The Likely Financial Benefits of Signing Masahiro Tanaka

Junko Kimura

In signing Masahiro Tanaka, the New York Yankees are likely to benefit from increased revenue from Japan -- but not as much as they enjoyed by signing Hideki Matsui.

With their reported seven-year, $155 million deal with Masahiro Tanaka, the New York Yankees will be hoping to increase revenue, both in existing revenue streams and new ones. A star player is a strong marketing tool, and if he makes the team better on the field, the increased winning percentage could also increase attendance. But will Tanaka's new team enjoy new revenue streams from Japan? The examples of Hideki Matsui, Ichiro Suzuki and Daisuke Matsuzaka provide some guidance.

The Yankees will not enjoy additional international broadcast or marketing revenue, at least not directly -- MLB has those rights, and the proceeds are distributed to all 30 clubs evenly. Instead, we're looking at advertising, corporate sponsorships, and ticket sales to tourists from Japan. With only a few players to study and no access to teams' financials, it's extremely difficult to reach any definitive conclusions about the extent to which a Japanese baseball star could increase revenue for a team through these Japanese sources. In a Harvard Business School working paper, however, Isao Okada and Stephen A. Greyser gave it a try.

I have trouble trusting in the conclusions reached by Okada and Greyser, in part because they seem to rely on a haphazard collection of anecdotal reports which are hard to compare to each other. Nonetheless, they marshal enough figures to be persuasive on the general point of financial benefits, and some of the seven criteria they identify seem intuitive, especially in light of the Yankees' history with Matsui. The three most significant factors appear to be the player's popularity in Japan before the move to MLB, whether the team and player enjoy high levels of performance, and whether the player is a position player or pitcher.

Player's popularity in Japan

Okada and Greyser credit Red Sox COO Sam Kennedy with the observation that "Japan is a much more 'player-oriented' market than the U.S." This could be partly due to the popularity of the high school baseball tournament in Japan, and the speed with which many Japanese players ascend to NPB. Before he was posted, Ichiro's legend was already enormous (partly on the back of seven consecutive batting titles), and as the best hitter on NPB's most popular team, Matsui was also already an icon.

Tanaka's youth is part of his allure, and a big part of why he warranted such a lengthy, lucrative deal with the Yankees. But it also cuts against him in terms of popularity -- Tanaka only rose to an elite level in 2011, and so it may be that his stardom in Japan is likewise young. While Tanaka's 2013 was particularly amazing (24-0 in 27 games started), it probably did not help that he was pitching for NPB's newest team. Tanaka's popularity probably lags behind that of Ichiro and Matsui.

Team and player performance

For the Mariners, it certainly helped that Ichiro set the league on fire from the date of his arrival, winning the AL MVP in 2001. For the Yankees, Matsui never did emerge as an MVP contender (his best finish was 14th, in 2005), but he still posted four seasons of 20 or more home runs (and a fifth for the Angels). On the team side, though, the Yankees certainly did better: they averaged over 97 wins per season during Matsui's tenure, whereas in Ichiro's eleven full seasons with Seattle, his team averaged less than 80 wins (although the Mariners' 116-win 2001 may have crystallized something).

More to the point, according to Okada and Greyser, the Yankees are "the most popular [MLB] team in Japan." The Yankees of late have not been the Yankees of old, but with no losing seasons since 1992 and playoff berths in 17 of the last 19 seasons, the club seems poised to perform nearly as well as it did during the Matsui seasons.

Position player vs. pitcher

Here's where things get more complicated. One of the big reasons why the Red Sox did not enjoy a large revenue bump by signing Daisuke Matsuzaka seems to be that Matsuzaka played only once every five games. This seems to have a particularly large impact on ticket sales (and on-site merchandise sales), but in the opinion of Okada and Greyser, the fact that Matsuzaka only played once every five games also caused sponsors to hesitate to place advertisements at Fenway Park.

I'm not sure what to make of the Matsuzaka lesson, as the situation of the Red Sox appears to be a perfect storm of bad ways to commercialize a baseball star from NPB (in Japan), but there's definitely something here. It's one thing to have a single favorite pitcher if you live near the stadium, and it's not necessary to buy tickets well in advance of the game. For fans to come from Japan to see Tanaka at Yankee Stadium, they'd almost certainly have to book a trip for an entire week's worth of games. That's a pretty sharp contrast to Matsui, who despite missing time in 2006 and 2008, was a good bet to be playing; in fact, Matsui played all 487 of the Yankees' games from 2003 to 2005.

Other factors

Okada and Greyser identify four other factors that they think could affect a team's ability to gain additional revenue from Japan by signing a baseball star from NPB: distance from Japan, whether or not there are non-stop flights, the size of local Japanese community, and whether or not there are other tourist attractions in the destination city.

All four of these factors seem likely to impact ticket sales/tourism more than sponsorship or advertising. And on the whole, New York does very well; the significant number of direct flights to Japan should neutralize the fact that New York is farther away from Japan than several other U.S. cities, and New York is probably unrivaled as a tourist destination. In addition, according to the research of Okada and Greyser, New York has the second-largest Japanese-American population of any city in the country (behind Honolulu), and the second-largest number of residents who are Japanese citizens (behind Los Angeles).

Conclusion

The New York Yankees certainly have a better handle on what makes sense for them financially than I do, even more so than some of the other clubs that were competing for Tanaka's services. They have seven years' worth of information on how Hideki Matsui helped them gain additional sponsorships and sell more tickets. As the Okada and Greyser paper details, the benefits to the Yankees from signing Matsui were significant.

Even with Ichiro still on the team, however, it may be that signing Tanaka will serve primarily to maintain the Yankees' current sponsorship arrangements with Japanese companies and its partnership with Yomiuri Shinbun, instead of opening up new revenue streams. The impact on ticket sales may be relatively minimal, although travelers from Japan who book week-long trips would have plenty to do in the city on days when Tanaka is not pitching.

Okada and Greyser note that according to one estimate, the "overall economic effect on the New York area" of signing Matsui might reach $100 million per year. The impact of signing Tanaka appears likely to be far less, although in terms of banking on revenue from Japan, it may be that no team is better situated than the Yankees.

. . .

Ryan P. Morrison is a Beyond the Box Score contributor, and co-author of Inside the 'Zona, a site on the Arizona Diamondbacks with a sabermetrics slant. You can follow him on Twitter: @InsidetheZona.

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