How Rakuten Can Get Around The $20 Million Posting Cap For Masahiro Tanaka

When Major League Baseball creates new rules governing the signing of international players, teams and player representatives find creative ways to get around them.

Yu Darvish

Texas paid $51 million to get the right to negotiate with Yu Darvish.

The newest rules affect Japanese players, with a posting system that places a $20 million cap on the “release fee” the Japanese team can make from allowing a player to be posted.

At the center of it all is the best pitcher in Japan, Masahiro Tanaka, who told Rakuten Eagles management and the Japanese media that he wants to pitch in MLB next season. The Eagles are hesitant to allow Tanaka to be posted, questioning whether the $20 million posting cap is fair compensation for allowing him to leave with two years left on his contract. Yu Darvish and Daisuke Matsuzaka commanded posting fees just north of $50 million each, and the Eagles were likely expecting in the range of $60 million for Tanaka.

The decision to allow Tanaka to be posted is ultimately up to the team. So how can the two sides compromise? One idea floating in international circles is that Tanaka could just agree to give Rakuten a percentage of his contract. But it’s not the only potential solution.

There is a way for Rakuten to get around the $20 million cap by taking a page from how MLB teams openly conduct business in Latin America. To be clear, there have been zero rumblings of this happening; It’s just an idea of how Rakuten could creatively come to a compromise with Tanaka.

Rakuten, essentially, would coordinate a package deal with Tanaka, another Eagles player and an agent who will represent both players and align himself with all three parties.

The Eagles would allow Tanaka to be posted for a $20 million release fee. Rakuten would also take a second player—preferably a low-salary reserve player it won’t miss—and post him, too; we’ll use a $15 million release fee for him, by way of example. The parties involved would all agree that, for an MLB team to sign Tanaka, it also has to sign the second player to a contract worth $1 million.

For the sake of argument, let’s suppose the Eagles were counting on a $60 million posting fee, and that Tanaka’s total value would have been $120 million.

If the Eagles are willing to post Tanaka now with no strings attached, the Eagles would make $20 million on the release fee and Tanaka could command $100 million. But since the Eagles seem to be wavering on whether to hold on to Tanaka for another two years, the package deal would be a compromise.

In the package deal, an MLB team would still pay $120 million total for Tanaka, but it would be partitioned differently. The MLB team would pay $20 million as the release fee for Tanaka, $15 million as the release fee for the second Eagles player and $1 million as the contract for the second player, with Tanaka signing an $84 million contract.

The Eagles would generate $35 million in revenues from the two release fees. Tanaka would be taking a $16 million hit from what he might make if the Eagles were to just post him for $20 million, but doing so accomplishes his goal of pitching in MLB next season rather than waiting two years, gives him an enormous raise and surpasses Darvish’s contract ($60 million) with the Rangers.

The deal works out for the second Eagles player, who would get a nice paycheck for himself, then perhaps be allowed to return to Japan in 2015. The agent for Tanaka would not make as much on Tanaka’s contract compared to him being posted with no package deal, but in exchange for minimizing his risk of waiting two more years for Tanaka to become an international free agent, he’s guaranteed in the neighborhood of $4 million in revenue on the commission.

Of course, once Tanaka is posted, there’s nothing binding a team to signing the Eagles bench player, which is why trust between Tanaka, his agent and Rakuten would be critical. Baseball—especially in the international world—is very much a relationship business.

In Latin America, teams do package deals for players all the time, for a variety of reasons. Pulling off this maneuver would certainly go against the spirit of the posting agreement, but the Eagles were also the only team vehemently opposed to the new system.

A package deal would be a compromise for all sides involved—and one that may infuriate the MLB commissioner’s office—but it could offer a solution that benefits several parties.

International | #Japan #Masahiro Tanaka

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