How I learned to stop worrying and love the big contract

Alfonso Soriano‘s contract was an idiotic move that sank the Cubs into an economic impasse. I’d like to congratulate myself officially for expressing that sentiment for the 1 billionth time. While the confetti falls and the celebratory fireworks explode, I just want to point out one problem with that notion that fuels so many protests from those who think acquiring Prince Fielder (or any big name player commanding a big budget contract) is an equally insane idea: it’s a big fat load of wrong that makes Prince look svelte. Or it’s a little off. Exaggeration sells papers.

The main point I want to make is that Alfonso Soriano’s contract did exactly what the people who concocted it wanted it to do: it drove up the value of the Chicago Cubs and Wrigley Field.

Forget about Jim Hendry and Jon McDonough. The Tribune Co. was in bad shape as the 2007 season approached. Sam Zell took over ownership of the media giant and accumulated a $13 billion debt. They filed for bankruptcy protection in 2008, and the one part of the company that wasn’t affected was the Chicago Cubs. At least they weren’t affected directly. The team was the Tribune’s most marketable commodity, and the Soriano deal (and the other parts of the spending spree that helped make the 2007 Cubs contenders) helped make them look like even more of a prize.

Every time anyone, whether it’s a free agent player, a managerial candidate, or a hot dog vendor, joins the Chicago Cubs workforce, one of the big draws is a chance to be a part of a Chicago Cubs championship. Putting that dream within reach made the valuable Cubs look priceless. Here’s how the value of the Cubs team escalated after the acquisition of Alfonso Soriano  with the average MLB team value included for good comparison (according to Forbes):

Year

Value (in millions)

% Change MLB Average %Change
2002 $287 $286
2003 $335 17% $295 3%
2004 $358 7% $295 0%
2005 $398 11% $339 15%
2006 $448 13% $376 11%
2007 $592 32% $433 15%
2008 $642 8% $472 9%
2009 $700 9% $482 2%
2010 $726 4% $491 2%
2011 $773 6% $523 7%

$

Notice that big jump after 2006? Yeah, values are reported in the spring, so that $144 million surge was recognized as the Cubs’ 2007 campaign was just underway. Not surprisingly, the team’s value continued to spike after the success of 2007 and 2008. Crazy, huh? Next thing you know, the Ricketts family is buying the team for a goodly price of $900 million (which was more than the team was or is worth . . . and yes, those values do include Wrigley Field in their calculations).

Obviously we can’t attribute the entire value increase to Fonzie. The Cubs made other improvements, including expansions to Wrigley to be able to boost ticket sales. And Hendry signed Ted Lilly, Mark DeRosa, and the inimitable Jason Marquis while also reupping with Zambrano type people. But the point is, the big contracts were part of a concerted effort to improve the immediate quality of the team and significantly boost the perceived value–and it worked. They sold the Cubs for nearly double what the team was worth in 2006. 

So, yeah, Soriano isn’t helping the Cubs too much now, but his albatross of a contract is but a salty drop in the ocean of debt, debt everywhere the Tribune Co. was swimming in. Building a get-good-quick contender made Sam Zell a ton of money.

I know you don’t care about Sam Zell. Nor do I. Our concerns are probably more concentrated on the Ricketts family’s ability to build a long-term winner now. But awarding a ginormous contract to Prince Fielder or any other legitimate top-tier free agent wouldn’t have the same suffocating effect that Soriano’s contract has had on the Ricketts Cubs. The reason is timing. This ownership should have an easier time finding cash flexibility when they’re not fresh off of an $845 million purchase.

Buying the Cubs put the Ricketts family in a bit of a bind. That made raising payroll a bit bigger of a challenge. The further removed they are from that initial debt bomb, the less imposing $20 million a year contracts might be on their budget. Signing Fielder wouldn’t have the same restricting force as the Soriano deal.

But the bottom line is this: the people who signed Alfonso Soriano to his contract made an awful lot of money because of it. They’re using it now to pay Paul Sullivan and a debt that could employ 650,000 Sorianos.

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