Posting Fees

Tokyo Dome
(image courtesy eyeonjapan.com)
I'm too late to really say much about the Rangers signing Yu Darvish that hasn't already been said. I'm okay with that. I want to try to come up with some method to quantify what a reasonable posting fee is, but I still haven't come up with anything. Leave something in the comment thread if you have an idea. I'm all ears.

Instead of continuing to feel like I'm hurling myself against a brick wall, I'm going to go in a different direction.

Darvish just signed a 6-year, $60 million deal as a 25-year-old. Much is being made of the $100+ million package the Rangers spent on him, including the posting fee (and much should be made of that), but let's pause and let that $60 million total sink in. Even though there's a good chance that Darvish is worth more than $60 million over the life of the deal, that's still a chunk of change that 25-year-olds rarely get in Major League Baseball.

Engrained in MLB's economic system is a ruthless method for underpaying good, young players. A player must play five or six seasons in the majors before they are a free agent, where they in theory will make fair market value. Without any competition in the open market, there is no incentive for teams to give players much beyond the league minimum. There is an arbitration process after two or three years, but even that works mostly as a system to gradually escalate a player's annual salary up to what they would earn in an open market. While arbitration gets a player closer to their true value, it is also a system built to underpay good, young talent.

Even though MLB's payscale is clearly unfair to young players, there's not much motivation to change it. MLB owners certainly aren't opposed to underpaying for talent, and the most influential leaders in the MLBPA will always be established veterans, who are also beneficiaries of this system. Plenty of players do not last six years in the majors, meaning there are less players available in the open market. That should increase competition for available players, which drives up their price. On top of that, teams have more money available to spend that they would not have otherwise if they had to pay younger players something closer to their market value.

Yu Darvish is a good, young talent, if you couldn't guess where this post might be going already. You can also probably guess the question I'm about to pose: would Darvish have a 6-year, $60 million deal right now if he had started his career in America?

If Darvish had been in America from day one of his professional career, he would have had to crack the majors at 19 years old to have hit free agency in this off-season. That's not impossible (just ask guys like Adrian Beltre, Felix Hernandez, B.J. Upton, and Justin Upton), but it's not very common. For a little more perspective consider this: as much as Taijuan Walker's prospect status continues to rise, he would have to make his MLB debut this year to hit the bigs at 19 years old.

We'll never know if Darvish could have been one of these extreme exceptions, but I highly doubt it. It would have required Darvish to be drafted as a high schooler (which he totally could have been with his talent), and make it through a minor league system in a year. Even though King Felix arrived on the scene at 19, his pro career started at 17. He took around two years to go through the M's minor league system, and that doesn't count time in the Mariners academy in Venezuela before (and after) he officially signed.

However, even if Darvish would not have been a free agent at this point in his hypothetical MLB career, perhaps he could have leveraged the arbitration system into a deal like the one he received. How likely would that have been?

King Felix is once again an obvious comparison. The Mariners bought out two of his arbitration years, and three free agent years*, when they inked him to his current five-year deal. Even though Felix did not hit free agency, he earned $10 million in a season for the first time in his career in 2011, his age 25 season. We've already gone through the problems with comparing Hernandez and Darvish though.

*This is the new trick to play with young players. It doesn't make sense to sign any young player to a long-term contract unless some free agent years are bought out. The arbitration system is that good at underpaying them. By the way, Felix's salary almost doubles this season, which happens to coincide with what would have been his first season on the open market.

Another interesting comparison to make is Tim Lincecum. He made the majors at 23 years old, a more realistic age for Darvish to hypothetically make it. If anyone could break the bank in arbitration, it should be Lincecum, considering he entered the process after winning back-to-back Cy Young awards. Ultimately, he and the Giants avoided arbitration when they agreed to a 2 year, $23 million deal. Lincecum got $8 million the first year, $13 million the second, and a $2 million signing bonus.

In the end, Tim Lincecum first earned $10 million in a season in 2011, his age 27 season. That's two years older than Darvish is right now, and Lincecum signed his contract immediately after winning back-to-back Cy Young awards. So, Darvish would have theoretically had to accomplish even more at a younger age than Lincecum to get more than $10 million at 25 years old, which is what he just got in his deal with the Rangers.

