From: cmk@athena.mit.edu (Charles M Kozierok)
Subject: Re: fair is fair: i believe cone
Organization: Massachusetts Institute of Technology
Date: Mon, 14 Dec 1992 03:12:09 GMT

In article <1992Dec14.022841.7953@alchemy.chem.utoronto.ca> golchowy@alchemy.chem.utoronto.ca (Gerald Olchowy) writes:
>In article <1992Dec13.230944.28514@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
>>
>>>The Canadian dollar has fallen over 10% in just a year and a half...
>>>almost all the Jays revenue (except for their share of MLB TV deal)
>>>is in Canadian dollars, and almost all of their expenses are in
>>>American dollars...10% of the revenue lost is pretty close to
>>>$10 million dollars (a Cone and a half).
>>
>>if this is the case, why are the purse-strings still flapping in the
>>wind?
>>
>
>They raised their ticket prices 10-15% across the board last week...
>in Canadian dollars it is an increase...in American dollars it really
>isn't.

they had the highest prices of any team in the majors before that. they
were raising prices like mad before the team won anything, before they
had 4 million fans, before the recession, any of it. they are raising
the prices because the demand for blue jays tickets is *very* inelastic --
they will sell out unless they virtually double the prices.

>
>Besides Borders, they face large arbitration
>increases for D. Ward, Wells, Olerud, and Stottlemyre.

stott should be a bat-boy somewhere. anyone who gives him a 
large arbitration increase should be shot. and if they expected
it to happen, they should have let him go. i guarantee they can get
a better, cheaper arm. they called up guzman as an injury replacement.
he turned out ok...

>
>They overpaid for Carter, but from Gillick's point-of-view he had no
>choice...

sure he did. he could have called someone up. that's how this team
worked from '77 to about '89 or so...

>and Molitor received the money, perhaps a bit more than
>Winfield would have gotten...

molitor is the only good signing of the year so far.

>and Dave Stewart got Jimmy Key's money.

neither deserve it.

>>
>>this is a whole different discussion. your comments also
>>reflect a mistake i have heard many times: evaluating the 
>>financial return of a ball club on its operating margin, while
>>ignoring the capital appreciation in the value of the club.
>>how much did the jays cost in '77? how much are they worth now?
>>
>
>It would be different if the real estate conglomerate that ultimately
>owns the Blue Jays were not nearly another O&Y due to the deflation
>of their real estate assets. 
>
>It is not clear that with the financial situation of the ultimate
>owners, and their outstanding debt, that these same banks would be
>willing to float loans to the Blue Jays to operate with a significant
>yearly operating loss.

they would do it if only to be able to plaster "official lender
to the Toronto Blue Jays" all over their ATMs... loans are also
evaluated in terms of relative proportions; the companies we are talking
about here deal in hundreds of millions of dollars. they could probably
get $9M on a line of credit just by writing a check. you honestly
think $9M makes a difference in the face of the deflation of commercial
real estate?

>The Blue Jays books are balanced as it is
>because 4 million people go through the turnstiles...how often has
>that happened in major league baseball history...and the corporate
>owners, because of the real estate situation aren't really a good 
>source of cash, to take advantage of the capital appreciation of
>the ball club.

of course they're in a good position to take advantage... all they
have to do is sell the club! you think there'd be no market?

if they're in such dire straits, why don't they do what other owners
do in such a position? sell them! i'll give you a hint: they make a
hell of a lot more off them than they'd like anyone to know -- both
financially and intangibly.

>
>>anyway, it's all irrelevant. see below.
>>
>>here we go again... is the following really so hard to understand?
>>
>>the point being made here is presumably that the jays could not afford
>>a $9M signing bonus, but that if it were paid as normal salary (ignoring
>>a small signing bonus which everyone gets just for simplicity), they
>>could afford it. i say bunk. we are comparing two alternatives, A and B:
>>

first of all, i assume you agree that the only real cost is here
is about $1M in interest since my analysis is deleted...

>
>The Blue Jays are not going to offer a $9 million dollar signing bonus
>facing a potential lockout...

all the money is guaranteed; makes no difference.
this has been said before.

>where ultimately there are shareholders...
>and not just a philanthropist like in Kansas City...

what, philanthropists like to waste their money?
does david cone qualify as a charity?

>and it sets a horrible precedent...

*that's* the only valid counter-argument. not a lockout, not financial
impossibility. not shareholders. i have admitted that possibility elsewhere.

>>so the only question is if they could have gotten the loan. and it is
>>not much of a question. think the jays will do good business this year?
>>how about all the WS championship merchandising going on? their cut of
>>that alone probably pays a good chunk of cone's salary.
>>
>
>The Blue Jays, which rely on ticket buyers, unlike KC which has a 
>philanthropist for an owner, would be in big trouble if there was a
>lockout.  The Blue Jays are operated so to operationally break even
>on a yearly basis.        

but there's no need that they do that. ask yourself what is really
included and excluded from those books. do you think they include
the advertising benefit, which they'd have to spend tons of money
on without the team? do you think they include *all* the merchandising, PR
and other spinoff revenue-generating activities? ask any accountant
about how difficult it is to make a corporation appear to make no money,
particularly one like a baseball club, which has so many owners and
things going on.

>>the only reasonable answer is that gillick chose not to spend the money
>>for some reason only he knows, or more likely, cone wanted to go to KC.
>
>The only reasonable answer is that Gillick, really Beeston, whose decision
>this ultimately was, is not going to offer $9 million dollars in lockout
>protection to any baseball player...the Blue Jays take risks but
>affordable ones, only.

beeston, fine.
the rest of the argument is refuted above.

--
charles