alex rodriguez final presentation
TRANSCRIPT
![Page 1: Alex Rodriguez Final Presentation](https://reader035.vdocuments.mx/reader035/viewer/2022070602/5878925b1a28ab375f8b5ebf/html5/thumbnails/1.jpg)
A-Rod or Bust!
Ilan Bielas | Robert Moras | Justin Pak
Max Phillips | Marissa Sunio
Sports Accounting and FinanceFinal Presentation
April 26, 2016
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Introduction
• Alex Rodriguez is a MLB Professional Baseball Player
• Drafted to Seattle Mariners in 1993
• 5 successful years in Seattle
• 4/5 years had batting average over .300
• 184 Home Runs • 574 RBIs• 126 Stolen Bases
• At the end of the 2000 season with Seattle, A-Rod was offered a contract with the Texas Rangers
Our objective was to assess the financial impact of signing Alex Rodriguez to the largest
contract in MLB History at the time.
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Contract Details Year Base Salary Signing Bonus
Deferred Compensation Total Value
2001 $21,000,000 $2,000,000 $23,000,0002002 $21,000,000 $2,000,000 $23,000,0002003 $21,000,000 $2,000,000 $23,000,0002004 $21,000,000 $2,000,000 $23,000,0002005 $25,000,000 $2,000,000 $27,000,0002006 $25,000,000 $25,000,0002007 $27,000,000 $27,000,0002008 $27,000,000 $27,000,0002009 $27,000,000 $27,000,0002010 $27,000,000 $27,000,0002011 $5,000,000 $5,000,0002012 $4,000,000 $4,000,0002013 $3,000,000 $3,000,0002014 $3,000,000 $3,000,0002015 $4,000,000 $4,000,0002016 $4,000,000 $4,000,0002017 $4,000,000 $4,000,0002018 $3,000,000 $3,000,0002019 $3,000,000 $3,000,0002020 $3,000,000 $3,000,000
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Key AssumptionsSponsorship RevenueTeam Player Payroll Local Revenue
Payroll as a % of Local Revenue
Sponsorship Revenue
Sponsorship as a Pct of Player Payroll
Yankees $92,538,260 $190,283,600 49% $17,125,524 19%Mets $79,509,776 $152,442,000 52% $13,719,780 17%Braves $84,537,836 $135,169,500 63% $12,165,255 14%Indians $75,880,971 $134,611,800 56% $12,115,062 16%Gians $53,737,826 $96,882,400 55% $8,719,416 16%Mariners $58,915,000 $117,140,100 50% $10,542,609 18%Dodgers $88,124,268 $116,725,700 75% $10,505,313 12%Rangers $70,795,921 $110,561,000 64% $9,950,490 14%Red Sox $77,940,333 $112,752,900 69% $10,147,761 13%Orioles $81,447,435 $113,832,000 72% $10,244,880 13%Astros $51,289,111 $88,350,600 58% $7,951,554 16%Tigers $58,265,167 $79,728,000 73% $7,175,520 12%Rockies $61,111,190 $106,951,800 57% $9,625,662 16%Cubs $60,539,333 $97,900,400 62% $8,811,036 15%Cardinals $61,453,863 $93,593,500 66% $8,423,415 14%Diamondbacks $81,027,333 $98,080,900 83% $8,827,281 11%Angels $51,464,167 $68,628,800 75% $6,176,592 12%White Sox $31,133,500 $66,023,800 47% $5,942,142 19%Padres $54,821,000 $60,732,000 90% $5,465,880 10%Devil Rays $62,765,129 $70,405,800 89% $6,336,522 10%Blue Jays $46,238,333 $54,764,600 84% $4,928,814 11%Phillies $47,308,000 $52,905,600 89% $4,761,504 10%Reds $46,867,200 $45,435,200 103% $4,089,168 9%Athletics $31,971,333 $40,263,300 79% $3,623,697 11%Royals $23,433,000 $39,058,800 60% $3,515,292 15%Pirates $28,928,333 $36,396,800 79% $3,275,712 11%Brewers $36,505,333 $38,140,800 96% $3,432,672 9%Marlins $20,072,000 $40,716,500 49% $3,664,485 18%Twins $16,519,500 $19,662,000 84% $1,769,580 11%Expos $34,807,333 $13,205,500 264% $1,188,495 3%
75th Percentile 15.7%
• Sponsorship Revenue makes up between 8-10% of Local Revenue (we assumed 9% across the league)
• In order to calculate sponsorship revenue tied to a specific player, we use sponsorship revenue as a percentage of player payroll (SaaPoP) as a proxy metric
