Pinch Hit: Why The Jays Could Have A $125 Million Payroll, aka, The Effect of the Canadian Dollar

Wednesday, October 10 2007 @ 09:23 PM EDT

Courtesy of John Northey.

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I found the following information about payrolls and exchange rates:

Year	Amount in US$	Exchange Rate	Canadian $
2007	$81,942,800	0.8650	$94,731,561
2006	$71,915,000	0.8533	$84,278,683
2005	$45,719,500	0.8232	$55,538,751
2004	$50,017,000	0.7633	$65,527,316
2003	$51,269,000	0.6791	$75,495,509
2002	$76,864,333	0.6252	$122,943,591
2001	$76,896,000	0.6350	$121,096,063
2000	$46,363,332	0.6874	$67,447,384

These figures are based on opening day payrolls and on the exchange rate at the end of the first business day of April.

We can quickly see that Gord Ash's last year and JP's first were amazingly expensive in Canadian dollars at $120+ million (yikes!) Given our dollar is now at or above par ($1 Canadian = $1.0156 US as of the 9th of October) the Jays suddenly have much more payroll room. Does this mean a $125 million payroll (what the Can$ amount in 2002 would be in US dollars based on today's exchange rate) is in the near future?

To know this we must compare the sources of revenue in 2001 and those of today. 2001 was the first season Rogers owned the Jays. They did not own SkyDome/Rogers Centre, from which 100% of the revenues are in Canadian dollars. They were getting very poor ratings for games, but today can get over a quarter of a million viewers. All those revenues are also in Canadian dollars. And since Rogers owns the TV station showing most games, they get an immediate benefit in increased ad rates if the Jays do well. MLB provides a chunk of change to the Jays in US dollars (now worth less) via TV revenues (about $14 million and stable since 2001, plus non-Canadian international, which one has to assume has grown in the Ichiro era), internet revenues (mentioned in many areas as growing very quickly), and merchandise revenues (shared by all teams and supposed to be as big as the US TV revenues). The net effect of this is that US revenue has to have climbed 57% since '01 to match those levels, which seems reasonable to assume given the spending spree we've seen US teams on lately (internet revenue seen as the big key here). So, in 2008, the Jays should have significantly more cash available (and potentially available) than they did in 2001, thus making it reasonable to assume they can spend just as much in Canadian dollars as they did then.

The Jays were around $82 million in '07, which included $13 million for Hinske, Koskie, Ohka, Thomson, Phillips and Towers, all of whom will be hunting for jobs this winter. Doing reasonable estimates for what to expect in arbitration for Rios (7), Hill (3), Johnson (4), Frasor (1) and Downs (2), plus 500k each for the kids who have to take whatever the Jays offer, I'd estimate the base payroll for 26 players to be at $87 million or, after factoring in bonus money which officially is spread over the whole contract, $99 million.

The shift in currency suggests that the Jays could have from $26 to $38 million available for the 2008 budget. Possibly more, as our dollar is expected to keep rising (Canada paying off debt, US going deeper into debt, resources going through the roof, US interest rates dropping while ours are not...). Now, who could be on the market for about $25-$30 million who could help the Jays? I know I have one player in mind who would eat that much, fill an ugly offensive hole in the lineup (assuming he can still play short), and weaken one of the two teams ahead of the Jays in the division. This winter the Jays could make a major splash with the potential to add 10+ wins and shift from also-ran to division title contender. Could it happen? Guess we'll see.

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