Article: The Tanaka Factor

[FSP]

He benefited greatly because Japan "deadened" their ball this year.

 

I heard Japan "livened" their ball. That is part of the reason why Wladimir Balentien destroyed their HR record. Also why their commissioner stepped down in shame recently.

[launchingthrees]

He benefited greatly because Japan "deadened" their ball this year. If he signs with the Twins, we might be seeing him get that Neck injury from watching the ball fly out of the park - especially in places like Chicago. I don't know if he is worth a triple digit investment.

 

http://hardballtalk.nbcsports.com/2013/06/12/japanese-baseball-officials-admit-to-altering-the-baseball-to-increase-offense/

 

So isn't the opposite true? Since he has been so productive with a juiced baseball you must be enthusiastic about signing him!

[clutterheart]

Japanese baseball officials admit to altering the baseball to increase offense | HardballTalk

 

So isn't the opposite true? Since he has been so productive with a juiced baseball you must be enthusiastic about signing him!

 

Yes, you are right, they did enbiggen the ball. I read incorrectly.

 

But...still not pumped about him and would like the twins to go after other FA

[mlhouse]

 

Furthermore, the posting process could drag out until March. I would hate to have the Twins have all their FA eggs in this basket and it not pan out.

 

The best outcome would be the Twins get aggressive with Free Agents and sign guys while other teams wait on the Tanka.

 

What eggs? Seriously? Maybe this is the year!!!! We have only been waiting for the Twins to spend on free agency for 50 years. I highly doubt the Twins will seriously compete for any free agents that command a salary above $5 million and they probabliy figure that keeping Kevin Correia is more than enough "investment".

[glunn]

Completely incorrect. Comments of this nature should probably be avoided without the appropriate background, because the result can be to mislead readers who don't know otherwise.

 

Human beings are not capital assets and cannot be depreciated or amortized. Also, the 'matching principle' of expense recognition does not apply to periodic expenses such as MLB salaries.

 

 

With all due respect, I am 99% certain that Major Leauge Ready is correct -- the fee paid to his ballclub in Japan would have to be deducted over the term of Tanaka's contact, i.e. amortized. I am too lazy to look at the primary sources tonight, but here is a link to a treatise by Sky Moore, who is a tax genius, and you can see Sky's citations in footnote 7. I am confident that Sky is correct, because Sky is always correct, but if you still disagree then please be ready to debate why Sky's citations are not controlling. Also, I would note that not requiring amortization would facilitate extreme shenanigans.

 

Kudos to Major Leauge Ready for his apparently correct intuition on this.

 

And let this be a lesson to all of us not to label someone else's post as "completely incorrect" unless we are 100% sure.

[glunn]

Completely incorrect. Comments of this nature should probably be avoided without the appropriate background, because the result can be to mislead readers who don't know otherwise.

 

Human beings are not capital assets and cannot be depreciated or amortized. Also, the 'matching principle' of expense recognition does not apply to periodic expenses such as MLB salaries.

 

The timing of the expense is not terribly important to the Twins because they run a profit in any event. Obviously, front loading a contract may result in lower profits in the short term and higher in the long term, but unless tax rates change significantly the overall effect is minimal.

 

The red flag on Tanaka is his out pitch is the split fingered fastball. The Twins organization believes the splitter causes elbow injuries.

 

http://www.nytimes.com/2011/10/02/sports/baseball/split-finger-fastball-use-of-a-popular-pitch-falls-off-the-table.html?pagewanted=all&_r=0

 

I wish that this post and the accompanying link were getting more attention. If this information about the splitter is correct, then Tanaka seems scary risky to me.

[Hugh Morris]

Completely incorrect. Comments of this nature should probably be avoided without the appropriate background, because the result can be to mislead readers who don't know otherwise.

 

Human beings are not capital assets and cannot be depreciated or amortized. Also, the 'matching principle' of expense recognition does not apply to periodic expenses such as MLB salaries.

 

The timing of the expense is not terribly important to the Twins because they run a profit in any event. Obviously, front loading a contract may result in lower profits in the short term and higher in the long term, but unless tax rates change significantly the overall effect is minimal.

 

It really is unfortunate you were so concrete in your claims. In addition to what Glunn pointed out, player salaries (originally and especially in Baseball) have enjoyed a somewhat unique relationship with tax law.