• Since Texas is a large market team, and Alex Rodriguez is a marquee free agent, the league 75th percentile of SaaPoP is used to measure the sponsorship revenue that the Rangers would receive from signing him
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83 84 85 86 87 88 89 90 91 92 93 94 950%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
American League Playoff Probability
Games Won
% C
hanc
e of
Mak
ing
the
Play
offs
Year Projected Wins% Chance to
Make playoffs
ALCS Additional Rev
(2 of 4 teams)
WS Additional Rev
(2 of 8 teams)
2001 82 0% $- $-
2002 85 0% $- $-
2003 87 20% $1,048,576 $1,048,576
2004 89 30% $1,610,613 $1,610,613
2005 90 65% $3,573,413 $3,573,413
2006 91 80% $4,503,600 $4,503,600
2007 91 80% $4,611,686 $4,611,686
2008 90 65% $3,836,923 $3,836,923
2009 88 25% $1,511,157 $1,511,157
2010 86 10% $618,970 $618,970
Postseason Dollars = % chance to make Playoffs * Value of Postseason Kicker
Playoff Kicker (given) = $10M for reaching ALCS; $20M for reaching WS
Playoff Win Assumptions
1. Gaines, Cork Chart of the Day: What It Takes to Make the Playoffs in Baseball, BusinessInsider.com, April 21, 2011
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Incremental Revenue Sources
• Alex Rodriguez will increase attendance at Rangers games
• Average ticket prices will increase by 25%
Increased Ticket Sales
• The marketability of Alex Rodriguez will drive sponsorship revenue at one of the top rates in the league
Sponsorship Revenue
• Increased Attendance will drive additional concession revenue
Increased Concessions
• Merchandise spend from signing a marquee free agent will increase by 40%
• Additional attendance will also drive salesMerchandise
• Alex Rodriguez will contribute at least 8 additional wins furthering the team’s chances at making a deep run in the playoffs
Playoff Revenue
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The Alex Rodriguez EffectIncremental Revenues
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
Ticket Sales Sponsorships Playoffs Merchandise Concessions
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-$8,000,000
-$6,000,000
-$4,000,000
-$2,000,000
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
Net Cash Flow by Year
Cash flows generally rise each year at the beginning or Rodriguez’s contract peaking in 2006, and diminishing following years.
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Cumulative PV Over TimeAlex Rodriguez con-tract ends and de-ferred compensation payments begin
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Sensitivity Analysis & Key RatiosDiscount Rate NPV
6.0% $20,184,9086.5% $20,594,323 7.0% $20,934,336 7.5% $21,211,768 8.0% $21,432,8008.5% $21,603,0419.0% $21,727,577 9.5% $21,811,023
10.0% $21,857,566
Key Business Ratios ROI 2.2%IRR -1%
Sensitivity Analysis shows that the positive cash flows from each year of Alex Rodriguez’s contract will always
result in a positive NPV.
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Non-Financial Considerations
Commitment to Winning
Ability to Sign and Keep Future FA
Raise Franchise Value by
$100-200M
Improved Team Image
Increased Franchise Visibility
Negotiate Future
Projects, including New
Practice Facility
Increase Hispanic Fan
Base
There are many Non-Financial benefits to signing Alex Rodriguez.
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Is He Worth It? • During his 10 years playing on
the team, the Rangers can pay A-Rod’s contract and still have a positive cash flow every year due to increases in ticket sales/prices, concessions, parking, merchandise, and sponsorships
• NPV of contract is $21,432,800• ROI is only 2.2%
The combination of making the numbers work and the positive non-financial benefits make the signing of Alex Rodriguez a no-
brainer!
