from the YES network. Their total gross revenue (That’s revenue before expenses folks) nears seven hundred million dollars. Everywhere in between each team is making money. In the NFL the per team average net revenue is even higher.

Knowing this is a business and quality counts the vast majority of owners are hungry to put not just a good team on the field but a team with the potential to win. It is a well tested fact that teams that consistently win make more money. In order to win top athletes need to be on the roster. The athletes are paid accordingly. The market bears this out in almost every case. The owners are not looking to lose money so all signings must make sense to them and their accounting departments before doling out tens of millions of dollars to an athlete. With the current full disclosure of earnings needed to maintain sports antitrust status athletes have the additional power of knowing what a teams gross and net earnings are each time they negotiate a contract, something they use to their full advantage.

In the case of David Beckham’s half billion dollar ten year deal the league as a whole is absorbing some of that cost, not just his team. The hopes are he is a big enough name to elevate soccer to the next level in the United States and turn casual observers in to long term fans. The jury is out on whether or not this move will pay off, right now it looks like a colossal blunder. In the case of the second highest paid athlete in sports Alex Rodriguez of the New York Yankees it is quite different. Rodriguez receives his hefty twenty seven million dollars annually, but the caveat is he also generates an estimated twelve to thirteen million dollars in additional revenue from multiple streams for his team simply by being there. It is estimated he is the only player in baseball that generates more than five million in added revenue to his team making the signing financially prudent.

It is understandable that people stand in slack jawed amazement when seeing what athletes are paid these days. Many of us remember the first million dollar athlete as well as the utter shock of Dave Winfield’s 1981 record breaking twenty plus million ten year deal. The game withstood that as well as as all sports surviving inflated contracts. We don’t point fingers at people in other lines of work holding out for increased salaries, and few of us would turn down a raise if offered to us. The average annual salary in the world has increased across almost all professions and sports is a part of that. As long as we the fans continue to pay to see the greatest athletes in the world the salaries will continue to rise. Just like anything else in life it’s supply and demand and so long as the demand is at the current record highs so will be the salaries of athletes.

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