The Weekly Rant: Masahiro Tanaka and the Posting System

Masahiro Tanaka may or may not be coming to Major League Baseball this winter.  The Japanese ace's future is in the hands of his current team, the Rakuten Golden Eagles. With the changes in the Posting System decreasing incentives for Nippon Professional Baseball clubs to post the very best players, Rakuten may hope to keep Tanaka for at least 2014, his last season before he reaches free agency in Japan. And then he would still have to complete one more season in Japan to become a free agent in MLB terms.

The new posting system allows NPB teams to place a price on players they post. That's a significant change. The more dramatic change is that the posting fee is capped at $20 MM.  Another major change is that any MLB team that meets that number will be free to negotiate with the player. For a quick recap on the incentives of the old posting system, check out my post on the subject.


The clear losers in the new agreement are the NPB teams. For most players who get posted, the $20 MM limit probably won't come into the play, but they stand to lose big money on players like Tanaka. And while this is a big loss for Japanese clubs, it is not a big gain for MLB clubs.  It's impossible to imagine that teams would spend less via this arrangement.

While the posting fee is capped, the players contracts part of the equation will probably make up the difference, especially since guys like Tanaka will essentially be free agents with many teams bidding. Small-market teams will still not be able to get the top posted players, although they'll be happy to see more of the transaction costs for big-market teams counted against the competitive balance tax.

Japanese players who make it through the process stand to get a much bigger chunk of the MLB club's money.  But with less incentive for teams to post them, many could lose out on years of a lucrative career in North America.  So just to sum things up, the Masahiro Tanaka saga will be a huge test of the posting system.

So the decision for Rakuten comes down to how much surplus value he will have to their team.  One way to think about this is one season at a time. Would Tanaka be worth more than $25 MM ($20MM posting fee + about $5 MM in salary) for them in 2014.  I don't know the answer, but it's not unrealistic that it could be yes. While NPB revenue (~$1.5 BB) is a fraction of MLB revenue, it is split among just 12 teams. While Rakuten has not traditionally been a top earner since it's entry as expansion team midway through the last decade, 2013's championship season may have helped bolster the club's income statement. But still, $25 MM is far more than any NPB player has ever made, and  likely too high an evaluation of Tanaka.

But if the team could still post him next year for a similar fee, then it's really a much simpler question.  There's no reason to believe the posting fee cap will be lowered, and unless Tanaka has a disastrous season, he would still bring the max amount.  It's likely even if he misses some time with injury, MLB teams still might be interested at a highly stomachable $20 MM. So yeah, it seems like Rakuten will be highly motivated to keep Tanaka for one more season.

The only hiccup could be Tanaka.  If he wants to pitch his age-25 season in MLB next season, he certainly will have some clout.  Rakuten would not want an ugly PR battle with their star. Although, contrary to what has been repeatedly in the US media, I'm not sure their would be public backlash to a team holding onto its best player after their first championship.  That's just not how it usually unfolds in sports.

But besides a publicity battle, Tanaka could simply hold out to gain leverage.  This would certainly make Rakuten more likely to post, or even trade him to another team that would.  Alternatively, some other agreement could be worked out. He could agree to a contract that takes him to full free agency, giving Rakuten two more years of his prime, and Tanaka the ability to essentially pocket the $20 MM posting fee.  These scenario's are a little far-fetched, but with the perverse incentives of the new posting systems, they are not out of the question.

The next few weeks should give us a great deal of information.  There will be further dialogue from  Rakuten on how much they value Tanaka.  MLB insiders will likely examine how he is valued stateside. At some point, there will likely be statements from Tanaka himself on where he wants to pitch.  He may very well wish to stay in Japan and earn a very comfortable paycheck for a few more years.  Or he may yearn for the brighter lights and even more comfortable paycheck that MLB teams can offer.  One way or another, we are going to learn a lot about the new posting system.

Blogger Roundtable: The Yankees' $189MM Question

The New York Yankees enter unchartered territory for a team used to two things: winning and spending money.  The front office has stated its desire to reduce spending next season to below the Competitive Balance Tax (CBT) threshold of $189MM.  Doing so would not only alleviate the 50% tax on spending over the limit this season, but would reduce the rate to 17% in the next season they choose to spend big. 

But it will not be easy.  The team spent over $203MM last season and failed to make the playoffs for the second time in decades.  The team has some big holes to fill, along with a number of free agents who would demand big money to stay around.  And though internally the Yankees may wish to cut payroll, their fan base's expectations of October baseball are doubtful to change. Even GM Brian Cashman noted that $189MM "is a goal, not a mandate."

