I’ve talked a bit on here about the changes that have been discussed for the posting system for Japanese players. If you’re unfamiliar with the system, it is the process that allows a player from a Japanese league, such as Nippon Professional Baseball, to sign with a Major League team.
The former agreement allowed teams to bid on the player. The highest bid, or posting fee, would win the rights to negotiate a contract with that player. For big name players like Yu Darvish and Daisuke Matsuzaka, the posting fee could reach $50 M. That amount would go to the Japanese team that was posting the player, but only if the MLB team signed the player. If the player wasn’t signed, the team would get their posting money back. The end result is that these players can receive about $100 M, with half going to the Japanese team as a posting fee, and half going to the player under his contract.
The newly proposed deal was aimed at keeping more money inside Major League Baseball by lowering the posting fees. There was talk that the new deal would allow the player from Japan to choose between the top 2-3 bidders, which meant that the high bidder wouldn’t always get the player. It wouldn’t matter to the player who made the highest bid, since that money would be going to his former team. This idea would have meant that big spenders like the Yankees and Red Sox wouldn’t have been guaranteed the inside track to every big name player out of Japan.
Instead, the new plan made a slight adjustment. The player still goes to the highest bidder, but the highest bidder only has to pay an average of the top two bids. That means if the highest bidder offers $50 M, and the second bidder only offers $30 M, the high bidder will only have to pay $40 M. Under the old system, the high bidder would have had to pay $50 M no matter what. Essentially the new system does nothing to remove the advantage that large market teams have, but it actually helps them by saving them money compared to the old system.
You hear these types of things all the time in baseball, and you wonder why small market teams never fight back — or at least why you never hear about it. According to David Waldstein of the New York Times, the small market teams are fighting back this time, or at least Pittsburgh Pirates president Frank Coonelly is fighting back. Waldstein says that a last-minute dispute by Coonelly put the new deal in jeopardy.
According to the report, Coonelly argued that the posting fee should count against the bidding team’s luxury tax. This off-season will feature top Japanese pitcher Masahiro Tanaka, who the Yankees are expected to bid on. The Yankees are running up against the luxury tax, which has a financial penalty if they exceed a $189 M payroll. A team is taxed 50% of every dollar over the threshold. The Yankees were taxed $29.1 M this past season, which is a record. They have also paid $253 M since 2003. You can understand why they’re trying to get under the $189 M threshold for 2014 — they don’t want to pay additional fees that don’t go to helping their club.
One confusion that always comes up, and is sure to come up at some point in this situation, is where the luxury tax money goes. It does not go to small market teams. That is revenue sharing. The luxury tax goes to MLB’s central fund and isn’t redistributed to teams. So Coonelly’s motivation wouldn’t be fueled by getting more money for teams like the Pirates. If the Yankees had to pay more in luxury tax, the only financial benefit would be seen by the league. The motivation for Coonelly would be to limit the spending by closing a loophole for the Yankees.
The Yankees are trying hard to get under that $189 M payroll, and one way to do this is to sign a guy like Tanaka. They can technically pay $100 M+ like Matsuzaka and Darvish, but only half of that counts against the luxury tax. This is a better alternative to spending $100 M on a free agent, where the entire amount would count against their luxury tax. Under the proposed system, the Yankees can make an extreme bid, knowing they wouldn’t have to pay luxury tax on that bid. They also wouldn’t have to pay the high bid, since the new proposal averages the top two bids.
Of course the proposal by Coonelly was opposed by the Yankees.
Randy Levine, the president of the Yankees, objected to Coonelly’s proposal and asked rhetorically if other rules for international player procurement — like the way Cuban stars have been signed — should be changed midstream as well.
That’s an odd statement to make, since the rules are currently being changed for the posting process for Japanese players. This seems like the perfect time to make a rule change.
The biggest opposition to a rule change is the player’s union.
Rob Manfred, baseball’s chief operating officer, explained in the meeting that the players union had rejected proposals that would have tied the fee to the luxury tax. The union has no interest in rules that limit a team’s ability to spend.
If the posting fee went against the luxury tax, that would limit what the Yankees could spend elsewhere. As previously mentioned, the Yankees can bid $50 M on Tanaka, and it wouldn’t count against the luxury tax. That means they’ve got additional money to spend on free agents.
Coonelly’s proposal would force MLB to re-open CBA discussions with the player’s union, and would ultimately result in less money available for the players. The union would reject this, unless MLB came up with a way for the union to receive more money. That would be a difficult negotiation, and it doesn’t seem that baseball is interested in opening that door.
The truth here is that MLB is changing the posting system to keep more money in the game. That is their only concern. They’re not concerned with small market teams, or the fact that the newly proposed system just gives a bigger advantage to teams like the Yankees. So it’s great to see Coonelly fight back against this system, but the odds of this fight being successful are slim, since MLB and the player’s union would both be fighting on the side of the Yankees. The end result is that MLB continues to make it easier for large market teams, while killing the soul of small market fans who are holding on to a small hope of their team ever having a chance to win it all.