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Wednesday, November 15, 2006

ESPN: Red Sox’s winning bid for Matsuzaka—$51.1 million

Wow.

NAPLES, Fla.—The Boston Red Sox emerged Tuesday night as winners of the bidding for Daisuke Matsuzaka with a $51.1 million offer and have 30 days to sign the Japanese pitcher to a contract.

The Seibu Lions of Japan’s Pacific League announced they had accepted the high bid—ESPN’s Peter Gammons this week reported the figure to be $42 million—for their prized pitcher, and the major league commissioner’s office simultaneously confirmed at the general managers’ meetings that the Red Sox had made the offer.

Kyle S Posted: November 15, 2006 at 02:43 AM | 363 comment(s) Login to Bookmark
  Tags: japan, red sox

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   301. JPWF13 Posted: November 16, 2006 at 12:38 AM (#2239034)
I was trolling Google, looking for any indication of what Boras thought the posting fee would be- apparently he thought it would be 20-25MM
I think that he thinks any more than that is definately money being taken out of his client's pocket
   302. b Posted: November 16, 2006 at 12:57 AM (#2239054)
His worth does not exist in a vacuum - it is a function of supply and demand. The Red Sox are part of the demand(in fact, they are all of it right now) - you can't ignore their desires in this respect. As a $25M free agent, the demand likely isn't there. That's why it's important.

Again, I hope no one thinks he'd actually get $25M a year on the open market. But, a bid that doubles what was expected going into the process has to, in some way, raise DM's sense of self worth. If people thought he could get Oswalt money when the bid was going to be $20-$25M, where does that reasonably put him now? More in the $17-20M a year range? If the Red Sox are offering 10-12, it obviously seems fair to them and you, but that doesn't mean it's worth taking.
   303. Swedish Chef Posted: November 16, 2006 at 12:59 AM (#2239056)
But really, what's the point of lowballing? He won't be bargain anyway, just let the money roll and get the superstar vibe going...

"Yeah, we can burn a hundred million bucks on a pitcher, we're filthy rich, you know."

A great team needs great stars, it pays off in franchise value now and later (Wonder what Ted Williams is worth to the Sox 2006?). Never mind marketing in Japan, what about the teams image at home?
   304. AROM Posted: November 16, 2006 at 01:38 AM (#2239077)
Boras can say "Zito got XYZ"

As an APBA player, I can assure you Zito does not have XYZ. In a good year he has Y.
   305. Tor Posted: November 16, 2006 at 01:59 AM (#2239085)
Many people seem to be assuming that since Boston has made the highest bid, it follows that Boston has the highest estimate of Matsuzaka's value. But a good faith bid would be based on the difference between Matsuzaka's percieved value and an estimate on what it would take to sign him.

It may well be that Boston has bid highest not because they have the highest estimate of his worth, but because they have the lowest estimate of what he is willing to accept.

Since everyone else is making predictions, here are mine:

1) No contract.
2) Bad feelings all around -- Seibu, Matsuzaka, many MLB teams.
3) Widespread calls for a new system.

And

4) Assuming nothing terrible happens to Matsuzaka between now and 2008, his eventual MLB contract will be much closer to Boston's best offer plus $51 million than it will be to Boston's actual offer.
   306. TDF, situational idiot Posted: November 16, 2006 at 03:05 AM (#2239118)
Some thoughts:

1. Talk has been that the Yankees are losing $40-50M real money (not accounting tricks money) per year. If this is true, why do people assume that the Sox could enter their payroll neighborhood?

2. In no way is it in Boras' best interest for Matsuzaka to sign this year. Boston isn't bidding against anyone else, so they'll pay X amount below Matsuzaka's real value; Boras will be losing his percentage of X. As an extension, I think it's idiocy to believe that Boras would consider the posting fee at all during negotiations, as it would also decrease the value of his client. I have to assume Boston looks at it this way, also.

3. If Matsuzaka doesn't sign this year, Boston has as good of a chance to sign him in '08 as anyone else. In fact, they probably have a better chance to sign him than the Yankees, since NY'll be paying the "bonus round" luxury tax ($25M to Boston will be fewer real dollars than $25M to NYY).

4. If any of the money from Seibu goes back to either Boston or Matsuzaka, the MLBPA will instantly kill the posting system.

David Nieporent:

Someone (CFiJ? I'm too lazy to go back and find it) said NLB contracts cover service time, not calendar years, and that Matsuzaka was inactive while injured in '02; thus, his contract really does expire during the '08 season.
   307. TDF, situational idiot Posted: November 16, 2006 at 03:11 AM (#2239124)
Oops, I forgot a thought:

5. Is Boston insane??? TINSTAAPP, even one who's been chewing up AAAA talent. And until he throws some innings in the bigs, he's nothing more than a prospect.
   308. sardonic Posted: November 16, 2006 at 03:12 AM (#2239126)
4. If any of the money from Seibu goes back to either Boston or Matsuzaka, the MLBPA will instantly kill the posting system.


I doubt the MLBPA will go to the mattresses on this, given that the players being posted are not union members, and making it easier for Japanese players to come to MLB would theoretically increase competition for jobs in MLB, leading to lower salaries.
   309. The Ghost's Tryin' to Reason with Hurricane Season Posted: November 16, 2006 at 03:20 AM (#2239130)
If the Sox don't sign him the second highest bidder has 30 days to do it, right?