 

For decades, organizations were allowed to write off salary expenses as asset depreciation as well (because all players were getting older and less valuable. Yes the internal logic for that position is tenuous at best) . In essence, a $2m salary became a $4m expense, doublecounting the expense to inflate the loss. Without any recent meaningful leaks, it's difficult to know exactly where this currently lies. Previous financial information leaks from the last decade or so have suggested that some form of this accounting policy is still in being used, with the blessing of the IRS and in accordance with GAAP.

 

I apologize for the slight derail as it's not specifically Tanaka related, but wanted to make sure readers weren't misinformed.

[Spicoli]

You see how many people here are dreaming about him in a Twins uni? Well the Dodgers, Yankees, Red Sox and every other big market team are doing the same thing. The only difference is they are willing to spend to win. When was the last time the Twins went out and out bid everyone to get the best FA or the best INTL FA? NEVER. And don't say Sano because we all know if there wasn't an age controversy the Twins would of have no chance. I mean we could of gotten Anibal Sanchez last off season but we didn't, and he was cheap when it comes to good SPs.

[launchingthrees]

It'll be a slap in the face if they don't spend the money they saved last year. Remember they promised 50-52% of revenue?

[drivlikejehu]

It really is unfortunate you were so concrete in your claims. In addition to what Glunn pointed out, player salaries (originally and especially in Baseball) have enjoyed a somewhat unique relationship with tax law.

 

For decades, organizations were allowed to write off salary expenses as asset depreciation as well (because all players were getting older and less valuable. Yes the internal logic for that position is tenuous at best) . In essence, a $2m salary became a $4m expense, doublecounting the expense to inflate the loss. Without any recent meaningful leaks, it's difficult to know exactly where this currently lies. Previous financial information leaks from the last decade or so have suggested that some form of this accounting policy is still in being used, with the blessing of the IRS and in accordance with GAAP.

 

I apologize for the slight derail as it's not specifically Tanaka related, but wanted to make sure readers weren't misinformed.

 

I slightly misread what MLR posted, but I was correct and his analysis remains problematic.

 

I clearly referred to 'salaries' and 'periodic expenses' in noting that the Twins could front-load a player's contract without having to amortize it. The posting fee is a one-time expense that I did not address; it would be amortized over the 'useful life' of the ultimate contract.

 

So while MLR was correct in that aspect of the posting fee, it is incorrect to suggest the result is a problem for the Twins. They could still shift actual expenses to the current year, where there is budget room. They could still front-load the contract to leave more room for later. And by structuring the contract properly, they could still amortize a substantial portion of the posting fee in the current year.

 

*** Edited to add - here's an example of what I meant:

 

Posting fee: $40MM, Salary 4 years/$40MM with 2 option years

 

Salary by year: $18MM, $10MM, $6MM, $6MM, $12MM (vesting option), $12MM (vesting option)

Present value by year including amortized posting fee: $33MM, $23MM, $18MM, $17MM, $9MM, $9MM

[Rick Niedermann]

I think the drop in payroll the last two years would cover the posting fee. And 10-11 million a year for a young #1 type pitcher is worth the gamble. But it will never happen. This is the risk averse Twins we are talking about. In Terry Ryan's eyes Mike Pelfrey is the answer. Accept and expect mediocrity next year. Because that is all Terry Ryan will give you.

[JB_Iowa]

I wish I understood the Nishioka failure better.

 

I realize that scouting a pitcher is not the same as scouting a SS but Nishi was such a massive failure, it is very hard for me to have any confidence in the Twins putting so much money in the Tanaka basket.

 

I'm not saying they shouldn't do it but I hope the Twins have a good grasp on what went so dramatically wrong with Nishioka's transition before they decide to try it again with Tanaka (and a lot more money on the line).

[Anthonyq]

I signed up specifically to comment on this thread which I am sure will lead me down the rabbit hole.

 

From what I have read this would be a decent way to go for the Twins. signing Tanaka would generate some hype (for the casual fan maybe not "good" due to the Nishi debacle), the team will get a good pitcher and will be seen as spending money.

 

However there are some things to think about here. First off is the posting fee. The people who think that his fee will be higher than Darvish's are likely wrong. Tanaka's stuff isn't as good. He also has some moving parts in his delivery, relies on his splitter for his out pitch, and has thrown a lot more pitches than most 24 year olds. The most worrying thing for me is that he seems to pitch high in (and out of) the zone. I got my info here ( I paid a bit of attention to the analysis but more to the stats.) Pitch high in MLB is a good way to have a high ERA.

