It’s About Revenue Sharing

I read a long article on mlbtraderumors.com about the reasons for new posting system (and it’s $20 million posting fee cap) which strangely ignores the main reason why MLB’s small-revenue teams insisted on a new system.

Yes, as Zach Links’ article states, the new $20 million posting fee cap allows more teams to have a realistic opportunity to negotiate with the posted Japanese star, helps small teams by allowing them to pay the posting fee over two seasons, and could (although I’m doubtful for the reasons set forth below) prevent one team from overbidding on the posting fee compared to other team’s bids.

However, it seems to me that the main reason the small-revenue MLB teams wanted the new posting fee cap is simply because under the old system the posting fee (which was over $50 million for each of Diasuke Matsuzaka and Yu Darvish) wasn’t counted toward the revenue-sharing salary cap (the luxury tax).  In terms of the luxury tax, the Red Sox and the Rangers signed Dice-K and Darvish for relative bargains after they’d ponied up their big, uncounted posting fees.

In fact, I’m not convinced that the new system doesn’t actually end up costing winning MLB teams more money overall for the top Japanese players than the old system did.  Think about it: the posting fee is capped at $20 million, but then Masahiro Tanaka and his representatives got to negotiate with every single major league team that was willing to post a refundable $20 million.

It’s clear the Yankees, baseball’s richest team, or at least with the Los Angeles Dodgers one of MLB’s two richest teams, was determined to sign Tanaka.  To the extent they saved any money they might have overbid on a posting fee under the old system, the Bombers overbid under the new system once Tanaka hit essentially an open market.

If the old system had been in place, my guess is that the Yankees would have come in with a winning posting fee bid of between $70 million and $80 million (how many teams in MLB, except the Yankees and Dodgers, could shell out a lump sum in that amount for the right to negotiate with a player?).  In fact, I think the Yankee’s winning posting fee bid would have been much closer to $70 million than $80 million.

At any rate, once the Yankees won the posting fee bidding process, they’d be the only team that could negotiate with Tanaka.  As such, I can’t see that Tanaka would have gotten more than $80 million to $90 million for six or seven years, because his only other option would be to return to the Rakuten Golden Eagles for less than $6 million on a one-year contract.

Realistically then, I don’t see Tanaka costing the Yankees more than about $160 million under the old system, compared to the $175 million Tanaka actually cost them under the new system, and that doesn’t even count the potentially enormous opt-out clause in Tanaka’s contract which allows him to go back onto the open market after the fourth season.  There’s no way Tanaka gets an opt-out clause if he can negotiate a contract only with the Yankees.

While the new system probably cost the Yankees more money in securing Tanaka’s services, it also means that instead of incurring $80 million or $90 million toward the luxury tax, the Yankees will be incurring $155 million plus the possibility of even more money under the opt-out clause.  As a result, the Yankees are going over the salary cap again in 2014 and probably future years, and every small-revenue team in MLB that receives revenue sharing money is going to get an indirect pay-out from the Yankees.

At the end of the day, the Yankees still get the player they want and the small-revenue teams all get at least a little money put into their pockets.  That’s the reason why the new posting fee system exists.

Explore posts in the same categories: Boston Red Sox, New York Yankees, Texas Rangers

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