Oh, I think that's where the misunderstanding stems from (unless what you mean is that it prevents you from signing someone else while you're waiting to see if you win the bid, which I agree with). Only the winning bid gets paid, and if you can't come to an agreement on a contract you get that money back.
Sorry, what I was intending to say is that, with a free agent, you're bidding against everyone else. Here, if you win the posting bid, you don't have an agent taking your offer to the Yankees and trying to pit you against other teams. So if you get the money back if you can't come to a contract, then I don't have as much of a problem with a team posting a bid just to get the rights and then offering a lesser contract. So this guy may want a $15MM/yr contract, but there's no harm to the Bluejays for offering $7MM/yr+incentives and if he says no, no harm done. I still think it's insanity to pay a net of $25MM/yr total.
As a comparison, Dice-K's net cost was $110MM for 6 years, or $18MM/yr. There's just no way he is or was worth that much, even if he was really really good. At the time, that was the going rate for the best players in baseball. Same thing here - this guy would cost as much as Albert Pujols on a per year basis, and you have no idea if he'll be any good. As much as this is counter-intuitive after what I just said, if I thought this guy were that great and was going to post a $50MM bid for the guy, I'd demand a *longer* contract since that's a sunk cost. Instead of 5 years, $15MM/yr, I would try to get 10 years, $10MM per. It's a larger total investment, but you get a better net rate as you're getting the last 5 years for an added $25MM.
I agree that that would be a much more fiscally sound idea, but it's pretty obvious it wouldn't get him, so you'd really just be doing it as a blocking move (which actually makes a lot of sense for some teams). Darvish can make like, $7MM/year in Japan for two years, then come over to the states as an IFA and sign with whoever he wants, which I imagine would dramatically increase the list of suitors. I guess with regards to the posting fee, I'm really only looking at it from the perspective of the Yankees, who have a ridiculous revenue stream from their cable network, and the Jays, who are owned by Rogers Communications, which I understand to be the Verizon of Canada (ChrisBosh or Cowboy_Bebop are welcome to correct me though). Since the fee doesn't count towards team payroll, you don't worry about future luxury tax implications, so it presumably wouldn't hinder you from making future free agent decisions. Also, fewer and fewer FA pitchers are becoming available through FA. Next years class looks great right now (Hamels, Cain, Greinke, Marcum), but I think at least three of those guys plan on signing extensions. Anyway, I agree that going super-aggressive after Darvish carries tremendous risk, but some teams are able to absorb it (and of those teams, the Yankees want to gaurantee and playoff spot every year, and the Blue Jays are trying to compete in a ridiculously tough division). But I don't know how much sense it makes for teams like the Rangers (and it would be complete insanity for the Nationals, IMO).
Just wanted to add a couple points to your posts. I think the strategy the Toronto GM is taking is in line with this move. The team has spent quite a bit on drafted players and international free agents in the past couple year (I believe in the top 5 in the MLB). They don't want to handicap the team with huge long term contracts (the Jays generally have to overpay for free agents to come to Toronto). The 40-50 Million is a lot of cash to pay but Rogers is essentially a monopoly in the telecommunications industry, this is pocket cash for them. The figure that is probably more important to them is the contract Darvish is going to sign. If that figure does not fall in line with what they are trying to do then they'll probably not sign him. Don't forget some of the positives, this deal will also help bring attention to the Jays from Japan where they'll probably see some cash from a TV deal(i think) and paraphernalia sales.
So the thread title was definitely premature, but http://www.mlbtraderumors.com/2011/12/top-bidder-for-darvish-to-be-announced-tonight.html
Agreed... thought the same thing with Dice-K. Essentially teams are paying top 3 starter in all of baseball money for an unknown. Even if he stays healthy and is a top 3 pitcher, you are only breaking even.
Both you and Major are unable to think outside the box, this is a unique opportunity for the Blue Jays, the risk fits their overall strategy (taking on high-risk high reward players but with limited financial investment and length, they won't sign this guy if he asks for ridiculous money). The risk the Jays are taking is the 40-60 Million/5-6years thats going to hit their payroll. In my mind that's not too bad, he's pitched against some MLB quality players when he played for Japan and he did very well. He;s been consistently good over his career unlike Matsuzaka (the guy who played for Boston). Also, I believe there are reports out that he worked on his upper body in anticipation to the move to North America, he's throwing in the 96-97 range. This kids got some great talent...i think its worth the risk....you've got to look beyond the 50-60 million posting fee, that's just the cost of doing business.
Umm, that makes no sense. No other free agent has that cost. The team is still paying that $50-$60MM, which means they could just as easily spend that money elsewhere. The cost of the player is $125MM or so for 5 years. Who gets that money and when it's spent is irrelevant - that's the opportunity cost for the Blue Jays. If they have that money, they could just as easily spend it on other players.
The point is that this guy isn't a high risk, high reward player. He's a high risk player. But there is no reward. Best case scenario is that he's the best player in baseball, and in that case, you're basically paying him fair value. Anything less and you're overpaying him. High risk, high reward means you take on a guy with potential upside above what you're paying him. That's not happening here. Otherwise, it's just high risk, no reward. That said, there is one potential reason for Toronto to do it. They are trying to compete this year, need a #1 starter, and are unable to attract free agents because of the Canada thing. If that's an issue, this is a way around that problem because they can force him to pick Canada or nothing. But they are paying a lot of money for that ability.
I don't get your logic, do you think the 50-60M is a bad investment or the 125M......or both? I'll explain it better once I get you point of view.
Look you have to see this investment from the perspective of the GM. He essentially has extremely rich owners that will allow him to spend up to 120-130 million in payroll once the team shows promise. The owners are willing to allow expenses from off the budget sheet expenses if it fits the strategy. Hence the 50-60 million posting fee, they showed this same line of thinking when they overpaid for their draft picks. If you think in terms of the restriction on the GM you'll see why the Blue Jays were willing to pay as much as its being reported. In the eyes of the GM they are essentially signing a free agent for 50-60 million, the other posting free cost is irrelevant in terms of the strategy being undertaken. That is why this is a high risk high reward move....if he does prove to be a top pitcher he'll only hit the books for about 10 million per season, allowing for other players to be signed. The other 50-60 million isn't opportunity cost because really that money isn't going against the budget. They are not trying to win this year, its a long term strategy as mentioned above. They might even give him a 2-3 year contract which will lessen the 50-60 million budget hit and allow him the ability to prove his worth. If he doesn't sign this year I believe he won't be able to come to the MLB until 2 years from now. The Blue Jays will hold a little power in the negotiations.
The net total cost is all that matters. How much of that is a posting fee and how much of that is a contract is irrelevant - how they divide that money has no impact on the finances of the team. The Blue Jays paying $125MM for 5 years of the best player in baseball is a reasonable price to pay. So if he turns out to be the best player in baseball, great - they got fair value. If he's anything less than the best player in baseball, they are overpaying for him. That said, if they have no other options and can't get a free agent to go to Toronto, they might be forced to overpay anyway so it would make more sense. I don't know if the Blue Jays have the same problem in MLB as the Raptors seem to have in the NBA with free agents not wanting to go to Canada, though.
Wait - how is this off budget? Are you saying the owner is willing to spend $50MM on a posting fee, but wouldn't be willing to spend that same $50MM on payroll if the GM could improve the team with regular free agents? If so, I would understand it from the GM's perspective, but the owner is then a complete moron that doesn't understand basic finance.
Close..... the owner is willing to allow the GM to spend another 50-60 million on a player if he wants, but he'll be limited to 120-130M in payroll. However in the eyes of the owner they are willing to allow for in-line with strategy expenses (high-risk high-reward) type investments if they present themselves (e.i the bonuses paid to draft picks or posting fee costs). I think it makes sense for a club that's trying to remain financially responsible, controlling the type of risk is their strategy.
Here is hoping he is another Japanese failure. Has any Asian pitcher ever had long-term success in MLB?
