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.

The Weekly Rant (12/2): The Mixed Incentives of the Posting System

The Posting System between Major League Baseball (MLB) and Nippon Professional Baseball (NPB) is a hot topic these days among the world's baseball fans.  The procedures set up in a 1998 document describe how players can be transferred from Japan (and Korea) to North America.  While the Posting System is not something American baseball fans usually worry about, coveted ace Masahiro Tanaka's possible posting has many talking about these issues.

The two best professional baseball leagues in the world originally agreed to the Posting System in 1998 after several incidents in preceding seasons (involving Hideo Nomo, Hideki Irabu, and Alfonso Soriano). Since then, NPB players with less than nine years of service time have been covered by the agreement, while those with over nine years are treated as free agents by MLB.

The process begins when players are "posted" by their NPB club.  The exclusive negotiating rights are then awarded to the MLB team with the highest bid in a "blind" auction.  If the player and the MLB team can come to an agreement, the NPB club receives the bid money in the form of a one-time "Posting Fee". 

Both sides were eager to make changes to the Posting System this offseason, and so far they have not been able to hammer out an agreement. No players, including Mr. Tanaka, can be posted until there's a deal in place. The only change under the current proposal is an alteration to the amount of money NPB clubs receive; they would get only the average of the two highest bids rather than the amount of the highest bid.

The discussion stateside has unsurprisingly focused on MLB's perspective in the negotiations.  For the clubs as a whole, this agreement would obviously be a small win. Posting fees simply would decrease by a small amount.  The main disagreement on the clubs sides is an internal debate about whether posting fees should count for competitive balance tax purposes.

While players would seem to have less skin in the game, the MLBPA actually has a great deal to consider.  The union certainly would like to see less money going to Japanese clubs, a group with whom they have virtually zero common interest.  They do have in an interest in seeing posted players get the largest salaries possible, for a variety of reasons (not the least of which is that those players are future members).  But current membership probably is not overly concerned with the matter, and they may wish to use their bargaining power for more direct benefits.

For NPB clubs, this new agreement may be a small concession after years of favorable terms.  They would stand to lose whatever MLB is gaining in lower posting fees.  But the system is still preferable for Japanese teams than any number of potential arrangements.

The most interesting angle may be that of the NPB players. Posted players could potentially receive slightly more money with reduced posting fees, but they don't stand to see huge increases. Regardless, the posting system is only a concern for a small percentage of  Japanese Professional Baseball Players Association (JPBPA) membership.  Only a few of their hundreds of current members could even dream of being posted.  Here's how Japanese super-agent Don Nomura described the players union:

"The Japanese players association is absolutely weak... I don't know if they have a plan, but obviously they're not winning in any labor talks. Free agency hasn't changed in many years and the players' minimum salary hasn't changed in about 15 years, so you can say the association hasn't really done much for the players."

If the JPBPA is not able to make headway on basic issues, then it is unlikely they can win on an agreement that affects about 1% of membership.  The union's executive director, Toru Matsubara basically admitted defeat on the issue, stating:

“There was not enough time on our side and we haven’t got any more bargaining power than this. It was an agonizing decision (accepting the revisions).”

Over the Posting System's 15 years, only 21 players have been posted, with just 13 actually agreeing to terms with MLB teams.  All of the parties would probably like to see these numbers increase.  The MLB wants the world's best talent, while NPB clubs want compensated for developing it. The MLBPA would like more high-priced players entering the League, and the JPBPA would like to see its players to get as much freedom and compensation as possible.

Instead, the only changes likely coming are superficial in nature.  MLB teams stand to make small gains in a fixed-pie negotiation with NPB, while the JPBPA loses again and the MLBPA remains a bystander.