Jacoby Ellsbury's $US153 Million Contract With The Yankees Is Not As Crazy As It Sounds

Major League Baseball’s Hot Stove season had its first eyebrow raising moment when
Mark Feinsand of the New York Daily News reportedthat the Yankees had signed former Red Sox outfielder Jacoby Ellsbury to a 7-year, $US153 million contract.

On the surface, it sounds crazy to give a player who will turn 31 next season a 7-year deal worth $US21.9 million. Carl Crawford, who has a similar skillset, was a year younger when he signed a $US7-year, $US142 million contract with the Red Sox and so far that deal has been a colossal bust.

There are also big concerns that this deal will keep the Yankees from re-signing their biggest free agent target, Robinson Cano, who is reportedly seeking a contract worth at least $US250 million.

But there are reasons to think that this deal is great for the Yankees.

First of all, the Yankees are no strangers to overpaying for older players. It is a strategy that causes headaches down the road (e.g. Alex Rodriguez), but has proven successful up front.

There is also a very good chance that $US20 million-per-year contracts are going to become much more common in the next 2-3 years and Ellsbury’s deal could end up looking very average for an above-average player. In addition to skyrocketing revenue from local television contracts, every MLB team will receive an extra $US25 million this year from the new national television contracts alone.

The other big buzz number right now is “$189 million.” That is the magic luxury tax threshold that the Yankees may try to stay under in 2014. In 2013, the Yankees paid a record $US29.1 million in luxury tax. If the Yankees payroll can stay below $US189 million in 2014 they won’t have to pay a tax. But more importantly, it will lower their tax rate in future years.

But let’s face it, nobody is forcing the Yankees to stay under $US189 million. If they want to sign Cano and field a team with a $US250 million payroll, they will. It is easy to imagine that the extra potential revenue from a World Series contending team will more than make up for the revenue lost from having to pay a luxury tax.

In other words, this contract for Ellsbury may just mean the Yankees are ready to get back to being the Yankees.

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