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Otani and Nippon Ham

by Robert Whiting (Dec 9, 2012)

Congratulations to Nippon Ham for making a successful attempt to convince Shohei Otani to stay in Japan instead of going to the MLB as he earlier vowed to do.  It had been widely believed that Otani was going to sign with the Los Angeles Dodgers, after he said he would refused to sign with any NPB if drafted. But Nippon Ham drafted him anyway, thereby making it difficult for the Dodgers, under the so-called "gentlemen's agreement" between Japan and the U.S.A. to make Otani an official offer until March 1 next year.

Nippon Ham met with Otani and told him about the case of a Korean high school star who tried his hand in  MLB and failed, and warned him about the life that he would have to endure life in the minor leagues for three years, in small towns, which could possibly be very difficult, especially for a Japanese, depending on the place. By contrast, they offered up the possibility that Otani could be used on the Nihon Ham first team in his rookie year and, potentially, earn more money in his first few years than he could in the U.S. ( MLB teams would have been unable to pay more than a $2.9 million signing bonus given the new rules on signing international amateur free agents without facing a 100% luxury tax, and how much salary they would be able to pay Otani while he toils in the minors is a question. The $2.9 million is the spending limit on ALL international free agents.)

Nippon Ham manger Kuriyama reportedly told Otani, "You've got potential as a batter as well as a pitcher. If you come play with Nippon Ham, there is a possibility we could use you in the batting order  as a DH, as well as a pitcher. You'd be a new type of player and you could really stand out."

Sadaharu Oh concurred with Kuriyama's assessment, Nippon Ham representatives also, no doubt, pointed out that if Otani signed with the Fighters, he would be getting on the ground floor of the "Darvish elevator" to MLB, as Scout Dragon manager Ira Stevens likes to put it. (Darvish was rumored to have been granted permission to go to MLB via posting after six years with the Fighters, but chose to delay his departure until  his divorce from his wife  and mother of his two children had been decided. Speculation centered on his wife's potential claims to a share of a new contract with an American team.) In Otani's time with the Fighters, be it 5, 6 or 7 years, as the reasoning goes, he would be able to develop his skills as a pitcher, learn some English and prepare for the eventual move to the USA. And the Fighters would be there to help him do it.

There is an important lesson to this tale. By choosing Otani in the draft, Nippon Ham Fighters front office successfully blocked a serious attempt by an MLB team (The Dodgers) to poach one of Japan's amateur stars. They were lucky that they had an ally in Otani's father who was virulently opposed to his son's going to MLB before playing in NPB, despite Otani's resolve to go anyway. Nonetheless, their took a risk and it paid off and other teams might well follow.

Another lesson lies in the business acumen displayed by Fighters executives. They have learned to turn the inevitable loss of a top star, if that is indeed what Otani becomes, into a great profit..

Consider the following. Nippon Ham drafted Yu Darvish back in 2004 and paid him a signing bonus of 1-oku yen. Then they paid him the following salaries in yen:

2005: 15,000,000
2006: 30,000,000
2007 :72,000,000
2008: 200,000,000
2009: 270,000,000
2010: 330,000,000
2011: 500,000,000

This comes to a total of ¥1,417,000,000

In 2012, the Fighters effectively sold Darvish to the Texas Rangers for a record fee of $52,000,000, which at the rate of 82 yen to one U.S. dollar, comes to a total of  ¥4,264,000,000.

That's a cool profit of  ¥2,847,000,000 on the services of Yu Darvish.

And that is not even counting the money made from tickets sales to Nippon Ham games in which Darvish pitched, or the playoff and Japan Series games revenue that Nippon Ham received thanks to Darvish pitching. Nor does it include merchandise sales related to Darvish jerseys and other gear , or income from print and TV endorsements Darvish made of which Nippon Ham received a healthy commission.

In sum, Nippon Ham made a fortune on Yu Darvish. In fact, they perhaps made more money than they would have made if Darvish had stayed in Japan for the rest of his career.

As Scout Dragon's Stevens put it, "They should be happy he wanted to go to the MLB."

One could assume they would do the same thing with Otani. Let's say they keep him for seven years, pay him a total salary of ¥1.5 to 2 billion yen, if he proves to be successful, and then sell him to MLB via posting. Even if he only attracts half of posting bid that Darvish drew, that still represents yet another considerable profit, when counting ticket sales, merchandise and endorsements revenue. Not a bad piece of business.

If NPB can not figure out a way to keep its top stars from eventually defecting to the MLB, than at least they can take a page from the way the Fighters operate.

Note: There have been allegations, suspicions, actually, that there was a secret deal between Nippon Ham and Otani's high school that there was a behind the scenes deal wherein Otani would first declare he was going to the majors so that no one would draft him so that Nippon Ham could then choose him unopposed and Otani would sign with them. This brings to mind a case involving Masumi Kuwata back in the 1980's when he declared he wasn't going to turn pro out of high school but was going to enroll in Waseda University instead. So no team drafted him, except Kyojin. Kuwata then did a turnabout and signed with the Giants. But suspicions about a secret deal between Nippon Ham and the Otani side are just that. There is no evidence.

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