Is it crazy to pay Juan Soto $765 million?
Running the numbers on the largest contract in baseball history.
Can we get a little “meta” here? This was originally going to be the headline item in SBSQ (Silver Bulletin Subscriber Questions) #16. We’re way overdue for some non-politics content. But it’s a long response. And there are also some long responses to other (non-politics) subscriber questions in the works. I’ve found that having more than one super-long response in an SBSQ doesn’t work: everything but the top story tends to get buried. So, I will run it as a standalone item, and then we’ll pick some other non-politics questions in SBSQ #16 soon.1 I do want to acknowledge, though, that it originates from a question that Eric Phillips asked on Notes:
Did the Mets overpay for Soto?
I can't resist this question. Literally, the first time I conducted a regression analysis — I think I might have been 14, which means that, yes, I'm an incredible dork — it was to estimate the effect of various factors on MLB attendance. So when the New York Mets announced they were signing the star slugging outfielder Juan Soto to a 15-year, $765 million contract — the richest in baseball history — I was curious to dig into the numbers.
New York City is starved for winners
Let's start with this: spectator sports are a huge business in New York, a sociable, competitive city with lots of people and lots and lots of money. The nine major men's sports franchises in the NYC metro area brought in more than $1 billion combined in gate receipts (attendance revenue) in their most recent seasons. That doesn't count the vast revenues that the US Open does every year or the increasing buzz around the WNBA Champion Liberty.2
But what New York really likes is winners. Although overall revenues tell a different story — the NFL’s gargantuan TV deals and revenue-sharing provide welfare to the sad-sack Giants and Jets — the market's one true blue-chip franchise, the Yankees, bring in enormous amounts of attendance money, and the increasingly successful Knicks are #2 with a bullet. The Rangers — also largely successful, although they've been in a slump this year — also do rather well for an NHL team; it’s an expensive ticket3 even if hockey doesn’t quite have the broader media profile of the other “Big 4” sports.
You can see New York’s premium on winners reflected in the gap between the Mets and the Yankees. To be fair, the most recent data from Forbes that I’ll cite in this article reflects the 2023 MLB season, which was (to say the least) much less successful for the Mets than their NLCS run in 2024. Still, those are some significant gaps: $284m in gate receipts for the Yanks in 2023 versus $110m for the Metropolitans and a $7.55 billion franchise value against a mere $3 billion.
I wanted to begin with that context because the conventional wisdom — even from, say, the estimable new Hall of Fame writer Tom Boswell — is that the Soto contract has to reflect some degree of irrational exuberance. Good for Mets fans, and no begrudging Soto, certainly. And good for Mets owner Steve Cohen, the owner of the hedge fund Point72 Asset Management, who has $21 billion to spend as he wishes.
But this deal can't possibly be worth the money, can it? Well, I'm not so sure.