Zell's Pinstriped Blog, A New York Yankees Fan Blog

Part 2 of 2

Yesterday, I went in depth into comparing Derek Jeter‘s value, based solely on performance. But as discussed, Jeter’s true value to the Yankees doesn’t end with his performance; it only begins there. I noted how even Yankee GM Brian Cashman has favorably compared Jeter to Lou Gehrig. Just to muck up the water some more, both Cashman and Hal Steinbrenner have alluded to Jeter’s iconic status during these contract negotiations.

Based on yesterday’s statistical analysis of how much a player of Jeter’s ability can honestly expect to receive, I came to the conclusion that on the open market Jeter should anticipate an annual contract value between $12 and $12.6 million; but if paid on the scale that the Yankees have traditionally paid players of his ability, then he could expect an annual contract worth $17.7 million. Based on those numbers, the Yankees reported $45 million, 3 year offer is reasonable and a good point for beginning negotiations. The main point of contention is how much is that Derek Jeter/New York Yankees relationship worth to each side?

Unfortunately, we don’t really have a great way to statistically analyze that number. The Yankees are not a public corporation, so we can’t peer into their financials to see how much Jeter has meant to the team in strictly a dollars and cents way – nor do we have access to their revenue projections, and you can bet that Derek Jeter merchandising and PR is part of those numbers. But we can take an educated guess at how much value the Yankees have placed on the relationship in the past.

For starters, look at what we do know about the team’s finances and how they’ve paid Jeter over his career. The last year before Jeter joined the Yankees, they drew 1.7 million fans into Yankee Stadium, good for 7^th in the American League. Team payroll in 1995 was $11,623,500 and the franchise’s net worth was around $580 million. In Jeter’s first year, 2,250,877 people filed into Yankee Stadium (still only 7^th in attendance, though) and the franchise value was around $600 million. Fast forward to 2010: the team’s attendance last year was 3,765,807 (the top draw in baseball for the 7^th time in the past 8 seasons). In fact, over the past ten seasons, the Yankees have drawn 3.5 million more fans than the next closest team, the Dodgers. Forbes reports that the Yankees franchise was worth around $1.6 billion at the beginning of the season and recognized a 7% increase in value from 2009. In a nutshell, Jeter’s Yankees have tripled in value, along with annual attendance figures. Before Jeter, the Yankees were a middling team in terms of payroll, franchise value and attendance. They were also perennial cellar-dwellers in the standings, with only two winning seasons in the previous 7. Since his arrival, the Yankees have dominated baseball financially the same way as the dynasty teams of the 40’s and 50’s – and have turned into perennial pennant contenders. (It should be noted that the Yankees threw that monetary weight around back then, too – the current era is not the only one when the team is accused of “buying championships.”)

It is an undeniable fact that the partnership of Jeter and the Yankees has worked out well for both teams. The question remains, though, how much of the teams financial success is directly attributable to number 2? We don’t have a way to measure that, per se, although there are sabermatricians out there working on developing models. We can, though, get an idea on how much the Yankees value Jeter’s contributions to the overall financial well-being of the franchise. How? By comparing Jeter’s last contract with those of his peers from that time.

Yesterday, I charted player’s salaries vs. their WAR over the past 5 seasons to determine Jeter’s present value, based on performance. The same can be done for when Jeter signed his last contract, in 2000:

Chart 1: MLB Top 15 players 1996-2000

Jeter was, when compared to his peers a decade ago, paid a $639,471 “bonus” vs. the MLB average in WAR dollars. Let’s assume that Jeter is, in terms of being a commodity, worth a similar amount today and factor in inflation – the $639,471 2001 dollars would be equal to $663,898, using the US Government’s inflation calculator.

So, by adding his value in terms of performance and what both player and team agreed to as his marketing and PR value a decade ago, you arrive at this:

Derek Jeter’s 2011 contract should be between $12.6 million and $18.3 million.

Well, there you have it. Let us know what you think!

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