2006-11-15

Boston Fighting History of Bad Decisions

Boston has always been at the center of American history- and this includes sports. From the Babe Ruth trade all the way to the recent Joe Thornton deal, Beantown is quite good at making people scratch their heads.

The Boston Red Sox have paid a stunning 51 million dollars just to speak to a Japanese pitcher who never played in the Majors. That doesn't include signing him to a contract. Which makes you wonder what exactly motivated Boston to make such a move.

To cite another sport, we saw something similar with the NHL recently. Europeans are claiming (quite accurately and justifiably) that the NHL is destroying the quality of their leagues. The Russian Elite league, now endowed with some financial muscle, is ready to fight back as they did with the Pittsburgh Penguins and the Malkin affair. But what is Japan's angle in this? Do they fear being raped by MLB? Lest we forget, Japan is the only country with a legitimate professional league outside North America.

And what to make of Boston's logic? In business, any sound business decision is based on one premise: what are the odds of increasing return? Most businesspeople make an educated calculated risk before investing to ensure a reasonable shot at earning profits - or at the very least getting their capital back. We all know business has risk associated with it and the basic axiom goes 'the higher the risk, the higher the return.'

Unless this pitcher is the second coming of Spahn, Matthewson, Alexander, Grove, Ford, Koufax and Drysdale combined the financial cost of this move may prove too much for even a rich team like Boston to handle. Paying someone before they merit it is a dicey game. Somebody in that organization must really, really, really believe in this pitcher. That's the, I suppose, calculated risk - assuming someone made that calculation.

What makes this move ironic is that Theo 'The Boy Wonder Genius' Epstein cried poverty during Boston's self-inflicted collapse during the 2006 season. Please the Massacre at Teutoburg (a.k.a. the New York Yankee five game sweep) for details.

Philosophically, I have no problem with teams spending the money they rightfully have the way they see fit. You won't be hearing any PC egalitarian musings about socialistic cap systems from my end..

However, there's fiscal spending with prudence and then there's imprudent spending - in this case possibly for Machiavellian strategic purposes. That is, maybe the Red Sox did this under paranoid duress in an effort to keep the Japanese star from signing with any of the New York clubs.

In soccer, what the Red Sox just did and what the Penguins went through, it's called a transfer payment. In this case, however, the Sox paid to just talk to a player. The beauty of the transfer payment (and I am being deliberately simplistic here) is that the smaller team who is about to lose its biggest asset is handsomely financially compensated for their loss. The flip side is that it literally pits the big clubs versus the small ones regardless of which league they are from.

What do I know? I'm just an observer. Whatever the case, it was a ground breaking move on the part of the Boston Red Sox. Who knows? Maybe the Sox are ahead of the curve on this one. Even though history is not on their side given the city of Boston's track record.

4 comments:

  1. The Commentator,

    The two biggest baseball payrolls are the New York Yankees (way out in front) and the Red Sox (about half of NYY, I believe). What the Red Sox have discovered is that the Yankees have profited -- hugely -- by having a Japanese superstar on their team, Matsui.

    As you may know, a huge Japanese media coterie follows Matsui everywhere: these folks bring lots of money -- and international press -- to the New York franchise. As a result, the Yankees have been able to broker large advertising deals with Japanese companies. These underwrite the Yankees payroll, in large part.

    The Sox want to be able to have Sony, Fuji, Yamaha, Mistubishi, or any number of Japanese businesses (and those American businesses that have big Japanese markets) to buy ad space on the Green Monster, or around Pesky's Pole, or on the Fenway backstop, or even on Japanese billboards in Tokyo. It's in many ways all about logo trading.

    So, this IS a business investment, first and foremost. It is about competing with New York for the pennant AND the Big Dollar. It may prove foolish, but there is probably some speculation that the Sox will get a return on their investment in about half an hour.

    At least this is all what my business pal believes, who, apparently, read this sort of analysis in the Wall Street Journal.

    What do I know, though? Nothing, really.

    Peace.

    BG

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  2. Bob, you bring up an important aspect I neglected. Outside the realm of baseball, I suppose this is the reality. It does make sense. Selling Red Sox apparel in Japan can prove to be profitable. Manchester United has learnt that Asia is a huge market to tap. So, it is quite conceivable that they factored this in. Still, 50 million is obscene to pay up front. In the end, it's all about winning. I think, who knows anymore? And I wondered if this kid was worth the price tag. According to Peter Gammons he's the real deal. As dominant as Ichiro and Matsui. We'll see.

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  3. Anonymous7/27/2007

    Without living in Boston and seeing the carnival like atmosphere that Matsuzaka brings to the park and to the city in general you aren't grasping the real value here.

    I have been to at least 2 or 3 of his starts and I cannot say how great it is to see Japanese families come to the park, utterly thrilled to see him. Yes, he may not have played in the Majors here, but let's face it, he was a stud back in Japan and anywhere other than Boston or NY he would be an Ace.

    Going over the top with 50+ Million was needed as the bidding was private and you wouldn't know what the other team was offering. Rather than loose a bid to the endless pockets of Steinbrenner and company, they were aggressive and got the job done

    Given the new fan base they have acquired in Japan and within Japanese Americans, a whole new channel of merchandising, getting a solid #1 or #2 starter, I'd say this was a pretty good decision by the Sox.

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  4. Anonymous, I agree and do grasp it. I did look at it from more of a baseball operations thing - which perhaps is not enough given the global nature of sports. I shoul dhave looked to soccer and made the connection at the time of writing but soon realized it afterwards. Thanks for the interesting local insight.

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