Brian Roberts is Not a Sunk Cost

When I start to write about Brian Roberts I think about the article I wrote when he signed his extension.  I initially used an aging model I created based on the aging patterns of second basemen.  It projected Roberts to be replacement level in 2012 and then performing in 2013 at such a level that he would have had to have been released.  That model was run right after his 2008 season in which he performed at an All Star level and could have been considered one of the top second basemen in the game.  I hesitated and decided instead to use a model based on middle infield aging.  I pulled a punch.  The article still stated that Roberts' extension was a poor idea, but it irritates me that I wrote more what I felt than what I thought.  Whether good or bad, tick off three years on the clock and it no longer is a concern for me.  Well, it is not as much of a concern because part of me still feels bad writing this.  I think I have become more hardened as evidence by what I wrote last March on him.  I like Brian Roberts.  I also think he should be removed from the 40 man roster.

Sunk Cost

Sunk cost is an economic concept that is much ballyhooed and much misunderstood.  You may have seen such players as Vernon Wells, A.J. Burnett, or Barry Zito referred to as sunk costs.  This is an incorrect application of the term.  Off the bat, their contracts would be the sunk cost, not them.  Second, the term refers to making a payment that cannot be recovered.  The sunk cost fallacy refers to a situation where someone feels too invested having made a sunk cost and throws more money into the effort.  Throwing good money after bad idea is considered irrational.  Here is an example:

Lets say you bought tickets to take your eleven year old kid or maybe a niece to see Disney Princesses on Ice.  Somehow in the few months between buying those tickets and the date of the show, your young blood relative realizes that going to this show will bring about teasing from her friends.  At this point, the money has been spent and nothing good will come from it.

Now, that is almost a sunk cost.  That example is similar to that of Wells', Burnett's, and Zito's contracts.  What would make the above example a true sunk cost is if Disney folds with no show and no refunds.  That is a true sunk cost.

The above example is not quite like the Brian Roberts contract situation.  More accurately:

Lets say that your niece and maybe even you being nostalgic are looking forward to the Disney on Ice show.  You buy your tickets, you eagerly await for the date of the show, you get to the arena, buy your favorite junk food and maybe a souvenir or two, and sit down for the show.  Fifteen minutes in to the show both you and your niece realize that this is the opposite of fun and you both are miserable.  

This is a sunk cost.  You cannot scalp the tickets.  What comes next is the interesting part.  Having spent money on the show, do you sit and watch the show even though it is not enjoyable?  Based on a plethora of studies over the past 20 years, two thirds of you will likely stay put and have a horrible night.  The other third will go get ice cream or fudge a couple blocks away at the inner harbor and call it a decent night.  Why will the majority stay put?  Emotional attachment to cost allocation.  This is the Brian Roberts Contract Scenario.

The Man

Brian Roberts has been Mr. Oriole for the 2000s.  He shifted from shortstop to second, fought off the more acclaimed Jerry Hairston Jr. (who was then traded for Sammy Sosa), and gave the Orioles the solid kind of lead off hitting that the 1990s Orioles enjoyed from Brady Anderson (minus a little bit of power).  His 2005 and 2008 seasons were at very good starting all-star level years.  He was exciting on the base paths and always seemed to start a rally with a double in the gap.  Roberts has been solid.  So solid and so much identified with the Orioles that Andy MacPhail's team extended Roberts a year prior to his free agency to a four year, 40 MM extension.  It was a contract that overshadowed the one Orlando Hudson, who slashed 305/367/450 in 2008, signed within a few weeks.  That one was for one year and at 3.3MM.  During the same period (2010-2013), Hudson will be paid 22MM vs Roberts' 40MM.

While Hudson's skills at second base have deteriorated, he has managed to appear in 245 games over the past two seasons and is expected to be manning second base for the Padres for the next two years.  Brian Roberts has been less fortunate.  In 2010, the fate of second base aging began to materialize for Roberts.  Roberts had issues in Spring Training with abdominal muscle strains and a bad back.  These issues continued throughout the season and left him with 59 appearances where he kept up his typical offensive performance.  However, his defense looked shaky.  This was the first year of his four year extension.  In 2011, illness, his back, and concussion symptoms led him to having a choppy Spring Training and only 39 appearances.  He was shut down in the middle of May.  His issues with concussions have been so bad that he was unable to make it to the 2012 Orioles FanFest.  For a player who has done so much for the community, it was surprising he was unable to attend.  To expect someone who cannot make a flight and deal with the chaotic nature of FanFest . . . to expect that person to play at a professional level is quite optimistic.  Sadly, I think it is clear that Brian Roberts' contract is a sunk cost.

