Is C.C. Sabathia Worth $161 Million? Valuing Long-Run Contracts

Abstract

In December 2008, the hot stove league received its biggest jolt in years when the New York Yankees signed ace C.C. Sabathia to a contract that would pay him $161 million over the seven following seasons. There was little debate that Sabathia was the best pitcher among the available free agents; but, to many observers, an average salary of $23 million a year was just too much, especially in the climate of a recession. Mike Cramer, a former Texas Rangers president turned Sport Management Professor commented, “I think it’s crazy and I think the numbers are out of whack.” During a radio interview, Florida Marlins President David Sampson commented that the Sabathia signing was irresponsible and compared the Yankees to “drunken sailors.”