The New Posting System And What It Means For MLB

Thursday will mark the 19th anniversary of Hideo Nomo signing with the Dodgers to become the first impact Japanese-born major leaguer to make the jump to Major League Baseball.  Meanwhile, we're just weeks removed from the latest Japanese sensation, Masahiro Tanaka, signing a much more lucrative deal with the Yankees.  When I spoke with former Dodgers GM Fred Claire, the man who brought Nomo to Los Angeles, earlier this offseason about the parallels between the two processes, he rightfully said that there were hardly any, save for their position and nationality.  Tanaka's transition involved about a year of will they/won't they chatter about whether the Rakuten Golden Eagles would post the star pitcher and thirty days of intense talks between clubs and agent Casey Close.  Nomo, meanwhile, broke free from the Kintetsu Buffaloes by simply "retiring" from Nippon Professional Baseball.  Yankees GM Brian Cashman surely wishes things were still that simple.

After watching Nomo flee with ease and, years later, seeing Hideki Irabu and Alfonso Soriano join MLB without any compensation coming NPB teams' way, NPB finally put their foot down in 1998.  NPB reached agreement with commissioner Bud Selig on a new system that would compensate Japanese clubs for allowing players – who have to wait nine years before reaching free agency – out of their contracts to make the jump.  The system, devised by Orix BlueWave GM Shigeyoshi Ino, called for MLB teams to take part in a silent auction where they offered up a dollar amount to the Japanese team to win exclusive negotiating rights with the posted player.  If the winning team and player reached agreement on a deal within the 30-day window, the NPB team would get their posting fee.  If a deal was not reached, the Japanese club got nothing and the player was returned to his NPB club.  It was a system that gave NPB clubs checks that ranged from the reasonable to the sizable to the titanic.  The first player posted, Alejandro Quezada, earned the Hiroshima Toyo Carp a $400K check courtesy of the Reds.  Ichiro Suzuki, the second posted player, went to the Mariners after Seattle gave the Orix BlueWave a little more than $13MM.  Nearly eight years later, the Red Sox paid the Seibu Lions $51.1MM for the privilege to give Daisuke Matsuzaka a six-year, $52MM contract.  There was a bilateral opt-out clause on the MLB-NPB agreement on a year-to-year basis, but it survived nearly a decade-and-a-half.  NPB had about as much incentive to tear up the contract as a lottery winner would have to light their ticket on fire.  It's surprising, however, that MLB allowed the system to continue as constructed for as long as they did.

With nearly all of baseball drooling over Tanaka in 2013, MLB finally forced NPB to come back to the table with NPB to hammer out a more favorable agreement.  The new system caps the maximum posting fee at $20MM and, unlike the previous system, allows the player to negotiate with any team that is willing to pay the fee.  On the surface, it would seem that this overhaul was a major victory for Selig & Co. since Dice-K and Darvish's fee was more than double that amount and Tanaka surely would have tripled it.  However, as this year's Tanaka sweepstakes showed, the overall cost to the winning club may not change very much at all.  Star pitcher Yu Darvish cost the Rangers $111.7MM overall between his $60MM contract and $51.7MM posting fee.  Tanaka's posting fee was roughly $32MM less but cost the Yankees $175MM in total with $155MM going to the 25-year-old.  Ultimately, what did MLB gain from the new system?  I spoke with Major League executives and agents to try to bring some clarity to the latest iteration of the posting system.

Some would argue the new system allows for competitive balance in the bidding process since a smaller market club won't have to pay an exorbitant tax to be in the mix for a prized Japanese player.  That doesn't seem to pass muster, however, when considering that the total cost could be effectively equal.  The new agreement also gives the Japanese player freedom to choose his club, but that aspect of it isn't a huge benefit MLB teams.  "I'm not sure what it accomplished other than giving the money to the Japanese player themselves rather than the teams," one executive said."If that was [MLB's] goal, then they accomplished it, but I don't know that it benefits them in any way."  One National League executive who spoke with MLBTR on the condition of anonymity explained that the new system makes for a more level playing field for a reason that hasn't gotten a lot of attention.