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Appendix
Pro-Forma FinancialsSummary of
AssumptionsCash Flows
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Pro Forma Incremental Income StatementFor the Year
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Revenues
Incremental Ticket Revenue $24,944,928 $24,026,738 $23,108,548 $22,190,358 $21,272,167 $20,353,977 $19,435,787 $18,517,597 $17,743,730 $17,743,730Expected Playoff Revenue $0 $0 $2,097,152 $3,221,225 $7,146,826 $9,007,199 $9,223,372 $7,673,846 $3,022,315 $1,237,940Incremental Sponorship Revenue $2,525,953 $2,525,953 $2,525,953 $2,525,953 $2,965,249 $2,745,601 $2,965,249 $2,965,249 $2,965,249 $2,965,249Incremental Merchandising Revenue $2,560,701 $2,636,661 $2,712,470 $2,788,076 $2,863,426 $2,938,465 $3,013,134 $3,087,371 $3,176,381 $3,349,387
Incremental Concessions and Parking Revenue $940,294 $1,015,651 $1,090,858 $1,165,864 $1,240,617 $1,315,060 $1,389,136 $1,462,784 $1,551,087 $1,722,720
Total Revenue $30,971,875 $30,205,003 $31,534,980 $31,891,476 $35,488,285 $36,360,302 $36,026,677 $33,706,847 $28,458,761 $27,019,026
Expenses Incremental A-Rod Pay $22,300,000 $21,929,422 $21,513,069 $21,045,285 $24,919,718 $22,129,230 $23,665,801 $22,920,421 $22,082,968 $21,142,068
Revenue Sharing $4,988,986 $4,805,348 $4,621,710 $4,438,072 $4,254,433 $4,070,795 $3,887,157 $3,703,519 $3,548,746 $3,548,746Total Expenses $27,288,986 $26,734,770 $26,134,779 $25,483,357 $29,174,152 $26,200,025 $27,552,958 $26,623,941 $25,631,714 $24,690,814Operating Income $3,682,890 $3,470,233 $5,400,201 $6,408,119 $6,314,133 $10,160,277 $8,473,719 $7,082,906 $2,827,047 $2,328,212
For the Year2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenues Incremental Ticket Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Expected Playoff Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Incremental Sponorship Revenue $274,560 $219,648 $164,736 $164,736 $219,648 $219,648 $219,648 $164,736 $164,736 $164,736Incremental Merchandising Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental Concessions and Parking Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Revenue $274,560 $219,648 $164,736 $164,736 $219,648 $219,648 $219,648 $164,736 $164,736 $164,736
Expenses Incremental A-Rod Pay $7,219,582 $5,775,666 $4,331,749 $4,331,749 $5,775,666 $5,775,666 $5,775,666 $4,331,749 $4,331,749 $4,331,749
Revenue Sharing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Expenses $7,219,582 $5,775,666 $4,331,749 $4,331,749 $5,775,666 $5,775,666 $5,775,666 $4,331,749 $4,331,749 $4,331,749Operating Income -$6,945,022 -$5,556,017 -$4,167,013 -$4,167,013 -$5,556,017 -$5,556,017 -$5,556,017 -$4,167,013 -$4,167,013 -$4,167,013
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Summary of Other Assumptions
Assumption Consideration
Increase in Attendance
• First year buzz will bring attendance levels to similar level as first year in new stadium
• As buzz wears off, attendance will drop by 1% a year until it reaches the stadium average of 74%
Ticket Price• Increase in Wins, and demand to see
better team will raise prices by 25% initially