Conceptual Value for a 40th Man

During the off season there is no 60 day disabled list.  Roberts must stay on the 40 man roster which effectively makes it a 39 man roster.  This issue is relative.  The 40th man on any roster is not likely to be of great use to a team, but it does prevent a team from potentially getting looks at certain fringe players in Spring Training.  There is benefit to that.  There is benefit to having Pedro Florimon Jr on the team.  There is benefit to having Kyle Hudson on the team.  There is benefit to having Rick VandenHurk on the team.  One thing is clear, the team is not losing anyone of great significance.  None of these guys will take you anywhere, but the first two provide depth in case of injury.  VandenHurk may provide you with a decent enough arm if the Spring proves treacherous for the Orioles' pitchers.  Additionally, sometimes a player just sort of figures things out.  Simply put, the 40th man is a low probability, low ceiling player. 

The difference between Roberts and the 40th man is that the 40th man can actually stand out on the field and potentially do one or two things adequately.  Roberts cannot lace up.  A year in and still suffering from concussion symptoms is not a promising thing.  In baseball, we've seen how concussions have ended Ryan Church's career and have severely impacted Justin Morneau's.  In hockey, we have seen what Sydney Crosby is going through.  In football, the data is coming out that is yielding more evidence that teams do not adequately protect players from the effects of concussions.  This past year, we have even seen reports showing that high school soccer players show some concussion effects in relation to simply heading a ball.  It has been truly an amazing and terrifying time these past few years with understanding the chronic effects of these kind of brain injuries.

That said, the comparison between Roberts and a 40th man is not truly a fair comparison.  The more fair comparison would the 40th man vs. a MiL invite who becomes the 40th man.  The difference between those two is not truly great.  They are likely the same person.  Pedro Florimon, Jr. was put on waivers, claimed by the Twins, put on waivers, passed through, and is now in the Twins' minor league system.  Kyle Hudson is a non-roster invite to the Rangers' camp.  Rick VandenHurk is likely to find something similar somewhere.  It appears that the idea that Roberts is preventing roster flexibility is likely one that is true in conceptual terms, but not in true application.

Brian Roberts is Not a Sunk Cost

My analytical side is informing me that Brian Roberts' contract is a sunk cost that does not affect the team to a significant degree (meaning significant in an abstract way).  However, even though the contract is a sunk cost, Brian Roberts is not.  Roberts has value to this organization in other potential capacities.  The problem I see with the current situation is that Roberts is a great person who has done wonderful things for the organization and the community.  The contract is an unfair burden to place on him because it carries with it the expectation that he needs to get back in shape to play.  The best thing I can see doing would be to buy him out and give him a place in Brady Anderson's chain of command in player development.  From all accounts, Roberts is has a strong work ethic when it comes to fitness, he comes from a committed baseball family, and he seems to enjoy Baltimore.  It would be solid to keep him in the organization.

In terms of a buyout, you can go two ways.  Pay him now in a lump sum or convert it over to a long term deferred deal.  If he trusts his investment team, you could probably buy him out now for 18MM instead of 20MM over two years.  That appears somewhat marginal in terms of cost cutting.  A long term deferred deal could look like 3MM/year over ten years or 2MM/year over twenty years.  The long term deal would be useful to the club in the near term, saving the team 7-8MM a season.  That is money that could be well spent on player development or even an average player.  I think this is a solution that would benefit both parties.

Of course, this discussion is unimportant if while on the disabled list with concussion issues the insurance plan the team has on him is favorable.  If insurance is paying the club anything more than 20% if Roberts' salary then it makes sense just to keep him on the 40 man roster.  The terms of such an arrangement may be so that Roberts cannot do other things that would be helpful such as instructing players or scouting.  If that is the case, then a buyout between the Orioles, Roberts, and an insurance company would make it far more difficult. 

Orioles sign Jeff Larish

According to a tweet from Oakland Athletics beat reporter Jane Lee, former A's first basemen and DH, Jeff Larish, 29 years old, has signed a minor league deal with the Baltimore Orioles.

Larish, who hasn't played in the majors since 2010, has batted a career .224/.308/.380 with  in three seasons with the Detroit Tigers and the A's. 

Lee mentioned in her tweet that Larish announced his signing with the Orioles via his Facebook page.

Editor - 
He has played 331 games at AAA with a slash of 269/359/475.  Last year, Larish played half a season at Lehigh, the AAA affiliate for the Phillies.  In July 2011, Larish broke his leg and tore several ligaments in his ankle while trying to score from second.

In what cities could MLB expand?