A possible attempt to slash CBT relevant spending appears to have failed in Derek Jeter's new $12MM contract.  It was thought that though it is an increase over the Captain's player option, that it would save on average annual value.  But though some complicated rules in the Collective Bargaining Agreement, the deal will cost the Yankees more in both real dollars as well as those which count for CBT purposes.

But there are reasons to be optimistic. With many expensive players coming off the books, the Bombers will have some room to work with.  If Alex Rodriguez misses all or most of next season due to suspension, upwards of $25MM could be saved.  Additionally, key target Masahiro Tanaka will be expensive, but his massive posting fee will not hurt the Yankees attempt to slide under $189MM.  It will take some creativity and maybe some restraint, but it's entirely possible the club makes its stated goal.

So here's the question for our esteemed panel:

Will the Yankees spend less than the $189MM competitive balance tax threshold in 2014?

Jesse Sherman (Director of Operations, SBS)- No

The 2013 Yankees payroll was well over $200MM- and I don't see it decreasing drastically below the threshold. The Yankees have three players making over $23MM for 2014 (Rodriguez, Teixeira, and Sabathia), and that's not including Robinson Cano who will command the highest salary on the team (unless the sides can agree to a back-loaded contract). The aged Jeter just received a pay increase, and the Yankees will have to bolster their pitching staff by spending some money this offseason. But with over 98MM already being committed to just 7 players, the only chance they have of getting below the threshold is by not resigning Cano or Granderson. But even removing Granderson's contract and finding a steady replacement won't do the trick.

Adam Kirsch (Co-president, SBS)- No

I don't think the Yankees will make it under the tax threshold next year.  A great deal depends on how they choose to address key free agents – most notably Robinson Cano's call for a monster contract. A few arbitration-eligible players, such as Brett Gardner and David Robertson, will also likely cut into the Yankees' thrifty efforts. After missing the playoffs this year, I think that Cashman and Co. will not be afraid to spend to keep their key pieces in the Bronx.  
 

Kevin Cole (Featured Blogger)- Yes

 

It seems like the Yankees are fairly determined to get under the $189MM number. The club's behavior over the last couple of seasons would be hard to explain should they abandon this attempt to get under the Competitive Balance Tax Threshold, and it does seem like they are poised to meet their goal of lowering payroll to this level. The Yanks have a lot of cash coming off of the books this offseason from the likes of Mariano Rivera, Andy Pettitte, Kevin Youkillis, and others. Salary write-ups that I've seen give the Yanks around $70 million to play with this off-season in filling about 18 big league roster spots.

 

The Yanks obviously plan on giving a large portion of that amount to Robinson Cano. But, they could have an extra $27MM to play with, should A-Rod's suspension be upheld. If that happens, A-Rod's spot will need to be filled for 2014, but the team will have some additional freedom in making some free agent signings. Some are speculating that the Yanks are poised for a nice spending spree this off season, possibly for the likes of Masahiro Tanaka, Brian McCann, Carlos Beltran, and others. We'll see about that, but I believe the team is set to meet the $189MM goal, resign Cano, and perhaps one or two other high profile free agents. Whether or not they field a playoff contender, though, remains to be scene.

 

John Zakour (Featured Blogger)- No

 

I don't believe the Yankees will spend less than $189MM, but I believe it will be close. The fact the Yankees are serious about Cano and Tanaka means they likely won't let a few mil stop them (who would?). There situation is fluid, and may even change depending on A-Rod's punishment. But the fact we're talking about this is noteworthy. It indicates a paradigm shift, and shows the Yankees might actually be (somewhat) responsible with their contracts. The title of the freest spenders in baseball rests safely with the Dodgers.
 

Matthew Hakimian (Featured Blogger)- No

 

Not a chance the Yankees have a payroll under $189 million heading into the 2014 season. Although the team was marred by an obscene amount of injuries throughout the course of the year, GM Brian Cashman will ultimately get his way. Not only does the team desperately need to resign Robinson Cano, but it also has no idea what the future of A-Rod holds. Look for the Bombers to be in the market for the likes of Brian McCann and Japanese product Masahiro Tanaka. Don't we all remember what took place after the Yanks missed the playoffs in '08?

Adam Malz (Featured Blogger)- No

While the Yankees front office has repeatedly stated that their objective is to reduce their payroll to $189 million, I believe they will end up going over that by the end of this offseason. The Yankees are set to embark on an offseason similar to that of 08-09 when they spent $423 million on CC Sabathia, Mark Teixeira, and A.J. Burnett. This year their targets include Robinson Cano, Carlos Beltran, Brain McCann, and Masahiro Tanaka. They will most likely end up spending over $300 million in contracts to the players that they ultimately sign. After this, it will be a huge financial challenge to get below the $189 million competitive balance tax threshold.