Monday, December 11, 2006

Pacific League -0.5 MLB


The latest news on Daisuke ("Skyline") Matsuzaka? Report: BoSox's talks with Matsuzaka nearly dead. The reality? It's more like even money that he'll be taking a physical on Wednesday and signed by the Thursday deadline.

In a recent column, Joe Sheehan at Baseball Prospectus elegantly explained how the Boston Red Sox "queered the process" of the posting system between MLB and the Japanese Pacific League. If you're not a BP subscriber (though you should be), here's a quick recap:

1) Boston overbid for the exclusive right to negotiate with Matsuzaka; their bid of $51.11 million was almost 30% higher than the second-place Mets' bid.

2) The Red Sox have refused to offer a market value contract for a starting pitcher of Skyline's ability. If 33-year-old Jason Schmidt is getting $15.66 million a year, the in-his-prime Matsuzaka should get $20 million/year.

3) Neither the Seibu Lions, Matsuzaka's team in Japan, nor Skyline himself, have any leverage in these negotiations. If the Red Sox and Scott Boras fail to agree on a contract, Seibu gets zero dollars instead of $51.11 million. Skyline would then have to go back and play in Japan, where his salary is only $3 million. He wouldn't become eligible for true free agency until after 2008.

4) Seibu has the incentive to return some of the posting fee to the Red Sox so the American team can better afford to add Matsuzaka to their rotation. If Boston gets a $10 million mail in rebate on Skyline and are able to sign him to a five year deal, that would lower the average annual value of the contract by $2 million. But MLB nixed that idea as against the spirit of the process.

5) Even if a side deal goes down, the Red Sox have broken the posting system. As Sheehan wrote, "For the teams that the Sox outbid in the blind process, nausea rules the day. It may turn out that the Lions receive less from the Red Sox than what the next-highest bids would have brought in straight up, which renders the process a farce. "

Just because next year's arrangement between MLB and the Pacific League will be different than the current posting system, one should not take the ESPN article at face value when it says Matsuzaka's on his way back to Japan. The article quotes a "source familiar with the negotiations," but also says that attempts to reach Boras for comment were unsucessful. That means our article's source is likely affiliated with the Red Sox, the other party to the talks. And what better way to exert Boston's leverage than through anonymously sourced news articles?

Two more reasons the Red Sox will have Matsuzaka in their 2007 rotation: First, they need him - they can't count on Schilling and Wakefield for 350+ innings. Second, MLB, which has notably intervened in the Astros' bid to re-sign Andy Pettitte, doesn't want to insult the Japanese by screwing over one of its baseball teams in the process of bringing their best player over to America. My guess is that Skyline signs with Boston for about $13 million per year.


***

The system's been broken before. In 1994, Hideo Nomo "retired" from the Pacific League so he could sign with the Dodgers. Three years later, a 21-year-old Alfonso Soriano pulled the same stunt. But as rich as Soriano became this November, the real catch of the 1997 offseason was one Hideki Irabu. To get a leg up on MLB, the San Diego Padres signed a working agreement with the Chiba Lotte Marines, Irabu's Pacific League team, essentially turning the Marines into a minor league affiliate.

That prompted Major League Baseball and the Pacific League to conjure up the posting system. Now that the Red Sox have exposed the fatal flaw, here are two possibilities for the next agreement between MLB and the Pacific League.

1) Allow subsequent bidders to step in after the winning team's 30-day exclusive window has expired. This would create pressure on the winning team to sign the Japanese player because someone else could get him. There's a chance that the second- or third-place bidders could also lowball the player in question, following in the footsteps of the auction's winner. But that's unlikely; because those teams' initial bids were lower, they'd have less trouble playing the average annual salary that the player's agent is seeking. And there's something to be said for getting the player your opponents also wanted.

2) MLB could pay the Pacific League a yearly fee in lieu of the bidding process in exchange for shortening the time before Pacific League players become free agents. Pacific League players would love to gain earlier access to the free market. Right now they must wait ten years after first signing. [Edit: It's nine years, as reported by the Japan Times. But the same article tells us that, unlike in MLB, Pacific League players don't accumulate service time while injured(!)] This agreement could reduce that time to seven or eight years, more in line with American leagues. MLB benefits on the field by having more of the world's best players in the world's best baseball league. They also benefit in the bank with some basic economics - by increasing the supply of players, the prices on those players will fall. Pacific League teams would receive a regular income stream from MLB, perhaps $40 million a year split among all teams in the league. This would allow the entire league, rather than individual teams, to benefit from Japanese stars migrating to America. It would also provide the Pacific League teams with regular income instead of the random postings we've seen over the last seven years.

However the parties agree, the Red Sox will be remembered as having paid the largest-ever posting fee under the old posting system.

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