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February 16, 2004

Prospectus Roundtable

The Rodriguez-for-Soriano Deal

by Baseball Prospectus

The following is an edited transcript of a discussion which took place Saturday afternoon, in the wake of the Alex Rodriguez-for-Alfonso Soriano trade rumors...

Gary Huckabay: OK, the deal's not finalized yet, but just for a second, let's assume that the worst possible parameters of the deal (from the Rangers' perspective) reported in the media are true. The Rangers get Alfonso Soriano, a minor leaguer from a list of five, and pick up $67 million of the remaining money owed to Rodriguez.

Do you see any way to justify this deal from the Rangers' standpoint?

Personally, I don't. Soriano's not going to be exceptionally cheap himself, he's not close to being the ballplayer A-Rod is, and even if you assume--which I'm not comfortable doing--that A-Rod's contract is anomalous and an organizational albatross, there's certainly some real and non-negligible cost associated with this specific dump.

Depending on the financial details of the deal, it's possible this deal could end up costing the Rangers money--when you factor in the $67 million, the contract Soriano will likely end up with after a year of puffy stats at The Ballpark in Arlington, the lost goodwill, and lost broadcast rights money.

Joe Sheehan: As for your first point regarding money: I disagree. The latest word is that it's $40 million, which really doesn't make a difference. This deal is bad for the Rangers, bad for Rangers' fans, and calls into question exactly how Tom Hicks made all his money.

The only justification I see here is in "financial flexibility." And those are buzzwords. As if the extra...let's see, Rodriguez minus Soriano minus the money they're still paying...maybe $14 million in '04 will suddenly enable John Hart--who's never been a bright guy in the market--to add 25 wins when there's no one left to give it to. (Maddux ain't going there.)

It's a load. Soriano's just getting more expensive, so the Rangers are going to be saving less and less each season. How much money does this really save the Rangers in '05 and '06?

Hicks gets out from under the '07-'10 years, which is what he's been aiming for. Trading Rodriguez has never been about baseball; it's been about Hicks and his money issues. Hicks himself probably gains "financial flexibility"; the Rangers gain losses.

On top of which, Rodriguez's contract is not an albatross. This is where I question how Tom Hicks got rich, because smart people should recognize that having Rodriguez is worth a premium, and I concede that this contract is a bit out of place post-2002 CBA. Rodriguez isn't, and has never been, the Rangers' problem. The Rangers' problem is Chan Ho Park, and Jeff Zimmerman, and Rusty Greer. (For those of you who don't remember him, Greer used to be a Rangers outfielder and has been on the DL, and under contract, since '88 or so.)

I've said this before, but it bears repeating: the Rangers are trading Rodriguez to subsidize the Chan Ho Park contract. That's unbelievably dumb.

For all this the Rangers lose a major competitive advantage as well as one of the game's most marketable players. As a result, they will also have to try and sell a losing team--maybe a .500 team--having made one of the biggest salary dumps in history. I wonder how many season-ticket holders, paying prices that were inflated to nominally pay for A-Rod, feel cheated this morning?

GH: If one assumes that Steinbrenner's decided to spend what's necessary, then there's no downside to a Soriano/A-Rod swap, is there? I don't think the prospect's going to be Dioner Navarro, so it's not like they're dumping Joe Mauer or Jeremy Reed in the deal or anything. It's a slam dunk all the way.

JS: The Yankees have no prospects who could make this a bad deal for them, or a good one for the Rangers. I like Navarro, but his prospect status is based on one season, and I know people who are skeptical about his ability to ever hit for power.

Hours later, after financial details were released...

JS: Now that some of the financial details are out, let's examine how much "financial flexibility" the Rangers have really gained. (Data as reported by AP and the bluemanc site.)

The Rangers will pay Rodriguez $43 million over the next seven seasons, plus $24 million in deferred money at a lower interest rate (2% vs. 3%). All deferred money is now being paid out five years later (2016-25, vs. 2011-20).

