Location: Vienna, Virginia, United States

A graduate of Dartmouth College (2005) and Washington and Lee University School of Law (2010). These are my personal blogs, and the musings expressed on them do not reflect the positions of my employer. They do reflect my readings, thoughts, and aspirations, which I figure is good enough.

Wednesday, November 29, 2006

Turning Japanese (Part 2)

The latest Japanese baseball player to be posted is Kei Igawa, a left-handed 27 year-old pitcher from the Hanshin Tigers.

Perhaps influenced by the bidding on Matsuzaka, the Yankees won the posting with a bid of $26 million, significantly more than the next highest bidder, the Mets, who are rumored to have bid $15 million. While the Mets bid is just a rumor, I find it likely, as early speculation had the posting fee around that level, and the Padres supposedly put out a bid of "more than $10 million."

My guess is that the Yankees took a look at the free agent money being thrown around and the Matsuzaka bid and figured that they should dial their bid up. Let's suppose Igawa gets 4 years, 28 million, which puts the Yankees expenditure at a total of $13 million a year over those 4 years. I don't know if that contract is going to be what Igawa will get, but I find it reasonable.

Obviously, the figure isn't exact, as the posting fee is not counted against payroll figures and is therefore not subject to luxury tax considerations, especially under the new CBA. This could actually save the Yankees some money; if they signed Barry Zito to a contract worth $14 million annually, that entire number would be counted into the payroll. With the luxury tax thresholds rising over the next few years, signing Igawa could be one of the first moves the Yankees will make to actually drop under, or at least minimize, their luxury tax payments.

This is why the posting process actually is a bigger boon and a more lucrative process than we think for teams with high payrolls and deep pocketbooks. In addition to having more money to throw around, the Yankees or the Red Sox (if the Red Sox were over threshold) would much rather pay a posting fee and a salary than an equivalent or slightly higher salary to an American free agent.

Just to give an example - if Yankees are over the luxury tax threshold:

Igawa: 26 million posting fee to Hanshin, plus 4 year deal worth 28 million (just an assumption).

For luxury tax purposes, $7 million a year, plus 40% luxury tax penalty equals 10.8 million.

If the Yankees stay over the threshold each year of the contract, which is unlikely given the new thresholds put into place in the new CBA, the total expenditure on Igawa will be $69.2 million

Suppan: Let's say the Yankees sign a league average Jeff Suppan to a 4 year deal worth $10 million a year. It looks high, but I would direct your attention to the contracts given to out a number of middle relievers (Danys Baez: 3 years, 19 million), and outfielders (Juan Pierre, Gary Matthew Jr.).

Quick Update - Adam Eaton, a pitcher who is barely average, if that, who has never pitched more than 200 innings in a season (close a couple of times), just got 24.5 million dollars over 3 years to go to the Phillies, where his high home run and fly ball rates will be just as manifest as they were in Texas. This convinces me as much as any other signing that someone like Suppan will likely get 10 million a year or more.

In any case, in our example with Jeff Suppan, the Yankees will pay

$10 million a year to Suppan, plus $4 million a year in luxury tax.

Total expenditure in 4 years: $56 million.

The difference, about $13 million, or a touch more than $3 million a year, isn't so much when you consider marketing and sales increases (even if profits are split, the Yankees would still make money on Igawa they wouldn't on Suppan), and the fact that Igawa is 4 years younger. Jeff Suppan might have more major league experience, but I would argue that Igawa has more upside.

Also, if the numbers are accurate, the Yankees might have figured that if they could break even on a posting fee of $13 million, they could afford bidding higher just to ensure they would get Igawa. Of course, money used in posting is money immediately spent (I assume the contract will be signed and that the posting fee isn't paid out over several years), so that should factor into calcuations. For example, the Yankees won't have that $26 million to invest elsewhere, whereas with a domestic free agent signing, they're paying out luxury taxes and salaries from year to year.

That said, the difference in luxury taxes may still make the posting fee worth it.

What kind of player is Igawa though? His page contains the best set of statistics I can find on him, and the numbers are a bit shaky.

While his strikeout rates can be excellent, he has also been inconsistent. 2005 in particular is a red flag - 23 HR allowed in 173 IP, along with 199 hits allowed (well over one per inning), and an above desirable walk rate (60 BB in 173 IP) all stand out. A 1.50 WHIP isn't very pretty in any league, and apparently his ERA was the worst among his team's starters.

That said, his 2006 was excellent, as his walk rate dropped and he allowed significantly fewer baserunners. Is this the Kei Igawa the Yankees should expect though?

Sturgeon General has a set of projections up that has Igawa being about league average. And I think that if the Yankees get a league average season out of him, it may be worth it.

Consider that a league average free-agent pitcher (like Jeff Suppan) in today's market is likely going to command anywhere from 7 to 10 million a year, possibly more if I'm underestimating the market this year. And that Barry Zito, who will likely cost 14-16 million a year, and more for the Yankees due to the luxury tax, has posted two straight years of 116 ERA+ (with horrendous walk rates, I might add).

In that case, the posting fee of 26 million and a 4 year deal worth 28 million might not look so bad for the Yankees. They've shown that they need starting pitching, what with Randy Johnson's inconsistency and Carl Pavano's absence. Signing Igawa will start them in 2007 with a rotation of

Mussina, Wang, Johnson, Igawa, Pavano, with Darrell Rasner and Philip Hughes as potential fill-ins.

The Yankees may have been able to save money by using Hughes, since you always save money by using cost-controlled players, but with the shakiness of Johnson and Pavano, it's probably for the best for them to hedge their bets and find more starters, which for the Yankees means dipping into their wallets and diving into the free agent market. And it might even save them money in the long run.


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