"How many clubs can afford to drop $60MM in the current year and then start the bidding process?," the high-ranking exec said of the old system, which called for the posting fee to be paid out rather quickly. "I think the old system was one of the most unbalanced things in the game…It just had so many imperfections."

While a $20MM posting fee paid out over 18 months isn't a drop in the bucket for a small-market club, it's much more palatable than a posting fee that had no ceiling and had to be paid within that year.  As many baseball officials pointed out to MLBTR, if Darvish's fee was nearly $52MM, how high would Tanaka's have been?  The cost alone would be prohibitive to most of baseball, but a GM would have to work even harder to sell his owner on doling it out relatively quickly.  The new system may not drive down the overall cost for the winning team, but it'll allow more clubs to be have a realistic chance to be in the chase because the money is spread out, the executive argued.  In conversations with MLBTR, multiple baseball people pointed to the Astros being finalists for Tanaka as evidence that the system is already leading towards a leveled playing field. 

The exec and a couple of agents also believe it's also possible that the new system will ultimately tamp down the overall cost somewhat, even if the savings were far from evident in the Tanaka case.  A blind auction without a cap can lead the winning team to pay the Japanese club far more than the second-highest bidder, an outcome that may have happened with the Red Sox and Dice-K.  While the negotiating process with any player is far from an open book, clubs at least found a way to 86 a good chunk of the mystery involved in signing a Japanese player and, possibly, lower the overall bill.

On the Simpsons, when washed up TV personality Krusty the Clown announced his retirement at a press conference, one reporter asked, "But Krusty, why now? Why not twenty years ago?"  A similar question could be asked of MLB.  With the right to get out of the old posting system in their pocket all along, why not take advantage and work out something new with their Japanese counterparts?  After all, it doesn't seem like NPB has much leverage in the matter.  Of course, MLB badly wants to have the world's best players on their stage during their prime years but NPB's ability to sign a player away also means netting the kind big money they wouldn't come close to seeing by keeping him.  A prominent agent familiar with the negotiations that took place told MLBTR that MLB reached this realization in 2013 and drove a hard bargain: either re-work the system or we'll put the kibosh on it altogether.  As much as they wanted to bring Japan's top talents across the ocean, they made it clear to the Japanese league that they would rather wait nine years and pay the clubs nothing than dole out a tax of $50MM or more for stars.  The Japanese teams bristled at the notion of losing out on so much cash but they ultimately buckled.  

Depending on who you ask, the reworked construct could save big league clubs some cash on its face, but nothing in the business of baseball happens within a vacuum.  With the premium for a star Japanese player coming down from upwards of $50MM to a maximum of $20MM, the situation is now a lot closer to that of a typical free agent.  In turn, some have theorized that agents can use Japanese players for comparison when their clients are on the open market.  For example, the agent for James Shields (expected to be one of the top pitchers in 2015), could point to Tanaka's as a comparable.  If Tanaka came with a $50MM+ surcharge like Darvish, then it would be harder to draw a straight line between the two.  While one exec believes it's more "apples to apples" and could have a small impact on values, other baseball officials told MLBTR that they didn't see it driving up the cost of regular free agents.  

Even if it doesn't help with overall costs, it seems as though the new agreement benefits a lot of big league clubs because it allows for competitive balance.  And, of course, the posted Japanese players are the big beneficiaries under the new agreement.  The new $20MM cap may be an improvement, but with a wide array of views and motivations, it's hard to find two baseball people who agree on what the perfect system would look like.  An executive who is largely in favor of the re-worked agreement theorized that the lowered payout could lead to NPB teams using "strategic timing" – hanging on to players until they get closer to free agency rather than putting them on the block in their early-to-mid 20s.  One agent would like to see MLB find a way to talk NPB into lowering the amount of service time needed to reach free agency.  Overall, team officials and player representatives seem pleased with the way the new agreement worked out.  It will still cost clubs a premium to bring over the next Darvish or Tanaka, but more teams will have a fighting chance to come away with a top overseas talent.