The Case for Holding onto Machado and Letting Him Walk

The Orioles do a wonderful job of ignoring multiple problems until they fly up and bite them on the butt.  While the club has done an amazing job taking MacPhail's core and supplementing them with the right players to build a very successful mini-dynasty (that holds only one trophy that was limited to AL East heroics), there have been many glaring issues that they have been unable to resolve.  Pitching depth has been an ever present concern, but that never made Duquette think twice about dealing it out even in the case of Andrew Miller when he really was not needed.  Corner outfield has been a place of need, but the club has done peculiar things such as bringing in Travis Snider at an amazing cost or putting Mark Trumbo out there.  We could go on and on, but we will get to the point of this post.

Manny Machado presented a terribly frustrating problem.  I went into some detail on this last January and noted that right then and there was the time to either extend Machado or trade him.  Neither of those things happened.  This offseason, it appears the Orioles are more aware that Machado is not remaining and something needs to be done about it.  While the interest in Machado is great, his 17.3 MM projected salary and his single remaining year of control have diminished his value.  Based on what I hear, the most any team has offered has been a single top 100 player and a couple lower tier players.

To put this into a more tangible framework, I will use the White Sox as an example here.  Keep in mind, that what I know has nothing to do with the White Sox, so do not take this as a definitive scoop.  A similar White Sox deal would be:

Alec Hansen, RHSP (fringe top 100 prospect, upper minors)
Carson Fulmer, RHSP (Rookie, major concerns)
Jake Burger, 3B (draftee, long road to go)

The above package would likely disappoint folks. To put it in Oriolese, It is like being offered Chorye Spoone, Radhames Liz, and Billy Rowell if it were 2008.  It would be in the neighborhood of a 40 MM value coming back.  That would be on point value for Machado, but not value that you would expect from a club that really, really, really loved. him.  As you can imagine, a package like that can easily go bust and may well not be all that different from what one could expect in a mid-season deal if the Orioles fall out of contention.

A mid-season deal presents some advantages and disadvantages.  On the advantage side, only about 9 MM of Manny's salary will come into play at that point.  While 10 teams right now have some interest in Manny, a lot of that interest in muted by that pricetag.  Halfway into the season and teams may have enough payroll space with ownership approval, have an unflattering contract to hand back, or the Orioles may be more willing to swallow some of the cost.

The cost angle is truly something to consider if you are running the franchise.  Based on the past twenty years, I have identified several "fire sales".  The first one on the board was the Marlins implosion after 1997's World Series and the most recent is the 2012 triumvirate of the Philles, Red Sox, and Marlins all letting their players depart in the winds.  Some other clubs in this data set include the 2000 Orioles, 2007 Twins, and 2011 Astros, just to give you a flavor.  On average, this group saw a decrease of 18% in attendance after trading out significant players the year before.  Best case scenario was that 2008 Twins team where no difference was observed, but most teams saw a drop in the twenties.

For the Orioles, their 2017 attendance was 2.028 million.  An 18% drop would take them to 1.663 million, or a loss of roughly 365,000 tickets.  Using the fan index, each lost ticket is worth around $46 in revenue.  In other words, if Manny Machado departs and the fan base sees this as a fire sale, then the Orioles are projected to lose 16.8 MM in revenue just from fan attendance.  This does not include the current renegotiation of partners with MASN where the loss of a major player like Machado might make those negotiations more contentious.  In other words, this could be a major loss the Orioles' bottom line, which can have long term implication on their ability to spend on future payrolls.

Anyway, a mid-season deal may only fetch the club a few B level prospects, which is what appears to be the current maximum offers if you believe the rumblings.  Or there may be a major push by a club who wants to shove themselves over the top and is willing to pay a boatload for Machado in a way that might be reminiscent of the Aroldis Chapman trade to the Cubs.  There certainly is that potential there.

The downsides are numerous as well.  If the Orioles are sniffing contention, ownership or the front office may be unwilling to throw in the towel.  Think of last year, if the Orioles came back from where they were at the deadline then it would have ranked as a truly historic achievement.  A major problem was that the fan base and maybe the front office saw that they were three games out and thought that was actually very close when, historically, it was not close at all.  That paralysis by appearance would be detrimental to the organization as they would be left with a Qualifying Offer placed on Manny and getting only a draft pick in return.  That draft pick compensation would be the same return if during the first half of the season Machado is lost for the year.

However, that draft pick compensation happens right after the first round, which is a value of around 13 MM.  How much is a pitching prospect like Hansen worth?  15 MM.  So the loss between dealing Machado now and letting him walk is Fulmer and Berger along with potentially losing 17 MM in revenue.  That, in all honesty, is beginning to look like a terrible deal.  Are Fulmer and Berger worth that 17 MM?  Yes, I think they are.   They are probably worth 5-10 MM more than that.  But, it is not much and that 17 MM in lost revenue in 2018?  Well, that may have future impact on club revenue more so than letting Machado walk away for 400 MM some place.

So what should the Orioles do?
Trade Machado last January.