NPB Tracker

When Rakuten was mulling over what to do with Masahiro Tanaka last December, a thought occurred to me: what if Rakuten came up with a compensation package that included company stock? Obviously Rakuten was never going to approach what Tanaka ultimately got from the Yankees, but if they had offered him, say, a grant of one million shares in Rakuten (TYO: 4755), that would have been a little more creative than just offering to double his salary. Of course in the end they did neither.

Unlike Major League teams, which are mostly owned by groups of wealthy individuals, Japanese baseball clubs are mostly subsidiaries of large corporations. While a few clubs are significant sources of revenue, many are operated as marketing loss leaders for their parent corporations. Rakuten’s Golden Eagles club, for example, seems to fit in to the latter category.

In my industry (technology/software), it’s commonplace to compensate employees with company equity, usually in the form of incentive stock options or restricted stock units. Japanese companies seem to prefer cash bonuses as variable compensation, but that bit of reality wasn’t enough to dissuade me from this thought exercise:

What if Japanese teams partially compensated their players with company stock? Would the players be better or worse off?

To explore the question, I took a player drafted at some point over the last ten years from each team owned by a publicly-traded company, and estimated how much money they’d have today if they had taken 10% of their draft signing bonus in company stock. I deliberately chose first round picks that haven’t panned out for this exercise.

The results are below, but before we get to them, here are some points to remember:

• This is a thought exercise. I’m not suggesting that anyone should do this.
• The starting share value is the closing price on December 1 of the year the player was drafted.
• Share values are as of market close on February 14, 2014.
• Lotte, Seibu, Yomiuri, and Chunichi are privately held, so they aren’t included here.
• The currency unit is Japanese yen. If you’re more comfortable with US dollars, JPY 100m is about $1m, and JPY 10m is about $100k.
• I didn’t account for dividends, and fortunately none of these stocks split over the periods I looked at.
• If you find mistakes in my calculations please let me know.
• I cheated for DeNA. Kota Suda was drafted and played his rookie season under Yokohama’s previous Tokyo Broadcasting System ownership. But this is a thought exercise, and it wouldn’t be fun looking at TBS’s stock, or a very recent DeNA draftee. So we’re clear, I denoted Suda with **.

To my surprise, most of the players would have come out ahead, with only Orix and Mazda really taking a beating. And even then, both were casualties of the 2008 global financial crisis and clawed back share value in 2013.

It’s not much of a surprise to see Softbank and Rakuten at the top of the growth table, as both are giants consolidating positions of global leadership in their industries (mainly telecommunications and e-commerce, respectively). It is a bit of a surprise to see Yakult up there, I haven’t looked into that one. I thought DeNA would have grown more, but they do seem to have a diversification problem and are in a notoriously fickle market (mobile games).

It would be irresponsible to write a post like this and not point out that much of the growth listed here happened in 2013, fueled by Abenomics monetary policy. While Abenomics seems to have coincided with stock market growth, there has also been some volatility, and it obviously remains to be seen if it leads to the end of Japan’s long problem with stagnation.

This is a big year for NPB imports into MLB, with as many as seven front-line players poised to be wearing MLB uniforms in 2012. While all of the these players will be missed, their departures do collectively open spots for younger talent to fill. Here’s a look at who we might see stepping up in the next year and beyond.

