Tuesday, February 10, 2009
The Biz: A-Rod's Fiscal Future
Unlike most big-name athletes, A-Rod's endorsements are just a fraction of his annual income.
Since the news broke last weekend that Alex Rodriguez had tested positive for performance-enhancing drugs in 2003, most sportswriters have reacted with outrage, even hysteria. We have been told that Rodriguez's legacy is destroyed and that he has blown his chance to be the one man on Earth to restore the relevance and romance of his sport. We've even seen a New York paper trot out an A-Rod nickname more commonly employed by Fenway bleacher bums.
Fans, in contrast, have delivered a more measured response—largely because many didn't think too much of A-Rod in the first place. And it is this reaction of the masses, not the howls from the media, that will drive the corporate response to A-Rod.
As of the writing of this piece, just 38% of fans say they were surprised by the revelations about Rodriguez and steroids, according to a recent ESPN SportsNation poll. Asked whether they would forgive A-Rod for his transgressions, 38% said yes, 33% said no and 30% responded that there was no need to forgive anything. These unscientific survey results speak to the queasy but real consensus that has developed among baseball fans about performance enhancement: they now suspect its use among players and can forgive the malfeasance if the athletes come clean. Asked how they would react if their favorite athlete admitted steroid use, 15% of fans who participated in the poll said they wouldn't care at all, while another 43% said they would be disappointed but would still support him.
Rodriguez is one of the world's richest athletes, but among that elite company, he is unusual in that his endorsement income is a fraction of his annual salary. He made $6 million from endorsements in 2007, according to Sports Illustrated, but has established few long-term relationships with corporations. A-Rod's highest-profile spots are probably the commercial he recently cut for Guitar Hero and his endorsements for Nike in South America; Pepsi decided not to renew its deal with him. In July 2008, A-Rod signed with the William Morris Agency to boost his image. But well before the recent headlines, Rodriguez's postseason troubles and off-field scandals had him scoring poorly in areas such as "aspiration" and "trust" on the Davie-Brown Index, a rating scale used by marketers to measure celebrities' influence with consumers.
A week ago, A-Rod was a polarizing public figure: prodigiously talented, vainglorious, hard-working, oddly insecure. He still is. Corporations have largely shunned him and they wil continue to do so. Unlike, say, Mark McGwire, Rodriguez doesn't have vast reservoirs of fan support or endorsement money to put at risk. A-Rod may seem even harder to admire now, but the truth is he has always been hard to love.
Businesswise, there is one sure loser in the latest A-Rod imbroglio. It's not the game of baseball—overall attendance and revenues have climbed throughout the era of performance enhancement, and the messy investigations and halfhearted confessions of the past few seasons have done little to dent fans' enthusiasm for their favorite teams. But the New York Yankees owe another $246 million over the next nine seasons (including a whopping $64 million in 2009 and 2010) to a player who is already 33, and whom they almost certainly cannot trade now. Moreover, the team had planned a long-range marketing effort around A-Rod's pursuit of the all-time home-run record. Rodriguez will earn an additional bonus of $6 million each time he passes one of the top four men on the list: Willie Mays at 660, Babe Ruth at 714, Hank Aaron at 755 and Barry Bonds at 762. Instead of celebrating those milestones with major events at the new Yankee Stadium, the Steinbrenners might want to go into hiding.
And then there's the issue of Derek Jeter, whose contract is up in 2010.
Jeter's skills are diminishing, to the point that ESPN.com's Rob Neyer, speaking for many analysts, recently wrote: "Derek Jeter can't play shortstop in 2011 … I also believe the Yankees will try to keep him in the fold, perhaps with a $10 million salary … and the vague promise of semi-regular playing time as a sort of utility player." Fat chance now. After watching him play side-by-side with A-Rod for another two seasons, Yankees fans will demand the team keep the Captain, the "true Yankee," at any price. Whether or not other teams even bid for his services, Jeter rightly or wrongly represents an intense connection to a more honorable past for the Yankees, and has just seen his asking price skyrocket.
But the idea that an Alex Rodriguez scandal could further rupture fans' expectations from baseball itself doesn't compute. Rodriguez is a major figure in tabloid and popular culture but not a mover of Wheaties or blue jeans precisely because he is a celebrity whom fans are curious about but don't emulate. And in this post-Bash Brothers era, a decade defined by the surliness of Barry Bonds, most fans have come to accept that athletes owe the public nothing more and nothing less than their best honest efforts on the field.
Asked about A-Rod, a 20-year-old fan named Ina Lah told the New York Daily News on Monday: "All he cares about is fun and winning."