Kidding! Just kidding!

I think every angle on every aspect of this deal has been stated at least 3 times in this thread. But carry on, by all means. I think it's the most fascinating deal I've seen on years.
   310. IronChef Chris Wok Posted: November 16, 2006 at 03:27 AM (#2239139)
5. Is Boston insane??? TINSTAAPP, even one who's been chewing up AAAA talent. And until he throws some innings in the bigs, he's nothing more than a prospect.

Matsuzaka has held up his own against MLB talent in really really small sample sizes.

P.S. - This "bad faith" thing is BS. I love how Bud Selig (or Scott Boras) gets to arbitrarily decide what is in good faith and what is not.
   311. Gaelan Posted: November 16, 2006 at 03:32 AM (#2239142)
Ok, the arguments have all been made and it's time to be explicit about predictions. I think that those guys who think a deal won't get done are out of their minds crazy and don't know what the hell they're talking about. For the record:

1) The deal gets done. I'd be shocked if there wasn't a deal. I put the chances of no deal at all around 1%
2) The deal is something like 6 years/60 million

In one month we can look back and see who was right.
   312. PJ Martinez Posted: November 16, 2006 at 03:56 AM (#2239154)
I know technically he's a prospect, but doesn't TINSTAAPP have a lot to do with age? Once a pitcher gets past a certain point in his development, haven't the career-ending injury concerns that the whole TINSTAAPP idea refers to, haven't they abided?

IOW, it doesn't seem accurate to say "he's nothing more than a prospect." He's more than a prospect. Less than a tested major leaguer, perhaps, but more than a prospect.
   313. CFiJ Posted: November 16, 2006 at 04:05 AM (#2239157)
Draft picks hold out because their future is not assured. It's worth it for them to risk a year of playing time to get a big payout because they might not ever make it to the big leagues, or make it to a million dollar contract.

Matsuzaka has already made roughly $12 million in NPB. Financially, he and his are taken care of. Thus, he can afford to forgo a big payday in a year or so, in order to be posted now. He's wanted to be posted since last year. For him it's not about the money, it's about getting to MLB as fast as he can. Every player who's used the posting system knows that they can get more money by waiting. Matsuzaka knew that before he hired Boras. The Red Sox bid doesn't change that. Boras may be a guy who tries to get every last cent for his client, but he's not stupid. He knows that the $51 million was created by the blind bid system and doesn't go toward the luxury tax. He knows that even if Matsuzaka has a great year in 2007 he's not going to get 4/100 on the open market. Players choose the posting system because they have every intention of going to MLB, not to test the market.

For my prediction I say:

1) The deal gets done. Like Gaelan I put the chances of no deal at around 1%. The hang-ups between Boras and the Red Sox will be over years, not money.
2) Red Sox will want five years, Boras will want three. They'll compromise at 4 years, at $10-12 million per, with something like a mutual option for a fifth year at $15 million.
   314. Count Posted: November 16, 2006 at 04:09 AM (#2239162)
He had Santana level numbers(but not Pedro level, contrary to what some have said) in a league somewhere between MLB and AAA.

Great, another NL pitcher coming to the AL. I hope he works out better than Beckett.
   315. AROM Posted: November 16, 2006 at 04:14 AM (#2239167)
4. If any of the money from Seibu goes back to either Boston or Matsuzaka, the MLBPA will instantly kill the posting system.

I don't know if the MLBPA will care, but the teams that lost sure will.

If Boston can bid 50 million and then say "we aren't really paying that much, lets negotiate" then why should they even have the rights assuming the Mets are really willing to pay 40 million?

If they can negotiate the posting fee down after the bid has been accepted, then the posting process in the future will mean the rights to whatever team can throw the most imaginery gajillions at the end of their offer.
   316. Mork Posted: November 16, 2006 at 04:47 AM (#2239189)
Ok, the arguments have all been made and it's time to be explicit about predictions. I think that those guys who think a deal won't get done are out of their minds crazy and don't know what the hell they're talking about.

OK, I've been somewhat persuaded by some of the views here that there are reasons why Matsuzaka might accept a short term deal that's modestly below the amount he might command as a straight free agent. Conceptually, he should probably be willing to take a hit of something around one year's salary (less his Japanese salary) across the deal. Maybe that puts him within reach of the Red Sox are willing to pay, especially if the guaranteed part of the deal is short enough that the discount pushes the annual outlay into acceptable (to the Red Sox) levels.

I still put the odds of no deal at at least 50%. If a deal is done, it will look something like 3/30 with some very expensive club options tacked on the end, something like 3 annual options at 20 mill, to protect the Red Sox' upside if he turns out to be very, very good.

Matsuzaka has already made roughly $12 million in NPB. Financially, he and his are taken care of. Thus, he can afford to forgo a big payday in a year or so, in order to be posted now. He's wanted to be posted since last year. For him it's not about the money, it's about getting to MLB as fast as he can.

Riiight ... like MLB is littered with examples of players for whom, at the end of the day, it wasn't about the money because they'd already made enough. Here's a little tip about human psychology: no-one ever believes that they have enough.
   317. The Ghost's Tryin' to Reason with Hurricane Season Posted: November 16, 2006 at 04:55 AM (#2239191)
Good idea to ask for predictions. Here's mine.

