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Number Crunching the Yankees’ Signing of Masahiro Tanaka: The Yankees Got Taken For a Ride

In Sports on January 22, 2014 at 2:15 pm

By: Brian Mangan

As you have undoubtedly heard by now, the Yankees signed right-handed starting pitcher Masahiro Tanaka to seven-year contract worth $155M on Wednesday morning.  At first blush, it doesn’t sound like a terrible deal – with an average annual value of around $21.15 million.

Tanaka is an unknown quality, having never pitched in the Major Leagues, but you could certainly justify taking a risk given the recent success of other Japanese pitchers like Hiroki Kuroda and Yu Darvish.

However, unfortunately for Yankees fans, there are two additional wrinkles in the contract that, although having been reported on in the media, have not received the significance that they are entitled to: a) the posting fee to Tanaka’s NBP team and b) the opt-out clause given to Tanaka as part of the contract.

In addition to paying Tanaka’s $155M salary, the Yankees were also required to pay a $20M “release fee” to Tanaka’s NPB team, the Rakuten Golden Eagles.   Ken Rosenthal reports that the “release fee” will be paid out in two installments, $13M in 2014 and $7M in 2015.

That ups the total cost of Tanaka’s contract to $175M, over seven years – already slightly worse.

But here is the kick in the pants for the Yankees: Tanaka can unilaterally “opt-out” after the fourth year of the deal, becoming a free agent.

Opt-out clauses have become more common over the years, as River Ave Blues points out:

Agent Casey Close insisted on the opt-out clause, which is the new trend in baseball. Close also secured opt-outs for Zack Greinke and Clayton Kershaw recently, plus the Yankees gave one to CC Sabathia a few years ago. A.J. Burnett opted out of his contract with the Blue Jays before signing with New York. They’re the cost of doing business these days.

However, none of those deals included a “release fee” like Tanaka’s does.

Essentially, the Yankees just signed Tanaka to a four year, $108 million deal with a unilateral player option for 3 more years at $67 million.

Granted, the Yankees have locked up Tanaka’s “prime” by having the four guaranteed years be his age 25 through 28 seasons.  However, the Yankees are paying $26 million per year for those four years, making it the second richest pitcher contract of all time, by average annual value (h/t River Ave: “Kershaw ($30.7M), Verlander ($25.7M), Felix ($25M), Greinke ($24.5M), Sabathia ($24.4M), Cole Hamels and Cliff Lee (both $24M), and Johan Santana ($22.9M)).

If Tanaka is excellent, then he will opt-out after four years like Alex Rodriguez did and demand an enormous and expensive extension.  If Tanaka is bad, the Yankees will have paid him the second-richest deal in history and gotten no return, and Tanaka will be entitled to a three  year, $67 million extension for nothing.  It’s a deal with limited upside and $108 million downside.

A lot of Yankee fan friends are telling me that the money doesn’t matter – which is a fine argument to make, even if I don’t believe that it’s true.  If so, disregard this article because there is no reason to analyze the value of the deal.

However, if money doesn’t matter, then why don’t the Yankees have Robinson Cano locked up so that he could finish his career as a Yankee?  Robinson Cano posted wins above replacement (WAR) of 6.4, 5.3, 7.7, and 6.0 over the last four years, and the Yankees let him walk because they didn’t want to pay him $24 million per year over the next ten years (and remember, $24 million in 2023 is significantly less than $24 million today).

Is Tanaka going to be better than Cano?  Unlikely.  And even if Tanaka turns out to be better than Cano, the Yankees will be losing him in four years anyway (or be required to sign him to an onerous extension).

None of this even bothers to discuss whether Tanaka will be able to transition to the Major Leagues, whether the enormous workload on his arm presents him as an injury risk, or whether pitchers in general deserve that kind of guaranteed cash.  Cano averaged around 6.5 (fangraphs) WAR per season as a Yankee.  Here’s the complete list of pitchers who posted 6.5 (fangraphs) WAR last season: Clayton Kershaw.  End of list. (Scherzer 6.4, Sanchez 6.2, Wainwright 6.2 … Darvish 5.0).

The Yankees had better hope that Tanaka is  Clayton Kershaw.

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Brian Mangan thinks its really neat that the Mets signed John Lannan, though!

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  1. What you don’t account for is the amount of money the Yankees lose by NOT signing him. The amount of money they will make while having him will pay for his contract tenfold. The Yankees lost over $100m last year by being an average team. Now they are bringing a superstar from another country over, just imagine the amount of money they will make unrelated to his performance. And if he does perform? And they get into the playoffs? That contract is paid in the first year. Adding the $20m posting fee to his salary is also erroneous. That doesn’t count towards their payroll and every other team would have paid it as well.

  2. George, I’ll grant you that winning helps a team’s bottom line, but I haven’t seen any solid information on how much having a Japanese superstar adds to that. And if it’s 1M over ten years, so what? How much is it? People don’t know, they’re just making it up, but it’s not that much.

    Also, the posting fee has to be included in the cost. I have no idea why people act like it’s not something the Yankees had to pay to get this guy.

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