Roll Of The Daisuke

I've been bagging blogging a lot on the Red Sox lately, and this post won't be much different. I just got done watching "Yankees Hot Stove" on YES. For those that don't know, it's an hour-long show dedicated to discussing the hot stove, as it applies to the Yankees and the rest of baseball. One of the main topics of this show was Daisuke Matsuzaka and the $51.11 million dollar posting fee the Red Sox doled out for the rights to negotiate with him. Several times this week I've mentioned that it seems like a lot of money, and it is. I've wondered whether or not it makes sense from a business standpoint. This is what I wrote a few days ago:
Plunking down $100 million to sign Matsuzaka may make the Sox money in the long run. Unless the Sox cut payroll or increase the costs of tickets and such, getting a positive return on their "investment" might be hard to do. From a business standpoint, I wonder what their plan is? Fenway sells out every game, so it's not like there is extra ticket or concession revenue to be had. Are they relying on the Japanese market to buy Sox gear? Seems like a tall order.
I had an interesting exchange today over on a Red Sox blog. They were trying to justify the posting fee as a great business investment and a good marketing move. I disagreed. Here were the start of my comments:
As for making money, where are these dollars coming from? The Yankees and Mariners made money primarily b/c they had tickets to sell. Sox games will sell out regardless. The Sox are gaining no additional revenue unless of course they increase ticket and concession costs, which is fine, IF they win. Then noone will care as much. The Yankees and Mariners had seats to sell. Hence the increased attendance figures for NYY since Matsui signed....... As for merchandising, you're not going to make close to $50 million when you figure in revenue sharing with 29 other teams, so you'll have to sell a buttload of merch to even make a dent in the $51 million. As for TV deals, there will be some cash there, both in broadcast and in advertising. A full time player like Ichiro and Matsui, is more valuable from an advertising standpoint as you get 162 games. The Sox are looking at 35 tops. Does revenue sharing apply to broadcast/advertising also? It's not as lucrative as you think, as the majority of the $ is to be had with ticket sales, of which there won't be any added income.
Pretty good take, wouldn't you say? Here was the response:
You make many presumptions with nothing to back them up......And to answer your question, there is no "revenue sharing" in MLB. There is a luxury tax that's based on a team's annual payroll. Revenue has nothing to do with it. That's why teams pursue additional revenue streams like luxury boxes, advertising, or a team-owned television channel like NESN or YES. It's all gravy
"No revenue sharing?" he says with a bewildered look on his face. Really now. The funny thing here is that this blogger was referred to as "one of the most savvy people when it comes to baseball." Maybe it was an oversight or confusion on their part, but still. My wife knows there is revenue sharing in baseball (no offense dear). So me, being the most savvy baseball fan I know, dropped in some language form the Collective Bargaining Agreement to make my point. I then went on to add that advertising revenue will be far less when you bank on a pitcher, than you do a hitter. Makes sense, right? A pitcher will get maximum 35 starts. A hitter can play in 162 games. More games played equals more opportunity to advertise. I was met with this response:
What will that revenue be? Please give dollar figures (or yen, if you prefer) and cite your sources. In other words, please explain on what you base your presumption that advertising (or merchandising, or broadcast rights) revenue will or will not exceed the money the Red Sox have spent for negotiating rights over the life of Matsuzaka's contract.
I won't bore you with my full response, but the short of it is I broke out some math and illustrated about how much merch the Sox would need to sell to make $51 million. I'm not a math genius and I'd need a degree in Advanced Calculus to be able to calculate an exact figure when you account for revenue sharing, but I made my point. My whole outlook on this deal was based on my logic and the assumption of how this whole deal will go. I had no source and I had no dollar figure at the time, but I do now and I love it when I'm right.
As I mentioned above, the big discussion on "Yankees Hot Stove" was about Matsuzaka. The panel consisted of SI senior baseball writers Tom Verducci and Jon Heyman, and NY Time senior baseball writer Jack Curry. For starters, neither of these gentleman believe this was a smart business move and none believed the Sox would get their money back. Then Mr. Curry dropped a figure that made me smile. He dropped a figure on how much revenue the signing of Hideki Matsui has brought the Yankees each year. That figure is $5-6 million dollars. That's some decent cheddar but at that rate, It would take the Red Sox 10-plus years to recoup their $51.11 million dollar investment. Mr. Curry further stated that Matsuzaka is only going to pitch in 30 or so games, where Matsui will play in 162, so the revenue would even be less than that. Another point I made thank you very much. I love it when people agree with me.
So I'll stand by what I've said many times over. This deal is a head-scratcher. If in fact the figures about the revenue Matsui generates are accurate, I see no way the Sox will gain a positive return on their "investment," especially if Boras negotiates Matsuzaka's contract for 3 years. Who knows? Maybe the Sox FO has the same outlook and their high bid was merely a tactic used to **** block the rest of the league from acquiring Matsuzaka? We'll find out just under four weeks. Assuming they do reach an agreement, I still see no way for the Sox to make money on this deal, without totally abandoning spending, which doesn't appear to be in the cards.
I've got an idea. Let's increase some ticket prices!
J