 

As disjointed as this post may be, my point is this: Tanaka has a ceiling of a good number 2 for a contender but is more likely to be an average 2 or top notch 3. For the Twins he would become our ace for next season and show the rest of the free agent market that we have found some ambition. As far as his posting fee, it should be around 33 million but if some team wants him enough could go as high as 45m. For me 45 is too much as I don't see Tanaka as worth that plus a five or 6 year deal at over 10m a season. you can find better value elsewhere.

[Tibs]

To me, I think the idea of paying $50-$60 million just to talk to a prospect is a little crazy. Let me ask this question, who here would be willing to sign Byron Buxton to a 6 year $120+ million contract right now? It's not a perfect question, but Buxton is the #1 prospect in the game and neither have played in the majors.

[Nick Nelson]

First off is the posting fee. The people who think that his fee will be higher than Darvish's are likely wrong. Tanaka's stuff isn't as good. He also has some moving parts in his delivery, relies on his splitter for his out pitch, and has thrown a lot more pitches than most 24 year olds.

Assessing what Tanaka might get for a posting fee isn't about comparing him with Darvish as a player. The landscape is simply different now than when Darvish came over two years ago. If Tanaka's posting fee is higher (which I suspect it will be) it's a reflection of the financial state of the game, not of his talent relative to Darvish.

[cmb0252]

Assessing what Tanaka might get for a posting fee isn't about comparing him with Darvish as a player. The landscape is simply different now than when Darvish came over two years ago. If Tanaka's posting fee is higher (which I suspect it will be) it's a reflection of the financial state of the game, not of his talent relative to Darvish.

 

Tanaka is closer to the Dodgers Ryu Hyun Jin than Darvish. While Tanaka and Darvish are Japanese, Ryu Korean, both Tanaka/Ryu are #3 starters with #2 upside stuff wise. Ryu was signed last year for $36M for 6 years and had a $25.7M posting fee. I find it hard to believe Tanaka will get over double Ryu.

[ThePuck]

I wish we had a #3 starter who carried an ERA of 3.00 and a FIP of 3.24. That would be fantastic! Just because Ryu is a #3 on the Dodgers, I'm not sure he's actually just a #3.

[cmb0252]

I wish we had a #3 starter who carried an ERA of 3.00 and a FIP of 3.24. That would be fantastic! Just because Ryu is a #3 on the Dodgers, I'm not sure he's actually just a #3.

 

Sorry, I meant to say when Ryu was posted that was the scouting report. #3 with potential to be #2.

[ThePuck]

Sorry, I meant to say when Ryu was posted that was the scouting report. #3 with potential to be #2.

 

Ah, I should have understood that. My bad.

[Nick Nelson]

Tanaka is closer to the Dodgers Ryu Hyun Jin than Darvish. While Tanaka and Darvish are Japanese, Ryu Korean, both Tanaka/Ryu are #3 starters with #2 upside stuff wise. Ryu was signed last year for $36M for 6 years and had a $25.7M posting fee. I find it hard to believe Tanaka will get over double Ryu.

Again, this is a comparison based on precedence and that doesn't work here. The stakes are raised when every single team has an additional 25-30M in annual income to play with.

[nicksaviking]

Assessing what Tanaka might get for a posting fee isn't about comparing him with Darvish as a player. The landscape is simply different now than when Darvish came over two years ago. If Tanaka's posting fee is higher (which I suspect it will be) it's a reflection of the financial state of the game, not of his talent relative to Darvish.

 

Not to mention that had everyone known what Darvish would have become his posting bids would have surely been higher. If free agency over the last 30 years has taught us anything, the best player doesn't set the curve for those that follow, he simply raises the bar with the expectation that the guys following him will raise it even higher, even if their skill is not equal.

 

I just noticed the Asian dating site add on the homepage. Perhaps I'm wrong, but I'm not sure that ad was targeted toward the most appropriate demographic. Or perhaps those marketing geniuses know something about the Twins off-season free agency plan that the rest of us don't?

[diehardtwinsfan]

Not to mention that had everyone known what Darvish would have become his posting bids would have surely been higher. If free agency over the last 30 years has taught us anything, the best player doesn't set the curve for those that follow, he simply raises the bar with the expectation that the guys following him will raise it even higher, even if their skill is not equal.