The deal gets done.

- 3 years, with annual salaries of $10, 11, and 12 million.
- 4th year is team option at $16 million with a $3-5 million buyout
If 4th year picked up,...
- 5th year is team option at $20 million with a $4-6 million buyout

Each buyout is minimum if under 160 innings pitched in previous year, midpoint if 160-200, and max if over 200 innings.
   318. nycfan Posted: November 16, 2006 at 05:02 AM (#2239194)
Anyone think they'll put some incentives in the contract? I'm sure Boston will make the argument that Matsuzaka hasn't proved anything in the majors yet, and if that makes Boston only offer $9m a year instead of $13m, maybe there will be ERA, IP, and Cy Young incentives. Obviously Boras would not be pleased with that, but if it's the difference between deal and no deal, it seems like he might go for it.
   319. nycfan Posted: November 16, 2006 at 05:09 AM (#2239196)
Matsuzaka hasn't proved anything in the majors yet


god i wish there was an edit feature on this site
   320. Buzzards Bay Posted: November 16, 2006 at 05:41 AM (#2239202)
Boras and Epstein will begin with a philosophical counter-treatise on the Black hole and meander to particle theory and detour to spin flow models then tumble into the gravel of time and space in general terms---

after the first meeting they will agree to disagree

2nd meeting ends with Beckett money and a spin cycle of addendums--they both look sharp and positioned not to fail
the deal gets done
   321. Zach Posted: November 16, 2006 at 05:42 AM (#2239203)
- 3 years, with annual salaries of $10, 11, and 12 million.

So Matsuzaka gets ~37% of the guaranteed money that Boston spends on the contract?

Forget Boras, I'd recommend turning that deal down.
   322. Kiko Sakata Posted: November 16, 2006 at 06:17 AM (#2239218)
- 3 years, with annual salaries of $10, 11, and 12 million.

So Matsuzaka gets ~37% of the guaranteed money that Boston spends on the contract?

Forget Boras, I'd recommend turning that deal down.


Under that scenario, Matsuzaka would also be hitting major-league free-agency <2 seasons later than he would if he rejected the deal, at which point he'd be $30 million richer and would have major-league experience.

What's he giving up in this deal? He's making $7 million more in 2007, at worst breaking even in 2008 (I doubt he could get $11 million for '08 if he can't negotiate until May), and losing out on what, maybe $8 million in '09 (if you think he could get $20 million as a 28-year-old free-agent with no major-league experience). You wouldn't take $7 million today over a chance at $8 million three years from now?
   323. Zach Posted: November 16, 2006 at 09:12 AM (#2239306)
What's he giving up in this deal?

Suppose the proposed deal is equitable for the Red Sox. 51+10+11+12=$84 million over three years, or $27 million per. As you note, that's for a 26 year old with no major league experience. I still haven't heard a credible argument for why the Red Sox care whether they cut the checks to Seibu or Matsuzaka. So why couldn't Matsuzaka wait one year, making $7 million in the process, and offer the Red Sox a one-year deal for $27 million even? That increases his take and decreases the risk to the Red Sox, who are no longer on the hook for $84 million. Matsuzaka now has an additional year for sale, which is ultimately the one quantity for which his supply is limited.

The problem with the proposed deals is that Matsuzaka has the option of waiting a year to be a free agent. That means for one year's salary differential between MLB, he can get the same rights that the Red Sox are theoretically willing to pay $51 million for. So unless their offer is an irrational fluke that would never be repeated in the light of day (I think it probably is), I really can't see why Matsuzaka would be better off taking the deal.

Seibu is really only offering one year of access to Matsuzaka, so I'd price an equitable contract as (post price + Japanese salary)*length of contract=dollar cost of contract, more or less. If I saw a figure diverging too greatly from that, then as a hypothetical agent, I'd be concerned that Seibu is getting a disproportionate share of the American team's money. This contract can't possibly fit that criterion. So unless you think the Red Sox dramatically overpaid, and will offer a contract to Matsuzaka that implicitly recognizes this, I don't see how a deal can get done.
   324. Bmore Boy (Thailand edition) Posted: November 16, 2006 at 10:50 AM (#2239326)
Ok, a couple things.

1) Is the NESN money for the broadcast rights shared? If not (and I think it's not), I suspect that the amount NESN gets for selling the rights to Red Sox broadcasts in Japan is going to be a fairly substantial figure.

2) From all the talk I've ever heard and the financial actions I've seen, I get the impression that the Red Sox spend at the luxury tax limit not because they don't have the money, but as a matter of principle (and because the tax is a substantial hit).

So for the bid to make sense, all you need is NESN/advertising + discretionary player payroll ABOVE the luxury tax over 4 or 5 or whatever years + discount obtained from exclusive negotiating rights = 51.1 or more. At that point, it makes financial sense. It perfectly fits into your budget, it is money you have but for various outside reasons won't spend otherwise.

In other words (and purely hypothetical numbers), say DMat signs 4/50, instead of 4/80. That's 30 mil.

Say NESN gets 3 a year for broadcast rights (likely conservative, it'll be national broadcasts for a rich country of 130 million or so): that's 12.

Let's use the $3 mil per on advertising, because I have no idea how much it's worth so it's as good as any: that's 12 again.

We're at $54 mil already.

