On Sunday, the Toronto Blue Jays released veteran DH Frank Thomas. While many have attributed his benching and release to his slow start, the more likely reason for cutting Thomas was a vesting option in his contract that would guarantee him $10 million in 2009 if he collected 376 plate appearances in 2008.
Supposedly, the Jays asked Thomas to take a lesser off-the-bench role to keep the option from vesting. Thomas was not happy about this, and the Jays simply released him, eating the remaining portion of the $8 million that the team owes Thomas this season. While I understand that the team probably wishes that it had not agreed to the original contract, I’m not sure that cutting bait was the best remedy.
I estimate that Thomas was worth $9.9 million to the Jays in 2007, which is about what the Jays paid for his services in 2007 ($1 million signing bonus + $9.12 million). This was similar but less than Thomas’s 2006 estimated production with Oakland that would have been worth about $11.9 million in 2007. I don’t think anyone expects him to repeat 2006 again, but Thomas is still a good hitter. And even if he wouldn’t be worth the $10 million he would get next year if his option had vested, it’s likely that his production would not be too far below this value.
By simply cutting Thomas, the Jays must pay Thomas $7 million not to play. I don’t get this, because Thomas is still a productive hitter—the type of hitter the Jays will miss if injuries hit the team and the team has a shot at the playoffs. Either you sit down and explain to him the contract he agreed to—“hey, you agreed to this vesting option, so become a bench player or go on the restricted list and get zilch”—or you trade him to another team and eat a smaller portion of his contract.
Even if the option had vested, it wouldn’t have been a disaster given what it will cost to replace his production. Let’s say Thomas is a $7 million player in 2009. Isn’t it better to pay $3 million more than what you are getting in 2009 ($7 million — $10 million = –$3 million) than $7 million than what you are getting in 2008 ($0 — $7 million = –$7 million)?
One lesson from principles of microeconomics is that just because you are earning a loss doesn’t necessarily mean it’s a good idea to shut down production. As long as the revenues from production exceed the variable costs, you make money to cover a portion of your fixed sunk costs by continuing to operate. Shutting down increases your losses. If a player is producing more on the field than he costs to keep on the roster, then you should keep him on the roster. The Jays have just gone from a situation where they were getting Matt Stairs and Frank Thomas for $9 million (prorated salaries for the remainder of 2008 of $7 million and $2 million) to having only Matt Stairs for that same expenditure. I don’t see how this is an improvement.
This situation differs from the Russ Ortiz situation in 2006 with Arizona (Keith Law offers a nice summary). Ortiz was in the second year of a four-year, $33-million deal. In 2005 and 2006 he was worse than the options available to the team, and therefore it made sense to send Ortiz on his way. Though the Diamondbacks are still paying off the deal, Ortiz isn’t good enough to pitch on a major-league roster. Had Arizona continued to employ his services he would have made the team worse; therefore, cutting Ortiz was the right move. In Thomas’s case, several teams are interested in acquiring his services because he is better than available alternatives.
Of course, there is the possibility that the Jays think Thomas is done. It doesn’t look like it to me, but I’ve seen exactly zero of his at-bats this year. Maybe those reports of a slowing bat aren’t just front office propaganda. But, he would have to fall awfully far to be worth dumping.