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Sunday, July 12, 2009


Jon Heyman of SI wrote,

"…Jays people continue to talk to interested teams, telling them they seek two big-time prospects who'll be major-league ready by next year, including a prime hitter, and two very good prospects who are further away from the bigs."

No rationale baseball owner signs off dealing two near ready prospects and then some for Roy Halladay. Halladay's on-field abilities and asset value (market minus salary) are well known.

C.C. Sabathia recently signed a contract paying him an average annual value of $23 million, which establishing the top of the market for a true number one starter. The difference between $7.67M ($23 prorated for a 1/3 of 2009) less Halladay's prorated 2009 salary is $2.92M plus the 2010 variance puts his value around $10M. He is sick and a bargain, but the huge unknown, in this economy, is the boost in revenue the additional wins a club gets from Halladay. This variable will limit the number of suitors and return for the Ace.

This past winter a "prime hitter" cost around $10M per season (see: Ibanez, Dunn, Bradley, Burrell). A top prospect's current asset value from 2010-2015 is roughly $38M (net present value discounted at 2.5%). Even adjusting that the "big-time prospect" will fail 25% at becoming a "prime hitter", he is still worth $28.5M. Double that for the two near-Show ready players and we are talking a $57M. By using the same set of assumptions but forecasting the pair of prospects reaching the Jays in 2013 and giving them only 25% chance of succeeding yields a value of roughly $35M for both. The total asset value the Jays are seeking for Halladay is around $92M.

In summary, a club would need to be confident in adding about $80M in revenue over 1 1/3 seasons to reasonably justify meeting the Jays demand. In this economic environment with fans saving money and ad budgets being slashed, increasing sales is doubtful. An owner has to be willing to take a possible long-term loss for short-term glory or he/she has plans to sell the club in the coming years. Hence, it is unlikely that Halladay will be traded in the next few weeks unless the price comes down.


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