To make it interesting, let's say they can't get a $30 mil discount, make it $10 mil, they pay 4/70 (not that I think that'd happen). We're at $34 mil now.

Then, if the Sox have $4 mil a year in discretionary payroll they could afford, but don't spend because of the tax, you're at $50 mil.

And my guess is, the FO isn't being slavish about accounting for the entire cost: if you end up covering only 40, that's ok.

I can't believe it myself, but assuming DMat is worth his non-bid salary+discretionary payroll above the tax, this might actually be a GOOD investment if the market goes where it looks like it'll go. The (imaginary number) $4 mil you can't spend otherwise, the extra revenue from broadcast rights and advertising, and the discount on actual payroll could easily make for $50 mil over a 4 year deal.

Of course, if NESN must share that broadcast money equally - say, MLB has control over all showings internationally - then it becomes a lot harder - but depending how much cash the Sox have just sitting around collecting interest, it can still make sense. It's a smart play for a team that has more money than they can invest in payroll.

My guess is, THAT'S why they had the highest bid - specifically because they don't want to go over the tax, but they have the money to. The Mets and Yanks both have no problem going over the tax, so they already are making optimal or near-optimal (or at least more optimal) use of their cash, leaving aside individual payroll decisions. The Red Sox aren't, and the posting system gives that extra cash a useful outlet.
   325. Tom Cervo, backup catcher Posted: November 16, 2006 at 11:03 AM (#2239327)
If not (and I think it's not), I suspect that the amount NESN gets for selling the rights to Red Sox broadcasts in Japan is going to be a fairly substantial figure.


Nope, you're wrong, it's split equally among the 30 teams. The Red Sox don't have the rights to broadcast their games internationally, MLB does.
   326. CFiJ Posted: November 16, 2006 at 02:03 PM (#2239346)
Riiight ... like MLB is littered with examples of players for whom, at the end of the day, it wasn't about the money because they'd already made enough. Here's a little tip about human psychology: no-one ever believes that they have enough.

Obviously Matsuzaka wants more, otherwise he wouldn't have hired Boras. But if he was looking for the biggest contract he could get (deep breath) he wouldn't have asked Seibu to post him. When I brought up Matsuzaka's salary, it was to compare his situation with that of a draft pick. A draft pick has a reason for holding out for more money; Matsuzaka doesn't. He asked to be posted this year because he wants to be in the Majors in 2007.
   327. TDF, situational idiot Posted: November 16, 2006 at 02:39 PM (#2239360)
4. If any of the money from Seibu goes back to either Boston or Matsuzaka, the MLBPA will instantly kill the posting system.

I doubt the MLBPA will go to the mattresses on this, given that the players being posted are not union members, and making it easier for Japanese players to come to MLB would theoretically increase competition for jobs in MLB, leading to lower salaries.


On the other hand, the posting system artificially depresses salaries for two reasons:
1. There is no bidding for the player's services, only on the right to negotiate with him. Exactly $0 of that $51M is going to any member of the MLBPA.
2. Money spent on bidding could just as easily be spent on salaries.

Everyone here thinks Matsuzaka is going to take significantly below-market money, which is definately not in the best interests of the MLBPA. If it comes out that there are shenanigans going on in the system, MLBPA will demand that the players all be treated like those from every other country - free agents.

and making it easier for Japanese players to come to MLB would theoretically increase competition for jobs in MLB, leading to lower salaries.

I don't think so, because only the best players will be able to come over (the merely good players won't be seen as worth the trouble), and salaries for the best players (generally) constantly increase. We often hear that the average salary has increased drastically over the years, but does anyone know what the median salary has done - are the average guys getting as big of increases as the guys at the top?

As for my prediction, if Boras is as good as he thinks he is, Matsuzaka gets paid like the best FA pitcher on the market - $45M/3, plus $20M option/$5M buyout for the 4th year.
   328. Francoeur Sans Gages (AlouGoodbye) Posted: November 16, 2006 at 02:57 PM (#2239369)
I like the predictions idea.

I predict 4 years, $52m, with options for two more years (possibly vesting).
   329. b Posted: November 16, 2006 at 03:10 PM (#2239378)
Obviously Matsuzaka wants more, otherwise he wouldn't have hired Boras. But if he was looking for the biggest contract he could get (deep breath) he wouldn't have asked Seibu to post him.

As I've said before, the way that Matsuzaka makes the most money possible is if he gets posted and the winning bidder offers him the contract he wants now. So, if he gets 14/14/14/Opt20 from the Red Sox, that's more than 3.5/16/16/16 if he waits a year. Hell, you've got a Silverman column today talking about how the deal may end up as short as 2 years with an AAV between 14 and 16. As I've said before, if the Red Sox go there, these negotiations will be easy.
   330. PJ Martinez Posted: November 16, 2006 at 03:12 PM (#2239381)
"I predict 4 years, $52m, with options for two more years (possibly vesting)."

That sounds close to me. One of the wild cards, thugh, is that reportedly Boston wants more years, while Boras/Daisuke want fewer-- which is odd, but, if true, is obviously because the latter want another big payday.