The $43 million breaks down as:


 2004: $3 million 
 2005: $6 million 
 2006: $6 million
 2007: $7 million 
(2008: $7 million)* 
 2009: $8 million 
 2010: $6 million 

Alfonso Soriano makes $5.4 million this year, and Rodriguez was scheduled to make $21 million, so the Rangers save $12.6 million. Of course, that does them no good, as there's no one to spend the money on. Moreover, there are going to be revenue declines associated with this, and I have to think they'll eat up much, maybe all, of that savings.

In 2005, the Rangers would have paid Rodriguez $25 million. Now, they'll pay him $6 million to beat them. Soriano? A reasonable estimate of his '05 salary is $7.5 million, given that he's a player--BA, SB, RBI--who looks great in front of an arbitration panel. That leaves $11.5 million in "financial flexibility."

In 2006, A-Rod's salary is $25 million, of which the Rangers pay $6 million. Soriano? Let's be conservative and say $9 million. That's about what Jeff Kent makes now. So the Rangers save $10 million.

(What Soriano can be expected to make is completely being left out of the media coverage of this, and is a huge factor in evaluating this deal.)

After that, Soriano can be a free agent, and will either be worth nothing to the Rangers, or be signed at, oh, somewhere between $8 million-$12 million/year. Let's call it four years, $41 million, with a 9-10-11-12 structure. I think that's wildly conservative.

  • In '07, the Rangers would save $11 million
  • In '08, the Rangers would save $10 million
  • In '09, the Rangers would save $8 million
  • In '10, the Rangers would save $9 million

The Rangers save a lot more money if Soriano leaves, of course, an extra $41 million according to the assumptions here.

Realistically, the Rangers are saving $72.1 million over seven years, or about $10 million year. For that, they downgrade from Rodriguez to Soriano, a difference of at least three wins a year. They probably endure a loss in revenue that eats up a chunk of the savings, and run the risk of losing Soriano after three seasons (or sooner).

The vaunted "financial flexibility" is a misnomer. The Rangers save cash, but there's no reason to believe that all $72 million, or even most of it, is going to be used to improve the team. Things that they would have done anyway, like trying to long-term Blalock and Teixeira, will be credited to the loss of A-Rod, but that's spin. Any free agent that gets signed will be paid for, "with the money we save on the Rodriguez trade," but knowing that this deal has been driven by Hicks' desire to lower costs, the only real winner here is the man's portfolio.

For what they did here, the Rangers could probably have gotten the same results by aggressively pursuing buyouts of the Park, Greer and Zimmerman deals. The Rangers paid those three $22.2 million last year--basically what Rodriguez got. Just Park played, and he did so at below replacement level. It's likely that only Park will play in '04, and God knows what they'll get from him.

The three will make $24.7 million in 2004. Park will make $14 million in '05 and $15 million in '06. I'll say it again: the Rangers made themselves worse in order to subsidize this decision.

The Rangers made a great decision in 2000, and it's worked out just fine. All the other decisions they made sucked, and the general sense of jealousy in the media, as well as the inability of anyone in the organization to grow a spine and point that out, led to today.

GH: I couldn't possibly agree more. In terms of a boost to franchise value, ticket sales, and on-field performance, which should cascade to revenue if things are managed properly, A-Rod's been a perfectly acceptable investment. It's the little things, like being surprised that pitching in Arlington's different than pitching in Chavez Ravine, and signing players not named Rodriguez to salaries that demonstrate a complete lack of understanding of the concept of marginal value, that's the problem.

Signing Alex Rodriguez to a 10-year deal for $252 million was a good idea. Signing Todd Van Poppel to a three-year deal for $7.5 million wasn't. Nor was Park at five years, $65 million. Or Jay Powell at three years, $9 million. I would argue that Rafael Palmeiro at $45 million over five years wasn't worth the money.

Seems to me that this is a clear case of the blind squirrel spitting out the acorn.

Related Content:  Tom Hicks,  Alfonso Soriano,  Rangers,  Deal,  The Who,  Rafael Soriano,  A-rod,  Money

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