Albert Pujols is a Bargain
In order to understand why the Los Angeles Angels are getting a bargain by signing Albert Pujols for $250 million over 10 years, it is important to stop thinking like a fan or a sabermetrician or even a general manager. In order to understand a contract like this, you have to think like an accountant. Put it this way: Angels’ owner Arte Moreno didn’t sign a baseball player, he made a 10 year investment that his accounting team has told him will pay a particular dividend.
I have no idea what the actual numbers are, but certainly there was an estimate made concerning the increase in fan attendance based on Pujols’ signing, which was then multiplied by the average amount of money each fan spends per game on things such as tickets, parking, and concessions. I’m guessing that dollar figure is a million or more and that’s probably very conservative.
If Pujols leads the Angels to the World Series next year, Los Angeles could easily host 8 more games above and beyond the regular season. That in and of itself represents a 10 percent increase, given 81 home games, in the opportunity to sell tickets, parking spaces, popcorn, tee-shirts, hats, scorecards, beer, souvenir rally monkeys, licensed jerseys, and anything else which the marketing men can create.
Albert’s salary is locked in for the next 10 years. Does anyone think that the price of tickets, parking spaces, popcorn, tee-shirts, hats, scorecards, beer, souvenir rally monkeys, licensed jerseys, and anything else which the marketing men can create is also locked in for the next 10 years? Put another way, will the 2021 dollar be worth what the 2011 dollar is worth?
Pujols now stands at 445 career home runs, which means that probably in early 2013 he will hit number 500. How many more tickets and tee-shirts will be sold during that pursuit? The same will occur in year five or six of the contract when he hits number 600, and it’s not unreasonable to think that by year nine or ten, that he will top 700 career homers and have a chance at breaking Barry Bonds’ record. How much will that be worth to the Angels?
The historical drama and more importantly the wins that Pujols will bring to the Angels’ should help them realize an increase in the value of their local television rights.
Then there is the opportunity to depreciate Albert Pujols when baseball season ends and tax season begins. If there is an accountant out there who can enlighten us all on that little recognized benefit to owning a baseball team, it would be most appreciated.
Taken all together, it is not unreasonable to assume that Albert Pujols’ presence on the Angels’ roster will make the Los Angeles franchise $25 million more profitable than it otherwise would have been over the next decade even when accounting for the increase in expenses. I don’t think that a 10% return in this economy is too bad, and again, I have a sense that this figure is conservative.
By the end of this contract, Albert Pujols may be a .250 hitting, platoon designated hitter and I’m sure that Arte Moreno could care less. His investment will have already paid off.
I don’t like to be contradicted, but evidence is evidence and Dave Cameron over at Fangraphs presents some factual contradictions to my argument. I stand by my point, however, that Angel accountants made a calculation that investing in Albert Pujols will turn a profit. Cameron argues that mega-star players only increase attendance as long as they help the team win. If I were Arte Moreno, I’d bet on Pujols doing that for my club. Perhaps what this debate needs is the participation of a tax lawyer. If Albert Pujols and every other player is depreciable, then what does that say about any given contract? And what ARE the tax benefits of owning a professional sports team, especially if you can show a loss to offset income from another business?