For that reason, I suspect it's 3 yrs with two options, or maybe 4 yrs with one-- but I wouldn't be surprised if the options are player options, especially if the AAV is closer to 10m than 15m.
   331. Kyle S Posted: November 16, 2006 at 03:15 PM (#2239389)
I would say 4/40, but since i think the guaranteed salary has to be higher than the posting fee, i'll say 4/52 as well. Sorry, OneAlou.
   332. Francoeur Sans Gages (AlouGoodbye) Posted: November 16, 2006 at 03:23 PM (#2239396)
Screw you Kyle - I'm going home.
   333. Daryn Posted: November 16, 2006 at 03:25 PM (#2239398)
But, what if no one else thought the guy was worth $20? What if everyone else had the player pegged at 15 or so and no one else was willing to go higher than 18-19? It becomes a cricket pick, for a few minutes it's so quiet in the room you can hear crickets chirping in the backgound. (then depending upon the maturity level of the league woners you'll hear either laughter, "what the hell was that" or continued silence")

My first year of playing roto was 1990. I bid $24 on Carney Lansford (following an opening bid of $5). Silence. I haven't done that again.
   334. Kiko Sakata Posted: November 16, 2006 at 03:40 PM (#2239414)
I still haven't heard a credible argument for why the Red Sox care whether they cut the checks to Seibu or Matsuzaka. So why couldn't Matsuzaka wait one year, [costing himself] $7 million in the process, and offer the Red Sox a one-year deal for $27 million even? That increases his take and decreases the risk to the Red Sox, who are no longer on the hook for $84 million.

Because neither the Red Sox nor anybody else would ever offer Matsuzaka a 1-year, $27 million deal. The reason why the rights to Matsuzaka are worth $51 million to the Red Sox today could be for either (or both) of two primary reasons:

1. The Red Sox refuse to pay luxury tax, so will only offer Matz a salary that keeps them under the luxury tax threshold. There's no way a $27 million salary would do that.

2. The Red Sox expect to recoup that $51 million in enhanced marketing opportunities in Japan. Nobody believes that they can recoup such a figure in one year. Hence, even if Matsuzaka were worth $27 million per year to the Red Sox over, say, 4 - 5 years, he's not worth anything close to that on a one-year deal.

Also, if it's true that he can't declare for free agency until May, 2008, then I think it's more accurate to think of him as being closer to two years away from free agency than one year, since I think he's going to have trouble getting big money in 2008 (a) because he'll only be available to his team for about four months (assuming it takes one month for him to negotiate/report/get in shape), (b) teams aren't going to have $20 million in free 2008 payroll lying around in May of 2008, and (c) the ancillary marketing benefits aren't going to be fully recoupable in 2008 if he doesn't sign before May.

I think that 3/$33 is exactly the kind of deal that Matsuzaka wants (obviously 3/$36 is better than 3/$33 and 3/$40 is better than 3/$36). The Red Sox, on the other hand, want to lock him up for as long as possible. I think the general emerging consensus that they compromise on 4 guaranteed years with options for 1-2 more sounds about right to me, and I think it's about a 95% chance that it gets done.
   335. JPWF13 Posted: November 16, 2006 at 04:05 PM (#2239430)
My first year of playing roto was 1990. I bid $24 on Carney Lansford (following an opening bid of $5). Silence. I haven't done that again.


Around the same time I made an opening bid of $15 on Mariano Duncan...

So far just about every prediction results in an average annual cost to Boston greater than $20mm per. My favorite is the 2 year 30MM prediction (Silverman?)
that works out to 2 years 80mm for Boston

Just nuts, completely nuts.
Boston seems to be counting on DM wanting to come to the MLB, having already cut ties with Seibu (which is by all reports in financial trouble) (in the words of one unamed MLB opfficial there is allegedly zero chance that DM can return to Japan)

I think Boston's bid was completely irrational (FWIW I also think the reported 2nd best bid of 38mm by the Mets was also irrational- which the Mets seem to realize- Omar looked relieved talking to reporters about it). It's double what Boras thought it would be for crissakes- and its apparently partly driven by Boston having money, but unwilling to go over a self-imposed salary cap. - All Boras really has to do to queer the deal (assuming Boston doesn't really go nuts and pay DM everything he wants) is keep telling DM, "Well they have the money, and they think you're worth it- but they don't want to give it to you, they want to give it to Seibu- the guys who've been underpaying you for years and wouldn't let you post when you wanted to"
   336. Zach Posted: November 16, 2006 at 04:19 PM (#2239439)
Well, obviously as an agent, I would be willing to offer as many years at $27 million per as a team was willing to pay. The example was constructed to show how easily both sides could benefit if you remove $51 million of dead weight from the contract.

I don't have much sympathy for a self imposed rule that forbids paying any luxury tax, but has no problem with a $51 million transfer fee. Both are expenditures for a payer that don't actually go to the player. It might not be coming out of the arbitrarily defined player compensation budget, but it comes straight out of the bottom line.
   337. JPWF13 Posted: November 16, 2006 at 04:30 PM (#2239448)
but it comes straight out of the bottom line.


yes but read all the posters above who seem to think that it doesn't- that it's monopoly money from the Redsox POV- and how you're a fool if you don't accept their quasi-mystical reasoning which clearly explains that the $51mm is compeletly meaningless.
   338. Kiko Sakata Posted: November 16, 2006 at 04:51 PM (#2239462)
I don't have much sympathy for a self imposed rule that forbids paying any luxury tax, but has no problem with a $51 million transfer fee. Both are expenditures for a payer that don't actually go to the player. It might not be coming out of the arbitrarily defined player compensation budget, but it comes straight out of the bottom line.