 

I just noticed the Asian dating site add on the homepage. Perhaps I'm wrong, but I'm not sure that ad was targeted toward the most appropriate demographic. Or perhaps those marketing geniuses know something about the Twins off-season free agency plan that the rest of us don't?

 

Well, a half dozen Asian names are in every other post. My guess is some bot logic is seeing that and thinking there's something Asian about the site.

[dannybgood]

It would make sense to me, since the Twins are so short on decent starting pitching, to bid aggressively on Tanaka. I think the down side of the older available starting pitching with their susceptibility to injury is what Ryan is looking at and I doubt he'll make any bids on the higher priced starters. I fear the Twins will look at people like Pelfry and once again this team be either at the bottom of the major leagues or close to it with starting pitchers ERA.

[BG816]

I've been a longtime lurker, but after reading about Tanaka, I finally felt I needed to sign up and join the discussion.

 

I think Tanaka is the Twins' top priority this winter, and there are several reasons that have led me to this conclusion.

(And as a disclaimer, I don't agree with everything the front office does, and I have been as disappointed as anybody over the past 3 years. But, personally, I don't think me bitching about the negatives would add anything to the conversation, so my posts are going to be of the glass-half-full variety. That does NOT mean I'm an apologist )

1. Although Ryan is known as a spendthrift, I think there has been strategy involved in him not spending as much as permitted by ownership the past few years. He's not stupid. He knew the Twins would be awful for a few years while rebuilding. Why spend unnecessarily to make a 96-loss team into a 90-loss team? He has had his eyes on the future and stashing the unspent cash for a certain posting fee. Again, total speculation.

2. The Twins have probably been following Tanaka and other Japanese players for years. Tanaka didn't just come out of the blue. We know senior staff has made the trip over the Pacific to see Tanaka firsthand. Did they do that for Darvish or any other Japanese pitcher in the past? This could be evidence of a high level of seriousness on their part.

3. Payroll has been cut by attrition and trades, and the Twins are not going to risk further alienating fans by not spending the money we know they have on free agents. Despite fielding an awful team, attendance was impressive this past year (I live in Cleveland, so averaging over 30,000 per game to watch the Twins amazes me compared to what the Indians drew with a playoff team.) Income, therefore, has not dropped by much, so there's no business reason to cut payroll.

4. The prospects are being brought up in waves, allowing for future financial certainty. Obviously, for the first 3 years, each will be inexpensive. But, again, the money has to go somewhere. A $15m/yr. deal would be affordable and during those first few years there will be extra money to spend on other needs as well. If Tanaka is signed to a 5-year deal, there will be at least 2 seasons before a $15m salary would potentially become problematic. After that 2 year buffer, the problematic nature of the deal would only gradually rise over the final 3 years of the deal. I think the worst case scenario is that the Twins are stuck with a bad contract for 2 years at most, more likely for only 1 year, and if Tanaka performs as advertised, $15m/yr. is a bargain. Then, there is a year of arbitration, or more likely, an extension, and the terms and impact of that deal are impossible to know today, and will depend on the business health at that time. However, in 5 years, all signs point to the Twins being pretty damn good, and good baseball equals nice profits.

5. Finally, any talk of the Twins having to pay Tanaka more to come to Minnesota is nonsense. If the Twins post the winning bid, Tanaka will have 2 choices: sign with the Twins or go back to Japan and make a lot less in a worse league. There is no doubt he would sign. (Admittedly, I can't remember if anybody has claimed that he wouldn't want to sign with the Twins and would refuse to play for a rebuilding team like I've seen in other threads. So I'm sorry in advance.)

Conclusion: I'm an attorney. Viewing this through the eyes of a litigator, Terry Ryan's moves and non-moves, along with the financial health of the team and the need for a top-of-the-rotation pitcher without wanting to give up prospects or draft picks, everything points to the Twins making a very serious run at the best pitcher on the market, and a possible ace for years to come.

[glunn]

I've been a longtime lurker, but after reading about Tanaka, I finally felt I needed to sign up and join the discussion.

 

I think Tanaka is the Twins' top priority this winter, and there are several reasons that have led me to this conclusion.

(And as a disclaimer, I don't agree with everything the front office does, and I have been as disappointed as anybody over the past 3 years. But, personally, I don't think me bitching about the negatives would add anything to the conversation, so my posts are going to be of the glass-half-full variety. That does NOT mean I'm an apologist )

1. Although Ryan is known as a spendthrift, I think there has been strategy involved in him not spending as much as permitted by ownership the past few years. He's not stupid. He knew the Twins would be awful for a few years while rebuilding. Why spend unnecessarily to make a 96-loss team into a 90-loss team? He has had his eyes on the future and stashing the unspent cash for a certain posting fee. Again, total speculation.

