by Daniel Gettinger

Earlier, Myron asked:

Would the $5.3M the Padres gave Garland be better utilized on, say, locking up young players currently on the roster, future draft pick signing bonuses, international signings, and improving the scouting, player development, and analysis departments?

Myron’s question is a good one, and some, including R.J. Anderson of Fangraphs have answered “yes, Garland’s impact on the club’s playoff aspirations is minimal, and therefore the money would be better spent in other areas.”

Tom Waits, in the comment section (2) of Myron’s post adds further complexity to the issue.  He writes:

If there was a good chance that the Padres would have spent the Garland money in other ways, I’d be on the same page with Myron. Using Garland’s 5 million in the draft or internationally could buy you 8-10 years of control each for multiple talented players. But if the major league and amateur budgets are separate, which doesn’t make a lot of sense but might still be true, then signing Garland isn’t robbing Peter to pay Paul. Peter was never going to get that money anyway.

Tom is mostly correct.  If the budgets for major league talent and “everything else” are completely separate (I doubt they are), then the Garland signing probably constitutes the best use of the Padres’ remaining budgeted funds, and is in a fact a good one.

However, as Tom alluded to, I bet that management has at least some flexibility to spend funds at their discretion.  If spending additional money at the major league level is not looking like a good investment, then it can probably transfer some of that to other areas.

Even in a world where management has full discretion over its spending, it may still make sense to spend money on a team not expected to compete for a post-season birth.

Sometimes we forget that marginal wins matter even for teams not expected to reach the post-season. Those wins still result in marginal revenue.

Furthermore, revenue generated is probably dependent not just on performance in the current season, but also performance in past seasons.  The Padres’ mediocre performance in 2009 is likely to negatively affect revenue in 2010. That the Padres were also bad in 2008 further magnifies the situation.  I believe a string of consecutive poor performances may have the ability to significantly drive the revenue curve down. That is, for any given level of wins, revenue will be lower if past performance was poor than if it was good.

If you accept such a model, achieving at least some reasonable level of success in  2010 can be important, and change the result of the cost-benefit analysis Tom and Myron were discussing.  A poor 2010 season would result in three consecutive bad seasons at the major league level, shifting the 2011 revenue curve even further downward (all else equal).

Because we do not have access to the Padres detailed financial information, it is impossible to fully analyze whether the Garland signing was a good one.  However, without adequate evidence to the contrary, I like to give the team the benefit of the doubt when it makes decisions on what areas of the organization it chooses to allocate funds.  Under such a framework, we must conclude that the Garland signing will result in a greater return on investment than the next best alternative.

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