Back at the Crossroad Part 4: Concluding thoughts

Last week I put together a framework for broadly estimating the Blue Jays ability to contend in 2018 given the current roster of players under contract/control and the likely resources available. The peak of distribution was around 84 wins, with the bulk of outcomes between the high-70s and high-80s wins level, and tails down to about 70 and up to 100 wins.

Based on that, I estimate a 5-10% chance of winning the division in 2018. Given five teams in each division, that means a well below average chance of winning the division compared to the generic average of a 20% chance of winning the division. That’s quite significant given the premium in the current system for division winners in avoiding the one game play-in.

Turning to the wild card, the critical issue is how many wins will be needed to snag one of them. The 12 second wild cards from 2012-17 have ranged from a low of 85 wins to a high of 97 wins. But even that doesn’t tell us what was strictly necessary, which is one more win then the third best highest total.

That number has averaged 87 wins, ranging from 81 wins (2017 AL) to 92 (2013 AL). Here there’s some difference over time between the AL and NL. IN the NL, the number has been very stable, between 83 and 87 wins every year. The AL number has been trending down (91, 92, 88, 86, 87, 81). Discounting the outliers and expecting the AL to be a little stronger than the NL, 86-87 wins looks like the most likely target.

That puts a point estimate of the chances of at least getting a wild card at 30-35% given my estimated win distribution, right in line with the overall/generic odds for a MLB team (5/15 = 33%). Again, that’s highly skewed towards the wild card though, as the generic WC odds are about 17% for non-division winners (2/12 in each league), with the Jays more in the 20-30% range.

The inclination of a lot of more hardcore fans is probably to discount the value of the wild card, as the payoff is a one game essentially crapshoot after 162 games. I lean towards that view myself. However, from a business perspective, the revenue implications are huge as it engages casual fan interest (and revenues). The big revenue gains/payoffs are in the 80-to-90 win range, particularly for “upper middle class” markets and for a franchise that has (at the corporate level) 100% upside on the media side as well.

All that considered, tossing away a decent chance in favour of punting 2018 would be very difficult. But we still need to look at, and balance, the opportunity cost of taking that shot.

More or less, we can divide the organization’s player assets in three groups: short term with 1-2 years of control, the cohort just hitting arbitration, and prospects/MLB players with little service time. In a rebuild, they’d be looking to add to that last group, not subtract from it. Having ruled out a wholesale rebuild, the cohort just hitting arbirtation are still part of the future. If the right offer came along they wouldn’t be untouchable, but they’re players the Jays should look to extend and build the future around.

That leaves the first group. Most obviously, Josh Donaldson and J.A. Happ have just one year of control remaining. But also potentially Justin Smoak and Russell Martin (the proper way to think about his contract is not 2 years and $40-million remaining, but 2 years, $16-million with $24-million deferred. This is based on matching expected production to cost, since the production was front-loaded and the dollars were back-loaded).

Moving the first two this winter and one or both of the latter should bring back a good haul of prospects. It’s pointless to speculate about exact returns, but it would be reasonable to expect a couple of top-50 type upper level prospects who should be ready on a similar timeline to Bichette and Guerrero, and a couple of impact lower level talent who are riskier. That would certainly bolster the chance of building an impact core for the 2020-25 timeframe.

But that doesn’t all go out the window if they don’t move them this winter. If the Jays have another bad start in 2018 and are out of it by late June, Happ and Donaldson should still bring back good returns. An acquiring team only gets half the season, but with greater certainty of their position on the win curve. There’s a cost to seeing how 2018 unveils, but it’s not a complete deadweight loss.

The big danger to holding and flipping them is health or performance issues. In late-May, Marco Estrada looked like he’d be one of the best rentals on midseason market, but two rough months evaporated all that trade value. Given their recent performance levels and 2018 projection, the risk with both Happ and Donaldson is significantly weighted to the downside rather than the upside.

More broadly, the problematic scenario is if the Jays are sit around .500 by June into July, where they’re close enough that you can’t justify throwing in the towel, but aren’t particularly close, and then either fall off hard down the stretch or coast to a mediocre finish without serious contention. Given the expected win distribution, this is far from a trivial possibility.

Even if you figure that the ultimate return on the “short term” player assets is as little as half if they were moved this winter, it’s not clear that outweighs the upside possibility from a successful 2018. Suppose the ultimate cost is a top 50 prospect and a top-100 prospect, something on the order of $50 to $75-million or so in expected (surplus) value.

Giving up 5-10 wins from the most lucrative spot on the win curve will have very significant revenue impacts, even net of lower MLB payroll. If wins are worth upwards of $10-million in the open market, it’s because their expected marginal revenue product is higher than that (especially given that MLB is oligopolistic). Conservatively, losing even 10% of attendance has a direct revenue cost into the eight figures. But even there, the TV revenues are the big factor. The Blue Jays are unique in having such a huge audience base, and one with such huge revenue upside for success (at the “real” corporate level).

One last point to cover is whether there’s a different path entirely around this crossroads. In effect, this would be committing to contending over the medium term, the lynchpin of which would have to be extending Donaldson. That of course takes two sides, but if Donaldson’s amenable to a reasonable deal (relative to fair estimate of future production), there’s no reason the Blue Jays shouldn’t be the ones to give him that deal.

We’ll see. The offseason is now here, and we move from the theoretical to the execution.