I agree with this, except to the extent that the luxury tax has a real cost, so $51 million untaxed = $55 million taxed if the tax rate is 10% (I forget what it is), but if the Red Sox view them differently, then it will affect Matsuzaka's ability to get paid $27 million per year.

Two other things.

1. The 3/$33 hypothetical set out above isn't in the best interests of the Red Sox. They obviously want to be able to spread that $51 million over as many years as possible. I would expect the Sox first offer to be for at least 6 years; it's Boras and Matsuzaka that want a shorter deal, so they can hit true free agency sooner.

2. If the Red Sox are the only team that values Matsuzaka at $27 million per season (and I don't think even they do), then, in free agency, he's not going to be able to get that - unless Boras gets the Sox to bid against themselves.

The SECOND bid is the key for estimating what he'd be worth on the free market, and if the Mets bid $38 million, with the intention that it could be spread over 6 years (since Matz isn't a free agent, the winning club would get exclusive rights for six years unless they chose to bargain that away), paying Matz, say, $12 million per year, puts his perceived value at $18 million per year or so. If that's the case, then all of a sudden 3/$33 becomes a no-brainer for Matsuzaka based on the math I laid out in #332 above.
   339. Zach Posted: November 16, 2006 at 05:03 PM (#2239474)
I appreciate you trying to work out a deal that's actually fair. It's too bad I've got to go to work and can't carry this on until this evening.

Assuming $38 as a better value for the transfer fee, I think you could work out a fair deal as
$10 million for the first two years, $20 million for the second two, $25 million for the fifth. That's an average expenditure of $24.6 million/year, and gives Matsuzaka a full year of salary at the average level of expenditure. Going from $38 to $51 million for the transfer fee, you might adjust the numbers as
13.4/13.4/26.8/26.8/33.5

That's the range of deals that might strike me as fair to Matsuzaka.
   340. JPWF13 Posted: November 16, 2006 at 05:18 PM (#2239489)
That's the range of deals that might strike me as fair to Matsuzaka.


Going from $38 to $51 million for the transfer fee, you might adjust the numbers as
13.4/13.4/26.8/26.8/33.5

That doesn't give Matsuzaka "$10 million for the first two years, $20 million for the second two, $25 million for the fifth." It would only if the bid had been something rational- like 28.9mm

Giving Matsuzaka "$10 million for the first two years, $20 million for the second two, $25 million for the fifth." entails Boston paying out approximately $136mm over 5 years- which is a bit pricy...
   341. Buzzards Bay Posted: November 16, 2006 at 05:19 PM (#2239492)
if you view the luxury tax as an individual taxpayer views government confiscation--the IRS--then you see it as strictly a monetary equation in personal terms-give and take-
if you view the luxury tax as the threshold at which you begin to strengthen your opposition--marginal wins created--by the funding of your opposition/your competition on the field--you can then argue persuasively to finance-borrow monies-to fund for posting,eg you utilize this system to improve your marginal wins solely
and then you become the roadrunner to wile e coyote's debt service
beep beep
   342. Backlasher Posted: November 16, 2006 at 05:56 PM (#2239519)
Again, here's the problem. NESN and the Red Sox don't own the broadcast rights to Red Sox games in Japan. NESN can't sell the broadcast rights to Japan any more than I can sell my neighbor's Jaguar.


Not technically correct, but possibly practically correct. The teams can certainly exert control over who broadcasts from their facility via the ticket license, and the broadcaster themselves would own such rights. What the teams have done through a contractual arrangement is guaranteed that MLBI will be the exclusive licensee of any resulting broadcast for the purpose of most foreign transmissions. So the analogy would be more like that you can't sell your car that you have leased to your neighbor, but happens to be parked in your driveway.

In the 2004 annual report, MLBI indicated they are in the first of a six year deal with Dentsu for the Japanese broadcast rights for OTA and cable broadcasts. It appears that radio is also part of that deal. Dentsu then licenses to the Japanese broadcast networks.

One thing that I have been surprised about is Bud's ability to keep all the teams on the same page with MLBI, local broadcast revenues, and MLBAM. I cannot see how teams like the Dodgers, Yankees, Mariners, and Red Sox would want to be part of such deals.

Back when broadcasting depended on dealing with someone that had very expensive technical infrastures and networks of affiliates this all made sense.

But ESPN burst the first bubble. Who needs networks when you can bounce your signal off a provider right to the local content distributor. The internets have burst the second bubble.

The Dentsu agreement expires in '09, but there is no sign whatsoever that the teams are going to do anything except keep up MLBI and MLBAM. Now those two could end up having an internal squabble b/c of the demands of content exclusivity by their licensees. Therefore, in terms of direct revenues, I don't think that you are going to see a heck of a lot. You may be able to increase signage rates.

In terms of goodwill and brand development, then you may see some growth. Which may be the endgoal after all. It gets the Sox in the National and International press. They could move into afterthought status pretty quick if they don't generate buzz and this will generate buzz for a long time especially if they sign Dice-K.
   343. David Nieporent (now, with children) Posted: November 16, 2006 at 06:26 PM (#2239546)
One thing that I have been surprised about is Bud's ability to keep all the teams on the same page with MLBI, local broadcast revenues, and MLBAM. I cannot see how teams like the Dodgers, Yankees, Mariners, and Red Sox would want to be part of such deals.
First, I don't think that MLBI or MLBAM had any revenues at the time teams first agreed to it, so it was an easy initial sell for Bud.