Previously, I touted the New York metro area and Connecticut as expansion areas.  Those arguments relied on a few difficult to foresee events: (1) the New York and Boston teams agreeing with new encroachment, (2) a multi-stadium home format would work until a real stadium could be built, and (3) proper infrastructure exists to support a new stadium.  The main problem with that idea was that there is not an overwhleming demand of locals to bring more baseball into those areas.  That means that no one could mount enough of a cause to get ballot measures passed to appropriate money to build a stadium.  Even if private funds were put in place, public funds would need to be tapped to put improvements on infrastructure to get people in and out of games.  Infrastructure is the main issue that is killing the Rays down in Tampa.  It is just so difficult to get to their stadium if you live in Tampa.  Connecticut and upper New Jersey have similar issues.

If those funds could not be put in place then MLB would wind up having teams that floated around the existing baseball stadiums as well as barnstorming AAA and AA stadiums in a sort of boutique fashion.  That idea might be too different for some people.   Think of it this way, if the Bowie Baysox stadium was dressed up with a 10 MM renovation, would you pay $50-150 instead of the normal $8-75 you pay at Camden Yards?  Would that level of intimacy work?  It would be a major risk.

In light of that, I decided to look at more traditional locations for expansion.  The following list was devised based on what cities were previously entertained with expansion and relocation opportunities.  For statistics, I will be using the same method I used when suggesting that you actually can argue the Orioles are a small market team.

Charlotte
TV Market - 25th
Radio Market - 24th
Population - 731k; 18th in US
GDP - 103MM; 2.6% growth

Charlotte has several things going for it as a potential MLB city.  First and foremost, it has a modern stadium in Bank of America Stadium, home of the Jacksonville Jaguars.  This provides a large capacity structure where a team could eek out a few seasons before a sufficient stadium could be constructed.  Not all stadiums can house a football team, I am assuming this one can.  Second, Charlotte has a corporate culture.  Seven fortune five hundred companies call Charlotte their home.  This includes Bank of America (134.2B revenue; 9th overall), Nucor (15.8B; 157th), Duke Energy (14.3B; 173rd), Goodrich (7.0B; 337th), Sonic Automotive (6.9B; 339th), SPX (4.9B; 460th), and Ruddick (4.4B; 498th).  Additionally, 50th ranked Lowe's (48.8B) is a half hour up I-77 in Mooresville, NC and Family Dollar (7.9B; 302nd) is 20 minutes away in Matthews, NC.  This means that there is a strong corporate base to buy season tickets in the area.  Charlotte's TV and radio market is better than five current MLB teams each.  It has a strong population that is steadily growing and a growing GDP.

Indianapolis
TV Market - 26th
Radio Market - 40th
Population - 820k; 12th in US
GDP - 92.8MM; 3.6% growth

Indianapolis share a few things in common with Charlotte.  It has a similar TV Market, a slightly larger population, a similar growth in commercial products, and a football stadium that should be able to be converted into a temporary home for a baseball club.  However, there have been yearly cries by the ownership of the Colts about how Indianapolis is a not a cash flush area.  It may just be ownership looking for a better deal similar to what Irsay did when he took the Colts out of Baltimore (or when Modell took the Browns out of Cleveland for that matter).  One difference between Charlotte and Indianapolis is corporate presence.  Indianapolis has two Fortune 500 companies bringing in a revenue of 81.9B within the city limits: WellPoint (58.8B; 42nd) and Eli Lilly (23.1B; 115th).  Cummins (13.2B; 186th) is located an hour away in Columbus, IN.  Charlotte has corporations headquartered around the city that pull in 2.5 times as much revenue as the ones around Indianapolis.  That reduced foundation makes for Indianapolis to be a potentially worthwhile MLB city, but with poorer footing than Charlotte.

Las Vegas
TV Market - 40th
Radio Market - 32nd
Population - 584k; 30th in US
GDP - 80.2B; -1.9% growth

Las Vegas is commonly mentioned as a location for an MLB team either by expansion or relocation.  In fact, Bud Selig considered Las Vegas a finalist when determining where to move the Montreal Expos.  It sounds like a good idea.  Vegas was going through a period of rapid growth until smacked down by the recent economic crush.  Lots of tourists with free time visit the city and may be interested in watching a game.  The concerns were that the city has a high level of flux, which would make it difficult for a baseball team to take root and there was some concern over the need for gambling establishments to take a major investment in the franchise.  Why gambling establishments?  There is not much else there in Las Vegas.  The city can claim three Fortune 500 corporations: Caesars (8.8B, 277th), Las Vegas Sands (6.9B, 342nd), and MGM Resorts (6.0B, 380th).  In addition to a poor corporate presence, Vegas would have the worst TV Market in the game, which is where a lot of the money is at, contracting GDP, and no suitable stadium for a team to begin play.  There just is not enough money in the city to prime the pump for a MLB team to move in.

