Daisuke Matsuzaka: Boston’s $51.1 Million Man (and Counting)
November 16th, 2006 by Lucas Dwyer
Last week, rumors regarding who won exclusive rights to negotiate a contract with Daisuke Matsuzaka (right) and his agent, Scott Boras, began to swirl and the Boston Red Sox were the unlikely (at least to this writer) team predicted to be the winner.
Rumors of bids in excess of $40 million floated around, mostly to the stunned eyes of sports fans (again, including this columnist).
“$40 million for the rights simply to negotiate with a pitcher estimated to be on par with Roy Oswalt?!” gushed the talking heads of Around the Horn, Pardon the Interruption, and other sports talk shows.
It seemed preposterous, but little did they know.
At 8 p.m. Tuesday, Major League Baseball and the Seibu Lions reported that the Boston Red Sox had won the bidding for the Daisuke Matsuzaka’s rights. The surprising part was the total: $51.1 million dollars. This total is reportedly well ahead of the second place bid; $39 million by the New York Mets.
The aftershock of such a huge bid was astounding. Even Yankees fans were crying foul. A Red Sox fan and longtime friend of yours truly called to say that he couldn’t go on like this with the Red Sox anymore and was switching to the Phillies (conveniently located in Philadelphia, where he resides). Met fans started calling the Red Sox the “Evil Empire,” an ironic statement, as this marks the first time the Mets have been outbid for anyone since Omar Minaya took over.
What is most interesting about the $51.1 million dollar bid is not the staggering sum of money it represents, but the exact nature of the bid.
This was not some arbitrary bid thrown out there. This was a bid designed not to lose, and that could mean a multitude of things.
First, let’s examine the precise amount of the bid and its purpose. The most obvious fact is the size. $50 million dollars to negotiate with a player when the former high was $13.3 million (for Ichiro Suzuki) and most people expected a bid of $40 million to win. Bidding that much more than the anticipated high bid emphatically states the Red Sox earnest in hoping to sign Daisuke Matsuzaka.
Secondly, the Red Sox bid $51 million. Adding the extra million to the already-high $50 million bid ensures that if another team tries to high ball the offer at $50 million, the Red Sox have them beat. That explains the $0.1 million (or $100,000) portion of the bid as well. In case any other club was trying to be sneaky and slip in a bid of $51 million, the Sox it covered.
While a $50 million bid would most likely be the high offer, by making it $51.1 million, the Red Sox put together an offer that would not lose the bidding war.
But the $51.1 million total only tells half the story. Knowing that the Red Sox were trying to ensure they were the only ones who negotiated with Matsuzaka and Mr. Boras, the question is why would the Red Sox want the exclusive rights? Or, at least, why pay so much that they’re positive they won’t lose?
Certainly every club would love exclusive negotiating rights with any Boras client (cutting off a lot of his leverage and money-building tactics), but for a 26-year-old pitcher, it’s even more enticing. At a cost of $51.1 million, however, apparently only one team wanted it that much and it wasn’t the Yankees.
Either the Red Sox have much more money to throw around than many people thought, or this is carefully-calculated business decision. Considering that the Red Sox play in a state with a population of under 6.5 million people (vs. 18 million for New York City, 12 million for Los Angeles, 9 million for Chicago, and 5 million in Philadelphia alone), the Sox may have more money than thought, but it remains unlikely they have resources comparable to Yankees, Mets, Dodgers, or White Sox.
The bid is about more than Matsuzaka the pitcher. As many writers surmise, this is about the Red Sox “planting a flag” in the Japanese market of baseball players, establishing a “foothold” in the Asian marketing community, and picking up a 26-year-old, quality pitcher. Rest assured that Daisuke Matsuzaka were instead Carlos Dominguez, from Spain, the bidding wouldn’t be nearly as great. At least from the Red Sox.
The other theory regarding the bid is that it was designed so that the Red Sox could low-ball Matsuzaka a contract offer, have him decline it, send him back to Japan, keep their $51.1 million and keep him away from teams such as the Yankees. When Daisuke is available for unrestricted free agency in 2007, the Red Sox are still around to sign him, and have a $51 million dollar cushion of “over-bidding” with which to work in order to make it a sound fiscal decision.
If it would take $50 million over five years to sign Matsuzaka in 2006 and $75 million over five years to sign him in 2007, the Sox would still save $26.1 million dollars and have their marketing superstar, even if it is a year later.
Opponents of this deal, such as ESPN’s Jerry Crasnick, claim that the Red Sox can not afford this type of approach because:
- It would ruin the Red Sox reputation with Japanese ball clubs.
- It would ruin the Red Sox marketing image in Japan.
- It would negatively impact the process that MLB has put together to allow players from Japan to come to the United States (and Canada) and play baseball.
Points one and three seem less likely to really matter because MLB already has a long history successfully transporting players to the U.S.
In fact, the same process will occur tonight with the announcement of which ball club won the bidding for Yakult Swallow (shouldn’t the Tampa Bay Devil Rays be renamed the Tampa Bay Swallow?) third baseman Akinori Iwamura. Point two would seem to be the biggest deterrent for the Red Sox from sending Matsuzaka back to Japan.
Even if the marketing potential is vast, and by sending him back, the Red Sox are damaging their cross-Pacific reputation, Matsuzaka comes with no guarantees. As many outlets have pointed out, MLB has yet to field a successful Asian pitcher, with Hideki Irabu and Chan Ho Park “topping” the list.
In fact, only a handful of Asian players have excelled in Major League Baseball. Certainly the marketability of Matsui, Ichiro, and Kenji Jojima has helped the Yankees and Mariners’ image in Japan, but they’ve been successful. $51.1 million, plus an additional $50 million contract, is a lot to sink into uncertain Japanese marketing. Even if Daisuke Matsuzaka is productive, the return is far from guaranteed.
That’s not to say the Red Sox front office, especially principal owner John W. Henry, are not up to the risk. Despite his seemingly timid and frail appearance, Henry made his fortune through commodities trading — largely considered, along with venture capitalism, to be one of the riskiest (and most profitable) methods of making money. Working with the commodities market is not for the faint of heart and neither is a $100 million investment in Japanese marketing.
Perhaps the reasoning being the $51.1 million bid by the Red Sox becomes clearer to us, but it still does not answer the question of whether it was smart.
If the rumors about the Mets’ bid are true, the Red Sox could have saved themselves 12 million dollars and still won the rights. The Red Sox have 30 days to negotiate with Matsuzaka and during that time, other free agent pitchers such as Barry Zito and Jason Schmidt will be testing the market as well.
The latest rumor out of the Matsuzaka saga is that Boras (left) will let the 30-days expire and buy out the pitcher from the Seibu Lions himself (talk about hurting your relationship with the Japanese teams), effectively walking away from $51.1 million and offering Seibu $40 million of his own money to make Matsuzaka a free agent. How angry will the cash-strapped Lions be then? What about the embarrassment for MLB? If the Sox can’t sign Daisuke and miss out on Zito or Schmidt, their fans will not be pleased.
The financial risk is evident to even the most casual baseball fan. But, in evaluating the design, purpose, and effects of the bid, we can see the saga goes well beyond our new favorite number: $51.1 million.
