November 15, 2006
Revenue Stream
Scott Boras put a price on Hideki Matsui's value to the Yankees:
Boras said he began talks with Epstein yesterday but would not outline a timetable for talks or say when Matsuzaka would be visiting Boston. To calculate Matsuzaka's financial impact on the Red Sox, Boras said, he will use Hideki Matsui as a benchmark. Boras said he's heard from Japanese sources that Matsui brings in $21 million per season for the Yankees in advertising and marketing, so he wasn't blown away by the $51.1 million bid.
Take that with a grain of salt. Boras exaggerated a client's worth before. But even if the revenue stream was $10 million a year, a $50 million investment is worth that. That's 20% a year, 40% if you use Boras' number. You also see why the Yankees weren't willing to bid that high. They already have the revenue stream, and adding Matsuzaka wouldn't raise it that much, I'm guessing.
Update: As someone pointed out in the comments, these percentages are way off base because the $50 million isn't principal. Sorry about that.
Posted by David Pinto at
08:29 AM
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If the Yankees realize $21 mil/year by having Matsui, then every general manager other than Cashman is a moron. How hard is it to figure out that you should offer the guy more than $21 mil/year? But nobody did.
If the stream were really $10 mil/year, Matsui would still be horribly underpaid.
Andrew Zimbalist is a baseball/sports economist:
"Zimbalist estimated that the Sox might gain no more than $3 million a year by cashing in on the Japanese icon because they would be required under major league rules to equally distribute the vast majority of their earnings related to the merchandising of Matsuzaka with the 29 other teams"
But... but... if you can't trust Scott Boras, who can you trust????
The more business astute teams (such as Red Sox, Yankees, etc.) make money from activites other than selling jerseys and jackets. Remember, the Sox own their own cable network and nothing stops them from making joint partnerships with Japanese firms. This money would not be shared with the other teams.
Also, it will be interesting to see how the negotiations play out. Boras/Seibu have an extremely high interest in making sure a deal happens. Things could get creative and it's possible money might change hands which reduces the $51M post to something closer to the next highest bid.
You can't measure rate-of-return the way you did, when you lose the $51.1m principal at the end of the investment.
If the Sox got $10m a year for 4 years, and then were 'done', their rate-of-return would be about -5%
Using Boras' number of $21m per year for 4 years, the rate of return would be about 13%
How does Boras have "an extremely high interest in making sure a deal happens"? I don't think he has. Much better for his wallet is for Matsuzaka to be a free agent next year. As for his other interests, I think it's silly to speculate.
I also decline to speculate, myself, about how much money the Red Sox will derive from the mysterious "Asian markets". Zimabalist's opinion is an expert opinion, so I guess I'm inclined to believe him. Boras, pundits, sabermatricians, bloggers, I doubt they have any idea how much the income stream will be.
Those revenue stream estimates for Hideki Matsui might or might not be true, but he has performed as expected, at star level. So has Ichiro. How much extra revenue did Kaz Matsui generate for the Mets, or Hideki Irabu for the Yankees earlier?
The Red Sox gamble is that Matsuzaka will perform as a star and stay healthy. If he struggles or has injury problems, he won't generate squat relative to the $$ Boston will have invested in him.
"How does Boras have "an extremely high interest in making sure a deal happens"? I don't think he has. Much better for his wallet is for Matsuzaka to be a free agent next year. "
If the Sox bargain in good faith and Boras blows the deal I doubt he would be the agent negotiating next year's deal.
Matsuzaka has 2 years left before he's a free agent under Japan's rules
adam, no it is NOT 2 years.
he can sign may 1 2008
japanese players are FA after 9 years and they must play 145 games a "year"