Is the New York Yankees’ Brand at Risk?
The New York Yankees have won 40 American League Pennants, 27 World Championships and have missed the playoffs once since 1995. The Yankee brand has become synonymous with winning. The franchise has been considered gluttonous and suggested by many to be ruining the competitive nature of Major League Baseball for many years now. Well, all of that is over folks. The New York Yankees sent their general manager Brian Cashman to the Winter Meetings with a checkbook and no checks in it.
It has gotten so bad the agents are complaining. Of course, they shouldn’t be because while the Yankees are sitting on their hands hoping some magical trade will wash away their ill-advised spending, other teams are going to town spending millions upon millions of dollars. What’s more, some of those teams would not be in the position they are to spend if wasn’t for the Yankees.
Hal Steinbrenner’s financial prudence is coming with an unexpected cost. (Image: Debby Wong-USA TODAY Sports)
That’s right folks the Yankees have been funding and helped maximize the revenue streams in Major League Baseball for some time now and they’re tired of it. The Yankees have pumped in hundreds of millions of dollars into revenue sharing, paid competitive balance taxes, traded for bad contracts made by poor teams and filled other’s stadiums. So, Hal and Hank Steinbrenner decided it was enough. They have grown tired of sending check after check to Major League Baseball for their contribution to the subjected revenues of the sport and being taxed for going over a payroll/benefits allotment. They mandated the 2014 season as the year they would not spend a cent over the $189 million threshold and be taxed again. They would only be responsible for the revenue sharing dollars and nothing else.
Now, as the Yankees begin the process of reaching that goal, they are feeling the consequences. They have three players taking in well over $20 million per season, CC Sabathia, Mark Teixeira and Alex Rodriguez. Derek Jeter is making $17 million this coming season, Robinson Cano will rake in $15 million and he is ready to completely cash in when he becomes a free agent at the end of the 2013 season. Since seemingly none of them is going anywhere, Cashman has to figure out a way to round out the roster with single-year deals so that he has a clearer path in 2014.
The team signed Hiroki Kuroda ($15 million), Andy Pettitte ($12 million) and Mariano Rivera ($10) to one year contracts with incentives attached to each. Curtis Granderson has become a trade chip now as he finishes out his deal making $15 million himself in 2013. What the Yankees did not calculate is that the young talent in their system is at least one full year behind being ready for the all important 2014 season, forget their usefulness in 2013. If they were ready, finding low-tier free agents would not be an issue, of which the Yankees have been shut out of thus far this offseason (Jeff Keppinger, Eric Chavez and Nate Schierholtz are yesterday’s examples).
The Yankees also didn’t figure that players they felt they could just lure back because they were Yankees in 2012, Russell Martin and Chavez for example, would go elsewhere. They didn’t plan on Rodriguez requiring hip surgery, thus creating a new opening at an already tenuous position. They didn’t think that traditionally bit-part players like Keppinger and Schierholtz would walk away from the chance to play with the Bombers.
But, the writing is on the wall. This may not be a very good team this year or next. Yes, there is still time to make some moves, but if Cashman doesn’t have the authority to match or make offers, then who is running this show? Hal and Hank? Remember, you can thank Hank for Rodriquez getting re-signed, which is where it all started really. Don’t forget, they signed Rafael Soriano for what amounted to one nice season for $21 million and Cashman made sure everyone know he had nothing to do with it.
The point is simply this. The Yankees may be placing too much emphasis on the tax instead of slowly remedying the situation. The notion of needing a change to the business plan is a very valid one, but there could have been a gradual pace to it. This culture shock fans are being subjected to is going to turn away some of them. Die-hard fans will continue to come to Yankee Stadium and watch on television, but rest assured they will not be quiet.
Yankee fans are used to winning. The winning culture has created more and more fans and increased revenues to astronomical proportions, whether it is ticket receipts or television revenues. If the Yankees can’t field a winning team for two straight seasons (and by winning I mean a playoff team) then they will most certainly lose fans along the way. That decreases revenues, it makes an already sometimes barren looking Yankee Stadium all the more empty. Sponsors will wonder what is wrong with their investment and walk. They’ll speak among themselves in meetings, ‘Do we want our sign at home plate associated with a team that can’t fill a ballpark anymore?’ Less people will watch the television broadcasts, which then prompts advertisers to invest elsewhere. Should the Yankees miss two straight or more seasons of playoffs, the perception of winning could be lost. Playing with more young players in 2015 or 2016 could prolong the chances of failure.
‘So I’m trying to close the deal, right. I open up the check book and it’s empty!’ (Image: Don McPeak-USA Today Sports)
Yes, there is a very nice crop of players coming along and who could be ready by 2015/2016, but they’ll be inexperienced. In order to field a competitive team the Yankees will require some balance with experienced players who will inevitably be in line to make even more money than is being doled out this offseason. But, will the top free agents want to come to New York if the team has failed to reach the postseason for one or two seasons? Will they buy into the fact that the Yankees want to win on the field and not just maximize profits? By then, won’t the other large and maybe some current mid-market teams also be staying just below the competitive balance tax threshold? The perception is already out there that the Yankees could be in some trouble in the near future and money is not going to be used to buy themselves out of it.
The desired position of controlled spending is smart. The implementation process of doing it cold turkey is ill-advised. The Yankees could have found ways to limit payroll over the course of a few seasons, yet still maintain a top-level team on the field, which would continue to drive revenues while paying a lower tax and forgetting revenue sharing refunds they haven’t seen anyway. The push for a change is too aggressive given the confinement of past financial mistakes. They should have gradually fixed the issue until they rid themselves of the albatross contracts which have caused the problems in the first place.
As the Yankees have already found out, they are not the only team that can spend now and the number of teams with deep pockets will continue to grow so long as the popularity of the sport does. If the checks given to Brian Cashman all say VOID on them, the Yankees will continue to be spurned by even the lesser free-agents. There is a chance this can all be turned around with a couple nifty moves by Cashman, but I don’t see any happening. The Yankees have drawn a line in the sand and their legendary brand which has generated billions of dollars in revenues could be damaged for the foreseeable future.