Simply put, it is very difficult to dial up a scenario where Yu Darvish earns $10 million in 2012, much less $60 million over 6 years, if he had started his career in the United States. I'm tempted to even say that it is impossible. This leads to an interesting conclusion: Yu Darvish probably increased his earning potential by starting his career in Japan.

What's stopping an American born player from pulling the same trick?

The new CBA clamped down on draft spending a ton. Draftees can only be signed to minor league deals now, with accompanying signing bonuses, and the bonus pool a team has at its disposal is now restricted too. With guaranteed minor league deals, every prospect will earn league minimum for at least their first couple years of service, and likely their first three years.

To date, Stephen Strasburg has received the biggest signing bonus of all-time. It was worth $8 million, and he also signed an MLB deal. Let's say under the new system that the top pick signs for an $8 million bonus, and opens up their first full season in pro baseball on the opening day roster for their MLB team. This should be a ridiculous scenario that overestimates how much any draft pick can make with the way the CBA is structured now.

This theoretical player would earn roughly $9.5 million their first three years in professional baseball ($8 million from the signing bonus, and then $500,000 in base salaries, although some teams give nominal raises to players after each season).

Wily Mo Pena, this offseason, signed in Japan for 2 years and around $5 million. Former MLB outfielder Matt Murton made around $1.5 million in Japan last year. There's some money to be made in Japanese baseball.

What would happen if some Japan team offered the next Gerrit Cole a 4-year, $15 million contract? That's way beyond the money that Wily Mo signed for, but I'll come back to why it still might be a financial windfall in the end for a Japanese team. For an MLB team to offer a contract worth similar value, they would have to offer at least a $12-$13 million signing bonus, which would likely leave them with literally no money to sign any other draft picks. No MLB team could do that.

A Japanese team could make a potential fortune off of a deal like this for a top American prospect. To start with, a polished college player could probably step into a small role in Japan, and at least be okay, and quickly develop into a really good starter. Even if that's not enough production to justify $15 million, it doesn't matter. A Japanese team could put the prospect up for a posting fee before their contract expires. Certainly, some baseball team would give up at least $15 million to talk to a 23 or 24-year-old Gerrit Cole, even if they only had mild success in Japan.

Consider this: what if a guy like Gerrit Cole went over to Japan and absolutely dominated? Maybe he could with his huge fastball. Whatever team he plays for would have a star they could anchor a championship run around, and on top of that they would get a massive return on the posting fee. Maybe it would be hard for fans to say goodbye, but they already face that issue with current stars like Darvish. How crazy is it that a team could end up getting a superstar for less than free?

Going to Japan makes sense from the prospect's perspective too. Not only could they make more money in Japan for a few years than they would under MLB's rules, but they would then be signed to an MLB deal after getting posted, or simply leaving in international free agency. They wouldn't go to the majors and earn the league minimum; they would get $4 or $8 or $10 million, or whatever, depending on how good teams think they are. It certainly would be more than $500,000. Plus, their MLB career would barely be shortened, if at all. The years spent in Japan would be ones that they likely spend in the minor leagues anyway. Maybe if Dustin Ackley had gone to Japan he would have been posted this offseason, and missed out on three months in the majors. For his trouble, maybe he would have earned one and a half times the money he has so far, and I bet he would get more than the $1.5 million or so he is due in 2012.

There is a catch to all this (there's always a catch). Not many prospects would really profile as candidates to benefit from a jump overseas. The Japanese leagues are really good. The talent level might be somewhere between AAA and the majors. It would take an advanced college prospect, or high school phenom, to likely be respectable enough from the start of their pro career to survive in Japan. I think the most likely candidates are the ones that have been able to grab MLB contracts straight out of the draft - we are talking about guys like Danny Hultzen, Dustin Ackley, Anthony Rendon, Matt Purke, and Stephen Strasburg. The vast majority of draftees would still sign straight out of the draft, and report to rookie ball.

However, the exceptions would be very high profile. If enough of them didn't sign, resentment towards the current system could develop.

What would stop advanced amateurs from going overseas? Does some Japanese team have the guts to approach a top American prospect? Would that prospect have the guts to turn down an MLB team, especially as a top draft pick, to go to Japan? It would be a monumental deal if it happened. Maybe the sheer audacity of it all will keep it from happening.

You don't think that Scott Boras noticed the Yu Darvish deal though?