Orlando
TV Market - 19th
Radio Market - 34th
Population - 238k; 79th
GDP - 94.2B; 2.4% growth

Orlando has a few things going for it and a few reasons why it hasn't been tapped for a team.  It has a solid low second tier TV Market and the region is rather prosperous.  What has hurt the city is that much of the money is in entertainment in the form of all of the amusement parks in the area.  As has been shown countless times, baseball teams do not make money for the city as opposed to merely pushing it around a little bit.  With the city already being a pilgrimage of the Mouse...there just is not likely to be a major buy in from those group.  The only Fortune 500 company headquartered there is Darden Restaurants (7.1B; 332nd).  The Citrus Bowl is likely to be the only stadium to be able to be used for baseball until a new one could be built.  Finally, Florida seems to be home to two baseball clubs that are not exacting pinnacles of business success.  Putting in a third one, two hours from the Tampa Bay Rays may not be the best of ideas.

Portland
TV Market - 21s
Radio Market - 23rd
Population - 584k; 29th
GDP - 121.7B; 4.7% growth

Portland appears like an obvious location for a MLB to sprout up.  It has a long history with AAA baseball.  It has had a rapidly growing GDP.  It is a decent size city with a respectable standard of living.  A corporate presence is on the low side, but it does have Precision Castparts (5.5B; 409th) and Nike (19.0B; 135th; 15 minutes away in Beaverton) call it home.  Even with this presence, AAA baseball has left the city twice in the past 30 years.  That is not a great record.  However, I would put it ahead of Orlando and Las Vegas.  With Indianapolis it is a question how whether one believes more in corporations and population or media markets and GDP.

San Antonio
TV Market - 36th
Radio Market - 28th (Cinci, Clev
Population - 1.327 MM 7th in US
GDP - 73.6B; 3.0% growth

San Antonio is a promising option, but with a drawback.  First with the good news, San Antonio has an immense population that is being poorly served by top tier professional sports.  The media market is not great, but has good long term prospects.  This region has been a hotbed of growth even during the economic struggles the rest of the United States was facing.  San Antonio also has a major corporate presence.  The city is home to Valero Energy (86.0B; 24th), Tesoro (20.3B; 128th), United Services Automobile (17.9B; 145th), CC Media Holdings (5.9B; 391st), and NuStar Energy (4.4B; 497th).  That is a good group that would help buy up seats and luxury suites.  The problem is though that the main stadium available, the Alamodome, was built without the ability to store a MLB field.  The structure cannot be retrofitted to accommodate a team either.  This means a club would need to have a new stadium waiting for it.  The Arizona Diamondbacks accomplished that feat.  The Colorado Rockies, Tampa Bay Rays, Miami Marlins, and Washington Nationals required an existing stadium.  Before them, Seattle and Toronto used preexisting stadiums.  Point being, it is uncommon to have everyone in order for a MLB to show up on your doorstep.

Vancouver
TV Market - ~20th
Radio Market - ~42nd
Population - 590k; ~29th
GDP - 83B; 3.0% growth

I have argued before that baseball should move up north again.  I think baseball could work in Montreal, but I don't think that will happen any time soon.  That city is no longer MLB ready anymore.  Vancouver is.  Of all of the cities, Vancouver would be the easiest one to move into because of BC Place.  BC Place was originally built with the intent of luring a baseball team.  That was unsuccessful, but the building has been renovated and is a fairly modern stadium with proper infrastructure in place.  It hearkens back to the Tropicana except that it has an excellent location and the stadium has been kept up.  Vancouver also boasts a few corporations who would appear on the Fortune 500 if they were in America: Telus (9.6B; 257th), Teck Resources (8.8B; 277th), Jim Pattinson (7.1B; 331st), and Best Buy Canada (5.6B; 404th).  That is not a stellar corporate presence, but it is stronger than Portland, Orlando, and Las Vegas.  It has a second tier TV market, a third tier population, and a growing economy.

Conclusion

Of these cities, Charlotte is an obvious front runner for an expansion team.  San Antonio has a strong foundation, but would need to get enough capital in place to not only buy a franchise, but also develop land for a stadium for the team to play in on day one.  That is logistically difficult.  Indianapolis has supposedly had issues with the Colts pulling in enough cash, making them threaten to look elsewhere.  Portland is an old school favorite, but their difficulties in keeping their AAA clubs cast some doubt and they need a stadium immediately.  Orlando and Las Vegas are simply poor fits.  Vancouver looks like a decent third tier location with a great stadium situation.

I would probably award Charlotte and Vancouver the teams.  I would bump out Vancouver if San Antonio could promise a stadium.

Also of note, with Constellation Energy appearing to be falling under Exelon, Baltimore will have no Fortune 500 companies.  Washington DC has seventeen.