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New ballpark, MLB revenue-sharing rules made Sabathia deal possible

Despite a down economy, anticipated revenue bumps from the new Yankee Stadium gave the New York Yankees the base for signing C.C. Sabathia to the richest contract ever offered a pitcher, but the financial wherewithal of the team goes much further.
Despite a down economy, anticipated revenue bumps from the new Yankee Stadium gave the New York Yankees the base for signing C.C. Sabathia to the richest contract ever offered a pitcher, but the financial wherewithal of the team goes much further.

A number of factors are in play here.

First, the team cleared up some payroll space by shedding $80 million in contracts from the likes of Mike Mussina, Bobby Abreu and Jason Giambi.

Second, the team could count on a reduction in their luxury tax, MLB’s version of a salary cap of sorts. Basically, high-revenue teams like the Yankees, Angels and Red Sox pay a tax on excessive payrolls, and the Yankees have been paying a 31 percent tax for several years. But teams are allowed to deduct expenses like a new ballpark from the mix, so basically the rest of Major League Baseball is paying for a new Yankee Stadium by receiving less in luxury-tax payments.

Third, the team is expecting additional revenues from the YES Network, as the team is expecting higher ratings throughout the season. New Yorkers are a fickle bunch, and last year they started ignoring the team after a slow start, which impacted advertising revenues. Money from YES Network does not count against revenue sharing for the Yankees, making it even more valuable.

And, finally, the Yankees made a calculation that a splashy free-agent signing would bring big bucks to the ballpark in terms of sponsorships and suite sales, which have been slower than anticipated.

More from The New York Times.

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