Triumphant Return

Well, I missed the excitement of the playoffs, but I am returning barely too late to comment on the Matsuzaka posting. I will say up front that I am very excited about Matsuzaka. Every projection I have seen would make him a legitimate ace. It seems Boras’s claims that he will be a top 10 pitcher might be uncharacteristically accurate. The Sox have apparently been scouting him for some time, and agree. He will almost certainly be the best pitcher available this year, and has a chance of being the best by a long shot. However, there has been much discussion of the huge amount of money in the posting fee (ESPN is reporting $51 M, but apparently a Red Sox email quotes $42 M). People want to conflate this fee with his presumed salary and they are already calling him the ‘$100 M man.’ Fox Sports has gone so far as to pronounce the Sox “the new Evil Empire.” Obviously I find this endlessly annoying, but I know it should be expected.

Firstly, we have to realize that it is a mistake to conflate salary with the posting fee. The fee does not count towards the salary cap, and it is not drawn out; it is a one time cost. Many people have expressed surprise that the Red Sox, who had recently showed such fiscal conservatism by letting Damon and Pedro walk, would open their checkbooks like they did for Matsuzaka. The difference is simple. The organization has long avoided contracts that would saddle them down in the future as players decline. This, however, is a one time cost; a single check for money that we all know is there. And Matsuzaka is only 26, a very rare commodity to be able to come by. Further, the luxury tax cap has been sort of the working limit for the Sox (Henry publicly appologized after toppong it a couple years ago). Since the posting fee does not count towards this cap, it will not limit their ability to pay other players this winter. In fact, I expect a quite busy off season. But there are several more reasons that this makes sense.

It should not be forgotten that this signing does not cost the Sox a draft pick, as signing an A graded MLB FA would. There are also the issues of investment. The Sox investment works on two levels. The first is the straight-forward investment towards selling caps and broadcasting games in Japan. The second is the investment in Asian players. According to Gammons on ESPNews Tues night, Theo is convinced that 30-40% of the best players in the world will be coming out of Asia, and he has plans to get into this player market by opening academies in Thailand and China. A high profile Asian star could be helpful in attracting players from the area. So it stands to reason that this $51 M is coming from at least 3 or 4 different (presumably somewhat independent) budgets: MLB roster, marketing, and player development, as well as likely some sort of ‘rainy day fund’ to be tapped in the rare instance that, say a 26 year old potential ace is suddenly available. When looked at this way, the number does not seem quite as huge.

It will make even more sense if we look at how it might break down. It is likely that Mats will pitch like a pitcher worth $15-16 M per year. If the Sox think they can sign him for $10-11 M, due to the exclusive negotiation, then posting is immediately worth the balance of (assuming a 4 year deal) $20 M. Perhaps they figure it’s worth another %10 since it doesn’t count towards the cap: $22 M total. I saw it posted in SOSH (sorry, I can't find the link - far too many long threads to look through) that an economist estimated that the Sox will make ~$3.3 M per year in Japan due to Mastuzaka (seems a conservative estimate especially given the marketing creativity the Sox FO has shown). I will use this number simply because it is the only concrete estimate I have see. If 3.3M is right, he is worth a $13.2 M investment for marketing, for a total of $35.2 M. Say, for the sake of even numbers, the draft pick they can retain is worth $0.8 M, for $36 M total. His value as a symbol and spokesman could be about $5 M for attracting Asian players. On top of this it is not a stretch to think that due to the rarity of acquiring such a package is worth another $10 M from a rainy day fund (or JWH’s pocket) to make absolutely sure it happens. Now this doesn’t prove anything, because I’ve completely made most of these numbers up. But it does seem likely that the FO broke the post down in a similar way. I don’t think any of these numbers are unreasonable, (some are even quite conservative) and as such they make the $51 M total make a bit more sense.

All of these values are somewhat contingent on his performance, but I think this may be overstated. Certainly, if he is a total bust, he will attract little attention and thus money and players from Asia. However, the chances for this are sufficiently slim that it’s worth the risk. The important point is that Matsuzaka does not need to be one of the best pitchers in the game for most of these investments to pan out. Consider Hideki Matsui. He is a legitimate #5 hitter (on most teams), for sure, but he is no superstar. That is, he is no superstar in terms of skills in MLB, but he is treated as a superstar in Japan. The Yankees are very well known and followed closely by many in Japan, largely because of Matsui’s presence. And he’s maybe the 4^th best hitter on the team! My point is that, in order to be valuable for marketing and player development in Asia, Matsuzaka doesn’t need to perform above the level of, maybe, a legitimate #2 starter. I think he is very likely to exceed that level of success. My point is not that there is no risk in the signing; there certainly is some, and maybe more than most FA signings. My point is that the cries of “he has never thrown a pitch in MLB!” are exaggerating this risk. Further, as several recent FA signings have shown, it may well be better to take a risk with a big upside than a guaranteed mediocrity.

And the final point: It’s just money. Players are worth much more than money. This is relevant because of implications of this signing with regard to the draft and to player development. Players can be can be used on their own right (you can fill a hole in your lineup from within), they can be turned in to other players (via trade), and if necessary, they can be sold for money. Money can only get you free agents. Free agents are very restricted in quantity, they can only be acquired during the offseason, and they are usually quite expensive. Trades, however, can be made anytime (theoretically, this is ignoring trade deadline complications), and many more players are available by trade at any time than are by free agency. The point is that players are a more flexible asset and thus more valuable from a team building standpoint than their strict salary value might indicate.

All in all this is a very good move by the Sox in my mind. They needed a boost in their rotation, and he was clearly the best available. I am very excited to see him pitch. And according to Will Carroll’s latest account, he does throw the gyroball. Oh joy.

Coming up soon is my 2 part explanation of what I think would be an ideal off season for the Sox. After all, you asked my opinion just by visiting the sight.