Blue Jays' future spending brought into question by baseball's revenue trends

The matter of how much the Toronto Blue Jays spend on their major league roster is a sour and complicated issue that has haunted the franchise for ages.

This is a big-market team with deep-pocketed owners and yet there have been times when the investment in payroll hasn’t seemed to be there — even when it would have been prudent to help get the club over the top, or at least into the race. There have also been moments when the desire for more spending has been a gripe of questionable merit borne from a failure to be realistic about the club’s chances.

This offseason, the Blue Jays have spent a total of $11.5 million on the quartet of Matt Shoemaker, Freddy Galvis, David Phelps, and Clayton Richard. Just over $4 million is coming off the books in what the Yankees and Dodgers are paying the Troy Tulowitzki-Russell Martin duo. Not exactly inspiring, but a little hard to complain about considering how far behind the Yankees, Red Sox, and even Rays they are. It’s difficult to see what a little more money would do to give the 2019 Blue Jays a shot.

In 2020 and beyond is where things will get interesting. Following the upcoming season, Kendrys Morales and Justin Smoak come off the books, as does Martin’s contract. Tulowitzki’s deal also gets cheaper and there aren’t any enormous arbitration raises on the horizon. This is the oft-discussed “payroll flexibility” the club has long trumpeted, but what they do with it remains an open question.

The company line is that as the Blue Jays drop the dead weight of these contracts and develop their homegrown core they’ll increase spending. That’ll allow the club to remain competitive for the foreseeable future. It’s a rosy picture, but recent developments in baseball’s economic landscape leave some room for skepticism.

A couple of weeks ago, Neil deMause put out an excellent piece on Deadspin entitled “Baseball doesn’t need collusion to turn off the hot stove.” The main thrust of the article is that the changing shape of baseball revenues makes wins less valuable, monetarily. If wins are worth less, then the idea of shelling out big-money contracts makes less sense, from a business perspective.

When we talk about free agency, we often do so in terms of the price of WAR, or Wins Above Replacement. It’s not a perfect gauge of value, but the basic premise is that there’s an approximate price the free agent market will pay for one WAR. So if you’re projected to be a one-win player over the life of your contract you can expect to make something in the area of $10 million. If you’re a two WAR player you’re “worth” twice that.

There are some exceptions. Relievers tend to get paid more than their WAR value, while position players who create value primarily on defence tend to make less. Even so, it’s a useful framework for conceptualizing free agency.

This type of thinking is very helpful for front office types trying to wring the most out of a specific budget. It’s not as useful for owners, who are generally trying to earn a profit. If you’re an owner and you sign Bryce Harper for $30 million per season over 10 years that could be considered an efficient deal, but are you going to “profit” off it?

According to deMause’s piece, the financial value of a “win” has been estimated as low as $1.5 million. We don’t have to take that number as gospel — and there are some mitigating factors such as the chances of a World Series and the associated windfall plus a player’s marketability — but it gives us a sense of what we’re dealing with here. This is an era of baseball where competitiveness and revenue are less interconnected than ever.

Not only are gate and concession revenues — which are correlated with winning — an increasingly small portion of the pie, they are also taxed by revenue sharing. If you keep payroll down, you can rely almost solely on streaming rights, TV deals, and the aforementioned revenue sharing, to make a tidy profit. Putting a hopeless product on the field has never been so lucrative.

It would be alarmist and inaccurate to say that’s the way the Blue Jays are headed. It’s very unlikely they’ll morph into “Miami Marlins North.” If nothing else, it would be a PR nightmare that would be tough to swallow for Rogers. However, it is fair to say that because the Blue Jays are corporately owned, they need to be more profit-motivated than their competitors. Rogers, love ’em or hate ’em, has a very transparent purpose, which is to be as profitable as possible and provide shareholder value.

The way in which they profit off the Blue Jays is complex because they get to underpay themselves for their own TV rights and there are synergies and cross-promotional opportunities that are difficult to valuate. It’s a nifty set-up, and more often than not it all works nicely — and it certainly works better if the Blue Jays are good.

On the other hand, Rogers doesn’t just want to turn a profit, it has to. If the financial landscape in baseball continues to shift in a direction that makes minimal spending the most profitable course, the Blue Jays cannot afford to completely ignore that incentive.

Most owners are billionaires for whom a baseball team is a vanity project. Making money tends to be important to them, but they are also willing to forgo profit maximization at times in pursuit of glory. The idea of being a city’s hero, or at least a part of one of its big moments, is probably part of what motivated them to buy a club in the first place. Rogers, although it is composed of human beings, does not share the same thirst for notoriety — at least probably not enough to throw fiscal caution to the wind.

This is not a new or shocking revelation about Rogers. However, as the economics of baseball shift, so too could the meaning of corporate ownership. Owners around the sport tend to run their teams like a business, but for Rogers the Blue Jays are a business — and the business of baseball is changing.

More Blue Jays coverage from Yahoo Sports Canada: