Paving the Way for a Domestic Posting System

Yesterday, Major League Baseball officially announced their new agreement with Nippon Professional Baseball regarding the transfer of players from Japan to the U.S. The most prominent change in the rules is the $20 million maximum fee that NPB teams will receive, and this is the aspect of the rules that has drawn the most attention. However, there is another significant change to the rules that is worth looking at, especially because of its potential long term ramifications on domestic players already under contract to MLB teams.

Under the old posting system, the move of a player from Japan to MLB was somewhat akin to a trade, only with MLB teams using cash instead of players as the currency to acquire the player’s rights. The system wasn’t that different from what we see in minor trades between MLB teams, where a player’s rights are transferred from one club to another in exchange for a small cash payment. In the last year, players such as Chris Nelson, Mike Carp, Casper Wells, and Travis Blackley have all been traded for cash, as their rights were sold from one team to another in exchange for monetary compensation. The posting system was basically just this kind of trade, only magnified, because the players getting posted were usually quite good.

The new system isn’t really like that at all. In fact, MLB isn’t even calling the payment to NPB teams a “posting fee” anymore; it is now a “release fee”, but a more simple description of it would just be a sales tax. No longer are teams buying exclusive rights to a player, as the agreement essentially allows posted players to become free agents, negotiating with any team who agrees to pay the release fee if he signs a contract with them. Because the release fee is only due after a player signs his contract, there is no actual barrier to gaining negotiating rights with the player, and the expectation should be that every team with even passing interest in acquiring talent will agree to the release fee for pretty much every player posted. There’s no cost to gaining those rights, so it should be expected that a posted player will be able to negotiate with any team he wants.

In reality, the posting system will function for MLB teams like a sales tax does for regular consumers. Just like we are all free to go into a store and shop around, MLB teams will be able to shop for posted Japanese players knowing that the final bill will just include a $20 million tax (or less, for non-impact talent) on the purchase price. No longer are teams really buying anything with that fee, since it doesn’t grant them any real privileges that other teams don’t have access to. Instead of it mimicking a minor trade, the system now just looks like free agency, only with an extra fee tacked on at the end.

Whether this system is better or worse for MLB teams remains to be seen; it is clearly better for the player and worse for NPB teams, but I don’t think we know yet how this will affect MLB teams and the total cost of acquiring a posted player. Even without knowing exactly how this will play out on the U.S. side, however, I think this system is interesting because it could theoretically work here as a domestic transfer system as well.

For instance, let’s just say you are the GM of a small market team, and your annual payroll can’t really exceed $65 million or so. You control the rights to a Cy Young caliber pitcher for two more seasons, but he’s getting pricey enough that he’s going to eat up a large chunk of your budget, and you have to trade him before he reaches free agency because you can’t afford the long term contract he’s going to demand. There are a lot of teams interested in giving you a boatload of young talent in exchange for this pitcher, but you want to win in 2014, and most of the players being offered in return are better future pieces than present pieces.

What if Andrew Friedman could, in lieu of trading David Price, make him a free agent two years early in exchange for a sizeable “release fee”? Price would certainly welcome the chance to negotiate a new long term contract with every interested team immediately, rather than only being able to talk to the team who trades for his rights. Big market clubs flush with cash but light on the kind of talent that the Rays are demanding would get involved, and the demand for Price would likely increase, potentially creating a system where the Rays get more of a return in monetary value for their ace than they could by trading him for players under team control.

Back in November, Theo Epstein was quoted as saying:

“We wish there was a free-agent market for young players.”

In talking about a potential pursuit of Masahiro Tanaka, Jed Hoyer told ESPN Chicago:

“It’s rare these days,” Hoyer said in November. “They (Japanese players) get posted at an age that is younger than the typical American free agent.”

The Cubs aren’t interested in parting with their best young prospects, so they’re an unlikely landing spot for David Price this winter. However, if the Rays could post David Price, they might well be the favorites, and their interest in Price would be good for the Rays. Would the Cubs, or another deep pocketed team that prefers to hoard its young talent, pay the Rays $50 million in cash, payable right now, if they could sign David Price for 6/$125M? I think it’s at least possible, and it’s also possible that the Rays would be better off in the short term with $50 million in cash to reinvest in their 2014 roster than they would be with a collection of prospects.

One of the trends we’ve seen in baseball over the last few years is long term contracts for players several years from free agency, as teams are more anxious to lock up the best years of a player’s career rather than wait for them to reach free agency and then pay for a short peak period and a long decline phase. Because of this trend, you don’t have that many guys reaching free agency in their 20s anymore. This year, Jarrod Saltlamacchia was the youngest notable free agent, and he’s heading into his age-29 season as a catcher. Pretty much every other free agent was already in their 30s, or will be by next summer. People talk about this as a weak free agent class, but really, it’s an old free agent class.

If MLB allowed teams to post their young players, creating a free agent market for players still in their mid-20s, demand would be intense. I think it’s fair to say that the demand for posted young players would far outstrip demand for aging free agents, as we’ve seen that Masahiro Tanaka’s questionable availability has essentially brought the free agent market for starting pitching to a halt. Teams prefer Tanaka not only because he’s probably better than the best available free agent starters, but because he’s five years younger than them too.

Maybe the Rays would rather have the young players than the cash. I don’t think a domestic system would have to replace player-for-player trades, but could perhaps be an alternative option. Perhaps a team could explore the trade market for a player, and then, if they can’t find a suitable trade that brings them the kind of talent they’re looking for, could simply post him instead, and let the market tell them exactly what kind of value the player has. Even just having the leverage to go that direction could potentially raise the price of talent a team could extract when trading a star level player.

There would definitely be some logistical hurdles that would have to be cleared, and it would only make sense for MLB teams if the maximum release fee either did not apply or was significantly higher than the release fee that was negotiated with NPB teams. Certainly, MLB shouldn’t want teams simply auctioning off their best players without reinvesting that cash into their franchise, so there would have to be mechanisms in place to prevent owners from simply using a domestic posting process to profit from selling off their best players and putting terrible teams on the field.

But, this is basically how players change teams in soccer, with large cash payments going from one team to another. Buying players with cash is widely accepted as the primary way of improving a team’s roster in the world’s most popular sport. Now, MLB has essentially adopted a system that creates a free agent market for young talent from Japan. Perhaps this is just the first step towards creating a similar system for players already in the United States.