• Hisashi Iwakuma (Rakuten) – Masahiro Tanaka took over as Rakuten’s ace in 2011, and the presence of Satoshi Nagai and Takahiro Shiomi softens the blow of losing Iwakuma. For me, the question of who inherits the title of Japan’s best groundball pitcher remains open.
• Wei-Yin Chen (Chunichi) – I’m not sure I see an immediate successor on Chunichi’s roster, though they do have young lefties Toshiya Okada and Yudai Ohno. And although he might be a year or two away, I’m looking to Yusei Kikuchi to emerge as Japan’s next top hard-throwing lefty starter.
• Hiroyuki Nakajima (Seibu) – Hideto Asamura played his way on to the Lions’ opening day roster in 2011, and was a tough out all season. He should move to shortstop in 2012, though he’ll have to fend off competition from Esteban German.
• Munenori Kawasaki (Softbank) – Softbank has young infielders Kenta Imamiya and Tu-Hsuan Lee waiting in the wings. It’s probably unrealistic to expect either to have the same kind of impact that Kawasaki did though. And it seems like the Kawasaki will be back at some point.
• Tsuyoshi Wada (Softbank) – Tadashi Settsu established himself as Softbank’s ace in waiting with a strong 2011. The losses of Wada and Toshiya Sugiuchi mean that there will be more pressure on guys like Kenji Ohtonari, Sho Iwasaki, Shota Ohba and Shingo Tatsumi to pitch quality innings at the ichi-gun level. We’ll see who steps up in 2012.
• Norichika Aoki (Yakult) – So far, Lastings Milledge is set to replace Aoki on Yakult’s roster. Softbank’s Seiichi Uchikawa would currently get my vote as Japan’s top contact hitter, though he lacks Aoki’s plate discipline. I’m not sure I see any Aoki-type prospects on the horizon… I’ve read some good things about Orix’s Shunta, but he needs some time to put it together.
• Yu Darvish (Nippon Ham) – In terms of public stature and marketability, Yuki Saito is certainly Darvish’s heir as the face of the Fighters. Saito is no replacement for Darvish on the mound, and I don’t think Nippon Ham will really have a true successor for him for a long time. Rakuten’s Tanaka seems poised to begin his tenure as Japan’s ace.

It’s much harder to predict the standings for the Pacific League as the teams are so evenly matched. But I’ll give it a shot.

1. Seibu Lions: I think we’ll see a little regression from Okawari Nakamura and Kazuyuki Hoashi, but a better performance from Hideaki Wakui. Overall it looks like the Lions have enough to repeat.
Key Players: Wakui, Hoashi, whoever gets the most at-bats at 1st base

2. Nippon Ham Fighters: Nippon Ham was actually outscored by their opponents last year. I’m putting them here because I believe that they have the pitching and defense to win close games, and that Sho Nakata will turn up at some point during the season and provide a little offense.The new additions to the bullpen have the task of replacing Michael Nakamura as well.
Key Players: Nakata, Ryan Wing, Masanori Hayashi

3. Chiba Lotte Marines: I didn’t think I’d have the Marines making the playoffs, but I’m putting them in third because they have a solid front four in their rotation, and no real holes in their lineup. Hopefully Bobby V can find a way to keep Tadahito Iguchi and Shunichi Nemoto both in the lineup, as Nemoto broke out last year with a .296/.369/.430 line.
Key Players: Bobby V, Yoshihisa Naruse, Yuuki Karakawa

4. Tohoku Rakuten Golden Eagles: The Eagles have two WBC heroes at the top of their rotation (Hisashi Iwakuma, Masahiro Tanaka), a couple of solid mid-rotation guys (Darrell Rasner, Hideaki Asai), and some power in the middle of their lineup (Norihiro Nakamura, Fernando Seguignol, Takeshi Yamasaki). But on the other hand they have some holes in their lineup and bullpen.
Key Players: the bullpen

5. Orix Buffaloes: Manager Daijiro Ohishi took over in May of last year and lead the Buffaloes to a seemingly improbable playoff run. Looking back, the Buffaloes pitched better than I realized, with a 3.93 team era and four starters with sub-4:00 eras and at least 10 wins. If the pitching staff can repeat that performance, and the aging lineup of foreign sluggers holds up, they’ll be competitive. If not, look for a B-class finish.
Key Players: Tuffy Rhodes, Alex Cabrera, Jose Fernandez, Greg LaRocca

6. Fukuoka SoftBank Hawks: It’s hard to pick the Hawks to finish this low with the amazing rotation depth they have — Tsuyoshi Wada, Toshiya Sugiuchi, Nagisa Arakaki, Shota Ohba, Kenji Ohtonari, Kameron Loe, Kazumi Saito (if he can come back from his injuries) and rookie Shingo Tatsumi. But on the flipside, their lineup just isn’t what it used to be. The Hawks hit just 99 home runs last year and haven’t added any significant bats. They’re hoping for a return to form from aging sluggers Hiroki Kokubo and Hitoshi Tamura, who have been shells of their former selves in recent years.
Key Players: Kokubo, Tamura

It was tough to pick any of these teams to finish last, because the league is so balanced and all the teams have strengths. It seems likely that Seibu will finish in the top 3 and SoftBank will finish in the bottom 3, but everything else is up for grabs. What are your thoughts?