From: cmk@athena.mit.edu (Charles M Kozierok)
Subject: Re: fair is fair: i believe cone
Organization: Massachusetts Institute of Technology
Date: Sun, 13 Dec 1992 23:09:44 GMT

In article <1992Dec13.223619.3452@alchemy.chem.utoronto.ca> golchowy@alchemy.chem.utoronto.ca (Gerald Olchowy) writes:
>In article <1992Dec11.182956.903@asd.com> scott@asd.com (Scott Barman) writes:
>>
>>>There's no way the jays could afford to put up the 9 mil plus another 3mil in
>>>salary, out of this years budget for cone or any player.
>>
>>The Blue Jays are owned by Labatts, eh?  I don't think Labatts is that
>>bad off that if they really wanted to make a deal with Cone that they
>>couldn't have figured something out to make sure he gets signed.
>
>New York, Boston, Baltimore/Washington, and Detroit are all larger
>markets than Toronto.

irrelevant. they have already spent more this year than $9 million.
we are talking about structuring the deal. more on this below.

>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?

>
>Labatts has lost market share with respect to Molsons recently
>because of some poor product selection/innovation/restructuring
>decisions.  Breweries in Canada are currently being forced to
>undergo significant restructuring because archaic provincial laws
>are being rewritten to conform to GATT, and are facing significant
>new competition from American breweries, and micro-to-mini breweries
>as a result, and the beer market has been mature and fairly flat.
>
>The real estate conglomerate which owns Labatts which owns the
>Blue Jays has been pretty hard hit by the recession also.
>
>The Blue Jays may not have to make any money to satisfy their
>corporate owners, but they certainly can't operate in such a
>way as to lose money.

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?

anyway, it's all irrelevant. see below.

>There is NO way the corporate owners, as opposed to the philanthropist
>who owns the Royals, would allow a $9 million dollar signing bonus.
>Carter was offered the same type of signing bonus that Cone was offered...
>I'm amazed Carter turned down KC's offer.

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:

              A             B
            ---           ---
92           $0           $9M
93          $6M           $3M
94          $6M           $3M
95          $6M           $3M
           ----          ----
Total      $18M          $18M

the total amount of money is the same. it is just structured differently.

now, assuming for simplicity that the '93 to '95 salaries are paid
in lump sums in june of each year, the total cost of doing B instead
of A is just interest. the interest is based on $3M for 1/2 year + $3M
for 1 1/2 years + $3M for 2 1/2 years. at say, 8%. that is 120,000 + 360,000 +
600,000 = $1,080,000 = pocket change to the jays.

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.

so what is the problem? you think gillick is not capable of looking
at his salary commitments over a three-year period?
instead of taking out a $9M loan (he really wouldn't have needed to borrow
the whole amount, i'm sure, i just calculated the worst-case scenario),
he signs dave stewart for $4.25M a year?

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.

--
charles