Second, if the big market teams don't do sufficient sharing, we end up with 1994. That ultimately is worse for the bigger market teams (and remember -- the more profitable you are, the more damage to the league harms you). So rather than giving up actual local revenues that they work hard to generate themselves, they let MLB do all the work in these new media formats, take all the risks, invest in all the infrastructure, and keep whatever revenues it generates.
   344. I am Ted F'ing Williams Posted: November 16, 2006 at 06:47 PM (#2239560)
Red Sox sign Matsuzaka for $30M or so.

NESN signs Matsuzaka to a personal services contract covering the same period for $5M.

NESN will begin a line of "Matsuzaka Gyroball Anime" that MLBI and MLBAM can't touch and rake in billions.
   345. TDF, situational idiot Posted: November 16, 2006 at 07:28 PM (#2239639)
Here's a broadcasting question:

Where is MLBI getting their feeds? If from the local producer (NESN), couldn't NESN charge a very large fee to MLBI, thus recouping some of the money paid for/to Matsuzaka? Or does MLB actually own the feed itself, with the local producer paying a fee to them to broadcast? And if that's the case, who pays for the production costs?
   346. Zach Posted: November 17, 2006 at 05:28 AM (#2240085)
Giving Matsuzaka "$10 million for the first two years, $20 million for the second two, $25 million for the fifth." entails Boston paying out approximately $136mm over 5 years- which is a bit pricy...

Yeah. It's that fee again. When you start trying to do the math, it's just too big for Boston to recoup and still give a fair contract to Matsuzaka. $38 million is the high side of reasonable. $51 million is too much.
   347. rr Posted: November 17, 2006 at 09:10 AM (#2240215)
A few days late, but no time to post like when you are recovering from getting wisdom teeth pulled and don't have to work tomorrow:

Well, now that is an interesting point, which I hadn't considered. If their stance on the luxury tax issue has always been political and not financial, then sure -- then I could definitely see why this makes sense and it would NOT affect their acquisition of other players. That would suggest they have been acting irrationally (from an economic POV) all along, and that this opportunity has given them a chance to take some of their resources which they were irrationally refusing to spend to acquire talent (for political reasons) and now actually spend it. And then, apart from that, they can go about their prior policy of spending on "payroll" right up to the tax trigger.

Very interesting analysis -- if it is the explanation for their policy, of course. What a bizarre little team those Red Sox are! ;-)


I think the Red Sox are playing a lot of angles here, the main ones being:
1)international market/revenue stream opportunities, 2)screw the Yankees, 3)improve the team. My own uneducated guess is that Henry likes #1 a lot, Lucchino is into #2, and Epstein is all about #3. I recall that before the Matsuzaka bids were revealed, many folks here and elsewhere were assuming it would be the Yankees or the Mets because this kind of move didn't seem to fit in with the Red Sox M.O. in many respects.

But these were exceptional circumstances, and the Red Sox were ready to make an exceptional move. And, they can try, at least, to still maintain their public "fiscal responsibility" stance, and well, if a bunch of columnists or Yankee fans say they're hypocrites, who really gives a ####? Selig is very unlikely to do anything to them even if they offer Matsuzaka 3M a year.

As I have said in other Red Sox threads, I know some things about Lucchino from two guys who dealt with him extensively out here in San Diego, and I have seen him operate in person, in public, but not publicized--settings a few times. He is a slick ############, and really smart, but is very thin-skinned about criticism, even if it is from people who are no threat to him. He was a real assshole to people who questioned his ballpark plans in any way here, in the paper and in meetings, and one guy who dealt with him a lot said he is "brilliant, but sometimes seems to think of himself as a hero in a movie." So, he tries to present himself as being slick and cagey, and is a hard-ass pol, executive and negotiator, but also wants to be seen as civic-minded and community-oriented. It might be hard to be seen that way in some quarters if people think you have a lot of money you could be spending on the team that you are keeping because you are buds with Bud. But, most Red Sox fans, in this thread at least, just seem to want to see this as more smart Red Sox business. And maybe it is. We will see.

So, with that in mind, I think the "Evil Empire" line, while partly marketing and pub and schtick, is also something LL would actually want to believe, (And I think Bud Selig, given where he comes from, probably wants to believe it, too. A 200M payroll? Gross. Spending 51M to talk to the star of Bud's WBC? Awesome.) Lucchino wants to kick the Yankees' ass without being the Yankees--not bludgeoning the opposition to death with massive payroll, but dominating them with with brains and talent and character, sort of like the Patriots are seen as doing. He may not say much about it to the media--getting after local pols and and reporters and fans, as he sometimes did here, would be different in Boston--much different--than it was in San Diego. But unless he has changed a lot, the "New York Yankees of Boston" and "Evil Empire Jr." cracks--and there are going to a lot of them--will bug him a lot. So he has personal reasons to want to keep the payroll at the cap line--while still spending the 51M--and so does Henry, although those reasons are likely also very pragmatic. And, I would be willing to bet that you will see some public statements from Henry and Lucchino about how the luxury tax system is right and just and good and the Matsuzaka bid was a one-time thing that they did for their great fans and they have thought of a zillion innovative ways to make it pay off.

