How the Yankees got Masahiro Tanaka, and what he'll really cost

Wednesday January 22nd, 2014

In one of the least surprising developments of the offseason, the Yankees blew away the field and blew away their business plan from the past two years to sign Japanese ace Masahiro Tanaka. To become relevant again after missing the playoffs last year, New York always had Tanaka in mind as the big piece necessary to return them to October.

"It's no surprise," said one rival club executive. "It was obvious to me back when the posting rules first came under fire at the meetings last year. [The Yankees executives] started to turn bright red and were fuming. They were sick. He was obviously their must-have."

According to a source from a club involved in the bidding, most clubs, including the Dodgers, Cubs, White Sox, Diamondbacks and Astros, valued Tanaka at about $100 million to $120 million over six years. The Cubs, despite rumors they would chase Tanaka at any cost, were not the high bidders. The Yankees, given their need, were not about to be outbid. They added dollars, years and the sweetener of an opt-out clause to pull away from the pack, eventually securing him with a seven-year, $155 million commitment.

The signing has to be viewed as a big win for New York, even at those dollars. Tanaka's value is the result of the Yankees' need. Whether he turns out to be a number one, two or three starter, his signing moves them closer to being a playoff team. It's always a good move to address a glaring need when the cost of acquisition is only additional dollars, not talent.

It's just that today New York seems foolish for thinking it had the financial discipline to re-set its luxury tax rate this year by staying under the $189 million threshold. It was because of that goal last season that the Yankees fielded their worst team in 21 years and lost almost half a million paid customers from when they opened their expensive bauble of a ballpark in 2009.

The change to the posting rules did apply a financial hurt to the Yankees. Under the old rules, the money the Yankees would bid for the posting fee -- the blind auction to win the rights to the player -- was non-taxable. But when small- and mid-market teams complained about that kind of a tax shelter giving the rich teams an advantage, baseball changed the rules. The posting fee now is capped at $20 million, which funnels more money to the player's salary -- which counts toward the luxury tax.

The Yankees will shell out $175 million for Tanaka -- $155 million in salary plus the $20 million posting fee. But that's not all. The signing also pushes New York past the $189 million tax threshold, which means a 50 percent tax on the overage. That means Tanaka's salary (if you choose to isolate it and the team remains well above the threshold) effectively gets taxed as much as $77.5 million, bringing the potential effective cost of signing Tanaka to as much as $252.5 million.

JAFFE: How Tanaka's contract stacks up against deals for other aces

What are the Yankees getting for $252.5 million?

Said one executive who scouted Tanaka, "Our evaluation of him was as a number two [starter], not a number one, and with more than the usual amount of risk. He's a good pitcher -- a Dan Haren type."

Like Haren, Tanaka is a strike-thrower with a track record of durability and a well above average splitter. (At the height of his value, in 2009, Haren, a three-time All-Star, signed a four-year, $44.75 million extension.) The risk with Tanaka comes from his heavy usage in Japan and his mechanics. He threw more innings though age 24 in his native country than any pitcher in the major leagues has done since Frank Tanana from 1973-78. He also throws with two distinctive moves in his throwing motion that can be a concern to scouts: he wraps his right wrist as he brings the ball behind him and he brings the ball up first with his shoulder before rotating his hand up, a maneuver that causes him to load slightly later than most pitchers.

CHEN: Is Tanaka better than Darvish? He gets mixed reviews

"One thing you have to remember about pitchers when they come over from Japan," said one prominent agent, "is that you can count on their walk rate just about tripling when they pitch in the majors."

Said the executive who scouted Tanaka, "His walk rate will go up and his strikeout rate will go down. And if he doesn't trust his stuff against major league hitters, he'll nibble and his walk rate will go up even more, like happened with [Diasuke] Matsuzaka. And pitching in that ballpark in the AL East is another factor."

The Yankees understand all the risks. But Tanaka is worth all the risks and the money on the chance that he comes close to doing what Yu Darvish has done for the Rangers. Largely because of a barren farm system, the Yankees knew they could not field a playoff contender in the AL East this year for less than $189 million. A declining CC Sabathia and an aging Hiroki Kuroda offered too much uncertainty in the front of the rotation. The Yankees were not willing to accept the likelihood of punting another season for tax purposes. And so they obtained a 25-year-old pitcher in the prime of his career who brings stuff and celebrity to their brand. Time will tell if it was money well spent, but for the Yankees, it was money they needed to spend to stay within striking distance of the Red Sox and Rays.

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