The Mixed Incentives of the Posting System

The following article is brought to you by the ILR Sports Business Society.  It is written by Max Fogle an undergraduate student at Cornell University and the Editor-in-Chief of the ILRSBS Blog. Max has worked for several blogs and websites, most notably MLB Trade Rumors. He can be reached at maf373@cornell.edu and the original version of this article can be found here

The Posting System between Major League Baseball (MLB) and Nippon Professional Baseball (NPB) is a hot topic these days among the world’s baseball fans.  The procedures set up in a 1998 document describe how players can be transferred from Japan (and Korea) to North America.  While the Posting System is not something American baseball fans usually worry about, coveted ace Masahiro Tanaka‘s possible posting has many talking about these issues.

The two best professional baseball leagues in the world originally agreed to the Posting System in 1998 after several incidents in preceding seasons (involving Hideo Nomo, Hideki Irabu, and Alfonso Soriano). Since then, NPB players with less than nine years of service time have been covered by the agreement, while those with over nine years are treated as free agents by MLB.

The process begins when players are “posted” by their NPB club.  The exclusive negotiating rights are then awarded to the MLB team with the highest bid in a “blind” auction.  If the player and the MLB team can come to an agreement, the NPB club receives the bid money in the form of a one-time “Posting Fee”.

Both sides were eager to make changes to the Posting System this offseason, and so far they have not been able to hammer out an agreement. No players, including Mr. Tanaka, can be posted until there’s a deal in place. The only change under the current proposal is an alteration to the amount of money NPB clubs receive; they would get only the average of the two highest bids rather than the amount of the highest bid.

The discussion stateside has unsurprisingly focused on MLB’s perspective in the negotiations.  For the clubs as a whole, this agreement would obviously be a small win. Posting fees simply would decrease by a small amount.  The main disagreement on the clubs sides is an internal debate about whether posting fees should count for competitive balance tax purposes.

While players would seem to have less skin in the game, the MLBPA actually has a great deal to consider.  The union certainly would like to see less money going to Japanese clubs, a group with whom they have virtually zero common interest.  They do have in an interest in seeing posted players get the largest salaries possible, for a variety of reasons (not the least of which is that those players are future members).  But current membership probably is not overly concerned with the matter, and they may wish to use their bargaining power for more direct benefits.

For NPB clubs, this new agreement may be a small concession after years of favorable terms.  They would stand to lose whatever MLB is gaining in lower posting fees.  But the system is still preferable for Japanese teams than any number of potential arrangements.

The most interesting angle may be that of the NPB players. Posted players could potentially receive slightly more money with reduced posting fees, but they don’t stand to see huge increases. Regardless, the posting system is only a concern for a small percentage of  Japanese Professional Baseball Players Association (JPBPA) membership.  Only a few of their hundreds of current members could even dream of being posted.  Here’s how Japanese super-agent Don Nomura described the players union:

“The Japanese players association is absolutely weak… I don’t know if they have a plan, but obviously they’re not winning in any labor talks. Free agency hasn’t changed in many years and the players’ minimum salary hasn’t changed in about 15 years, so you can say the association hasn’t really done much for the players.”

If the JPBPA is not able to make headway on basic issues, then it is unlikely they can win on an agreement that affects about 1% of membership.  The union’s executive director, Toru Matsubara basically admitted defeat on the issue, stating:

“There was not enough time on our side and we haven’t got any more bargaining power than this. It was an agonizing decision (accepting the revisions).”

Over the Posting System’s 15 years, only 21 players have been posted, with just 13 actually agreeing to terms with MLB teams.  All of the parties would probably like to see these numbers increase.  The MLB wants the world’s best talent, while NPB clubs want compensated for developing it. The MLBPA would like more high-priced players entering the League, and the JPBPA would like to see its players to get as much freedom and compensation as possible.

Instead, the only changes likely coming are superficial in nature.  MLB teams stand to make small gains in a fixed-pie negotiation with NPB, while the JPBPA loses again and the MLBPA remains a bystander.

Featured Image courtesy of http://www.baseballdeworld.com

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