2. The Twins have probably been following Tanaka and other Japanese players for years. Tanaka didn't just come out of the blue. We know senior staff has made the trip over the Pacific to see Tanaka firsthand. Did they do that for Darvish or any other Japanese pitcher in the past? This could be evidence of a high level of seriousness on their part.

3. Payroll has been cut by attrition and trades, and the Twins are not going to risk further alienating fans by not spending the money we know they have on free agents. Despite fielding an awful team, attendance was impressive this past year (I live in Cleveland, so averaging over 30,000 per game to watch the Twins amazes me compared to what the Indians drew with a playoff team.) Income, therefore, has not dropped by much, so there's no business reason to cut payroll.

4. The prospects are being brought up in waves, allowing for future financial certainty. Obviously, for the first 3 years, each will be inexpensive. But, again, the money has to go somewhere. A $15m/yr. deal would be affordable and during those first few years there will be extra money to spend on other needs as well. If Tanaka is signed to a 5-year deal, there will be at least 2 seasons before a $15m salary would potentially become problematic. After that 2 year buffer, the problematic nature of the deal would only gradually rise over the final 3 years of the deal. I think the worst case scenario is that the Twins are stuck with a bad contract for 2 years at most, more likely for only 1 year, and if Tanaka performs as advertised, $15m/yr. is a bargain. Then, there is a year of arbitration, or more likely, an extension, and the terms and impact of that deal are impossible to know today, and will depend on the business health at that time. However, in 5 years, all signs point to the Twins being pretty damn good, and good baseball equals nice profits.

5. Finally, any talk of the Twins having to pay Tanaka more to come to Minnesota is nonsense. If the Twins post the winning bid, Tanaka will have 2 choices: sign with the Twins or go back to Japan and make a lot less in a worse league. There is no doubt he would sign. (Admittedly, I can't remember if anybody has claimed that he wouldn't want to sign with the Twins and would refuse to play for a rebuilding team like I've seen in other threads. So I'm sorry in advance.)

Conclusion: I'm an attorney. Viewing this through the eyes of a litigator, Terry Ryan's moves and non-moves, along with the financial health of the team and the need for a top-of-the-rotation pitcher without wanting to give up prospects or draft picks, everything points to the Twins making a very serious run at the best pitcher on the market, and a possible ace for years to come.

 

Excellent first post. I hope that you continue to participate.

[Mr. Brooks]

1. Although Ryan is known as a spendthrift, I think there has been strategy involved in him not spending as much as permitted by ownership the past few years. He's not stupid. He knew the Twins would be awful for a few years while rebuilding. Why spend unnecessarily to make a 96-loss team into a 90-loss team? He has had his eyes on the future and stashing the unspent cash for a certain posting fee. Again, total speculation.

 

Unspent money is NOT carried over by the Twins. They are on record saying that, it is not opinion or interpretation, it is fact.

[drivlikejehu]

Mr. Brooks is right, but that's not really the problem. The Twins just won't spend significant money on a free agent pitcher. I'm not sure what more they can do to prove this... decades of empirical evidence. Literally hundreds of statements by Terry Ryan. A cheap ownership group.

 

The chances of the Twins signing Tanaka are 0%.

[Oldgoat_MN]

Unspent money is NOT carried over by the Twins. They are on record saying that, it is not opinion or interpretation, it is fact.

 

It would be unwise for them to say otherwise.

That doesn't mean that they couldn't splash an amount of money one year that would push the percentage above 54% one time.

 

I truly believe that the Pohlads are tired of losing, too.

 

I agree with BG816 in that Tanaka appears to be the prize of the off-season.

[Dman]

I agree the Twins are interested in Tanaka and certainly are in a good position to make it work but given the history of the franchise I feel quite certain they will come up short. Another team will outbid them. When have Twins ever landed the premier free agent or player in their history? They will make a good bid but they will not get Tanaka so hopefully there is a plan B.

[nicksaviking]

Well, a half dozen Asian names are in every other post. My guess is some bot logic is seeing that and thinking there's something Asian about the site.

 

I think I'd prefer to believe that Don Draper has infiltrated the Twins front office.