Also, FWIW, I think Lucchino is a manipulative assshole, based on what I know, but he also seems to be a very smart guy, a skilled and innovative executive, and I see nothing "wrong" with the Red Sox bid. But I think they sure as hell could spend a lot more on the MLB payroll and eat the luxury tax with no problem if they wanted to and posting 51M for this guy is powerful evidence in support of that belief, reagrdless of how the money is accounted for.

Moreover, the "posting system" is not a bargained for element with labor and I would think the MLBPA has as much an interest in that process as it will increasingly affect the amount of labor compensation as they would be compensatory draft picks.

Yeah, and I am going to be interested to see if that changes. With the new CBA in place, of course, making changes now would be problematic. One "ripple-in-the-pond" thing to look for on this is if you see established players ######## about it. One counterargument could be that Matsuzaka does not get to keep the money, Seibu does, but MLBPA would also have a problem with that, either because they think he sure as hell should get part of it (like the 19th-century star Deacon White supposedly said, "no one is going to sell my carcass unless I get half") or there is an under-the-table arrangement among Boras, Seibu and Boston. And, of course the owners may want to change the system, too, but given the fact that NPB is an independent entity, that adds another element to the mix.
   348. rr Posted: November 17, 2006 at 10:18 AM (#2240225)
Olney's take via Shaughnessy and his own sources. Selig is "livid" about the bid, supposedly.

• Boston's bid for Daisuke Matsuzaka had Larry Lucchino's fingerprints all over it, writes Dan Shaughnessy. Rival executives assume that the Red Sox made their bid in this way: Initially, the Red Sox figured to bid $50 million, but then, like savvy disciples of the "The Price Is Right," they added another "1," figuring that could be a tiebreaker. And then, guessing that another team might also try the same ploy, they added another "1," coming up with $51.1 million.

The Red Sox will try to keep the negotiations hush-hush, writes Tony Massarotti. I really don't think it's going to be that complicated. An official involved in the Matsuzaka bidding said that if his team had won, it was prepared to offer a four-year, $36 million deal to the pitcher. A respectable, competitive offer, when you consider that proven young pitchers such as Johan Santana and Josh Beckett are getting $10 million a year. Part of the thinking in shaping that offer was that the total package for Matsuzaka -- salary and posting fee -- would need to be less than the annual average value of Roy Oswalt's five-year, $73 million deal.

"So I expect that the Red Sox are going to offer something in the four years, $9 million-a-year range," said the official, "but maybe try to work out a six-year deal in order to get the average annual value of the total package down -- say, like six years at $10 million, which would get the AAV down below $20 million [$51.11 million bid, plus $60 million in salary].

"Boras basically is in an impossible situation, because nobody wants the negotiations to break down and have this guy go back to Japan. Seibu doesn't want him back, because they want to keep the $51 million. Matsuzaka doesn't want to go back, and a $10 million a year offer is a 300 percent raise for him over what he made in Japan. Major League Baseball wants him to stay, of course, because of the interest he's generated."

The only way Boras could get real leverage in the negotiations, besides threatening to return to Japan, would be if commissioner Bud Selig determines that the Red Sox are not acting in good faith in negotiations; Selig is the only party in this matter with the power to award negotiation rights to another team. "And do you think that the commissioner is going to step in and say that an offer of four years, $36 million is not fair to Matsuzaka?" said the official. "Of course not. He's livid about the bidding to begin with, about the possible overall cost being far more than $20 million a year. Do you really think he would step in to rescue Scott Boras?"

Ah, no. Which is why I think the Red Sox will make a solid offer, and stand on it, and assume that Boras doesn't have the guts to take his client back to Japan.


Hmmm. Implying a guy who let JD Drew play in the Northern League doesn't have the "guts" to take Matsuzka back to Japan and will see this as an "impossible situation" makes it sound like LL himself is the source, using another Red Sox guy as a mouthpiece.
   349. I am Ted F'ing Williams Posted: November 17, 2006 at 06:35 PM (#2240471)
With $51M, Seibu could sign Zito or Schmidt for 2 years and have a few million left over.
   350. CFiJ Posted: November 17, 2006 at 06:43 PM (#2240487)
Implying a guy who let JD Drew play in the Northern League doesn't have the "guts" to take Matsuzka back to Japan and will see this as an "impossible situation" makes it sound like LL himself is the source, using another Red Sox guy as a mouthpiece.

And again, rather than being a human being with his own rational decision-making abilities, goals, and interests, Matsuzaka exists only to serve Boras's will...

The fallout for Drew playing in the Northern League was nothing like the fallout Matsuzaka faces if he goes back to Japan.
   351. rr Posted: November 17, 2006 at 06:57 PM (#2240497)
And again, rather than being a human being with his own rational decision-making abilities, goals, and interests, Matsuzaka exists only to serve Boras's will...

The fallout for Drew playing in the Northern League was nothing like the fallout Matsuzaka faces if he goes back to Japan.


I think Matsuzaka will sign. But Boras will not make it easy. But having watched LL work the media here, I think that quote is just a little gamesmanship planted by LL. Drew dealt with pretty serious fallout which follows him today, but it is obviously a different culture and a different situation.
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