Wednesday, December 17, 2008

Weighing in on the Halladay Debate

If you're a Jays fan then this off-season has had one repeated debate: do you trade Roy Halladay? The argument usually boils down to the merits of keeping JP Riccardi around. If ownership wants the Jays to rebuild then you fire JP and bring in someone else to blow the team up. Otherwise it might be prudent to have a extension discussion with Roy.

I'm not going to weigh in on the relative merits of JP or Doc because way too many bloggers have already done so. I'm going to look at what makes financial and economical sense in this argument.

Value of the Franchise

Forbes' ranked the Jays at a 352 million dollar valuation this past April, putting them 22nd in the 30 major league teams. Their operating income was -$1.8 million. These numbers aren't great seeing as they had a $350 million valuation the year before (good for 20th) with an operating income of $11 million. In 2007, only the Yankees were in the red in terms of operating income but in 2008 both the Jays and the Red Sox joined them, which is not a position any of the three teams want to be in. Note, however, that this probably does not account for all the value the Jays have for Rogers Communication as a lot of the value they gain for ownership is in marketing the Rogers brand.

Looking back at 2004
, when Rogers bought the Skydome, the Jays were worth $169 million with an operating income of $0. That's a significant jump in value in a few short years and a large amount of credit goes to outgoing President of Baseball Operations Paul Godfrey and his right-hand man JP Riccardi. On one hand, Rogers Communication will look favourably at JP's guidance during these years, but on the other they've been looking at declining incomes since 2006 so may not be terribly happy.

Consumer Confidence

Being a business, one of the largest concerns current interim Pres Paul Beeston and VP Riccardi need to consider is declining consumer confidence in their product. It should be obvious by now that the fanbase is getting pretty restless. The fact that the media shits all over JP every day hardly helps (I'm looking at you, Griffin). On one hand JP has gotten pretty unpopular over the last couple years and firing him may help in turning the public perception.

On the other hand, trading Roy Halladay can hardly help either. Dealing Halladay - who is a top three pitcher in the game right now and will be for the next couple years - tells your fanbase that you don't think you can compete for the rest of Halladay's contract. Barring a fantastic return for him (which I kind of doubt, looking at the Santana deal and the Peavy discussions) the Jays will probably be retooling for 2011 or beyond. If they're retooling for 2010, why trade him? That's asking a lot of patience of the fanbase that has been waiting 15 years for a championship. Trading Halladay instantly loses value for the franchise, he's just that great a player.

Economic Climate

Unless you've been living under a rock this last year you've be deluged by the R-Word, which is a lot less attractive to us than the L version. A lot of people are inclined to believe that the r-word will hit baseball hard and are incredulous at the Yankees' spending spree this offseason (that's actually how the Yankees' compete, but I digress). Historically however the entertainment industry is one of the few that actually grows during recessions. People are less inclined to spend on big trips or expensive luxury items so will go to ten dollar games more often to occupy their worried minds.

The loss of the GM sponsorship sucks, but the Jays are unlikely to lose their others. Interest rates are down so MasterCard's profits should be high and Labatt Blue can hardly be considered a luxury item, so the economy shouldn't hit the Jays as hard. They also have a benefit of being sheltered up here in the Great White North; we're not being hit as hard as the United States.

That last point actually gives the Jays a bit of a competitive advantage compared to the US clubs. Sure the dollar is down which cannot help but the Jays are going to be healthier going forward than any of the other franchises. Look for the Jays to go into the 2009 offseason in a much better condition, which I think leads me to my conclusion.


Going forward people are going to be inclined to trim payroll, which is certainly what's happening for the 2009 season. Trading Halladay doesn't really help though as his benefit to the public perception of the team far outweighs his contract's worth.

This time next year, however, the Jays will be in an interesting position. The current cream of the crop in the minor league system will have graduated to the majors which means contributions from: Snider, Arencibia, Cecil, Mills, Romero, Purcey, Jeroloman, and possibly Cooper. A return of Marcum and McGowan from injuries means that the starting rotation - led by Doc - will be in fantastic shape. If Snider is as we all hope he is then the offense will also have drastically improved.

The biggest thing will be that player contract inflation is unlikely to rise significantly next offseason. Most clubs are unlikely to raise payroll and the Yankees will not be nearly as large a player. With a trimmed down payroll and a shelter from the recession the Jays will have the opportunity to be the major player and grab guys like Greene, Bay, Vlad, or Holliday. It would even be better to talk to Halladay then about an extension when they're facing a greater sense of optimism with a young core and the money is likely to run a lot freer than this offseason.


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