• Prices will increase by inflation
Inflation • 2.40% which is the 3 year average from 1998-2000
Merchandise• 40% increase in merchandise
spending due to increase demand to purchase Alex Rodriguez jerseys
Sponsorship Margins
• Industry standard of 70%
Discount Rate • 8.0%Marginal Revenues
• Compared to 2000 season revenues
Average Shortstop Salary
• Average Shortstop Salary of $3,000,000 in 2000
• Salary increases by 12.35% a year (3 Year CAGR )
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Cash FlowRevenues Costs
Number Year
Incremental Ticket
Revenue
Incremental Sponsorship
Revenue
Expected Playoff
Revenue
Incremental Merchandising
Revenue
Incremental Concessions and Parking
Revenue
Total Revenue
Cash FlowCash Paid to
A-RodAverage SS
SalaryIncremental A-Rod Pay
Net Cash Flow
PV of Cashflow
Total Incremental
Ticket Revenue
1 2001 $19,955,942 $2,525,953 $0 $2,560,701 $940,294 $25,982,890 $25,300,000 $3,000,000 $22,300,000 $3,682,890 $3,410,083 $24,944,9282 2002 $19,221,390 $2,525,953 $0 $2,636,661 $1,015,651 $25,399,655 $25,300,000 $3,370,578 $21,929,422 $3,470,233 $2,975,165 $24,026,7383 2003 $18,486,838 $2,525,953 $2,097,152 $2,712,470 $1,090,858 $26,913,271 $25,300,000 $3,786,931 $21,513,069 $5,400,201 $4,286,854 $23,108,5484 2004 $17,752,286 $2,525,953 $3,221,225 $2,788,076 $1,165,864 $27,453,404 $25,300,000 $4,254,715 $21,045,285 $6,408,119 $4,710,159 $22,190,3585 2005 $17,017,734 $2,965,249 $7,146,826 $2,863,426 $1,240,617 $31,233,851 $29,700,000 $4,780,282 $24,919,718 $6,314,133 $4,297,293 $21,272,1676 2006 $16,283,182 $2,745,601 $9,007,199 $2,938,465 $1,315,060 $32,289,506 $27,500,000 $5,370,770 $22,129,230 $10,160,277 $6,402,698 $20,353,9777 2007 $15,548,630 $2,965,249 $9,223,372 $3,013,134 $1,389,136 $32,139,520 $29,700,000 $6,034,199 $23,665,801 $8,473,719 $4,944,334 $19,435,7878 2008 $14,814,078 $2,965,249 $7,673,846 $3,087,371 $1,462,784 $30,003,327 $29,700,000 $6,779,579 $22,920,421 $7,082,906 $3,826,674 $18,517,5979 2009 $14,194,984 $2,965,249 $3,022,315 $3,176,381 $1,551,087 $24,910,015 $29,700,000 $7,617,032 $22,082,968 $2,827,047 $1,414,227 $17,743,73010 2010 $14,194,984 $2,965,249 $1,237,940 $3,349,387 $1,722,720 $23,470,280 $29,700,000 $8,557,932 $21,142,068 $2,328,212 $1,078,413 $17,743,73011 2011 $0 $274,560 $0 $0 $0 $274,560 $7,219,582 $7,219,582 -$6,945,022 -$2,978,601 $012 2012 $0 $219,648 $0 $0 $0 $219,648 $5,775,666 $5,775,666 -$5,556,017 -$2,206,371 $013 2013 $0 $164,736 $0 $0 $0 $164,736 $4,331,749 $4,331,749 -$4,167,013 -$1,532,202 $014 2014 $0 $164,736 $0 $0 $0 $164,736 $4,331,749 $4,331,749 -$4,167,013 -$1,418,706 $015 2015 $0 $219,648 $0 $0 $0 $219,648 $5,775,666 $5,775,666 -$5,556,017 -$1,751,488 $016 2016 $0 $219,648 $0 $0 $0 $219,648 $5,775,666 $5,775,666 -$5,556,017 -$1,621,749 $017 2017 $0 $219,648 $0 $0 $0 $219,648 $5,775,666 $5,775,666 -$5,556,017 -$1,501,619 $018 2018 $0 $164,736 $0 $0 $0 $164,736 $4,331,749 $4,331,749 -$4,167,013 -$1,042,791 $019 2019 $0 $164,736 $0 $0 $0 $164,736 $4,331,749 $4,331,749 -$4,167,013 -$965,547 $020 2020 $0 $164,736 $0 $0 $0 $164,736 $4,331,749 $4,331,749 -$4,167,013 -$894,025 $0
Total $21,432,800