I’ve written a lot of articles about Masahiro Tanaka. Scouting report, here. First season projection, here. Tanaka’s deadline to sign with a MLB team is Friday, January 24th at 5:00 PM. Yesterday, we learned that ‘at least five teams have submitted formal offers, nearly all of them worth more than $100 million over six years.’  Based on Japanese reports, which haven’t been totally reliable, those five teams were the Yankees, Dodgers, Cubs, Diamondbacks, and White Sox. Tanaka gave teams a ‘self-imposed’ deadline of January 16th to submit offers. 

On the surface, giving at least $100 million to pitcher who has never thrown a MLB pitch is insane. However, as we’ve seen with most free agent contracts so far, teams are flush with cash and ready to spend big on impact players. Tanaka, who is only 25-years-old and was dominant last season in JPL play, is the type of player MLB teams won’t shy away from. I’ll walk through a valuation exercise to give you an idea of what teams are expecting and some comps to consider.

So far, we’ve heard a few different contract offers float around, but the consensus seems to be that most teams are willing to spend between $100 to $120 million over six years to ink Tanaka. If we do a simple valuation exercise that individual player wins are worth $6 million and inflation is expected to rise by five percent per year, I’ll show conservative and optimistic outlooks for Tanaka. Based on this article, I used a WAR of at least 4.0 :

Table 1: Conservative

Age WAR $/WAR Value
25 4.0 6.0  $    24.0
26 3.5 6.3  $    22.1
27 3.0 6.6  $    19.8
28 2.5 6.9  $    17.4
29 2.0 7.3  $    14.6
30 1.5 7.7  $    11.5
Total 16.5    $  109.3

Table 2: Optimistic

Age WAR $/WAR Value
25 4.5 6.0  $    27.0
26 4.0 6.3  $    25.2
27 3.5 6.6  $    23.2
28 3.0 6.9  $    20.8
29 2.5 7.3  $    18.2
30 2.0 7.7  $    15.3
Total 19.5    $  129.7

First-Year Valuation 

Last season, the following pitchers had WARs between 4.0 and 5.0, which is starting point for the valuation:

Table 3: Potential Comps

Player Team Innings Wins Losses ERA K/9 HR/9 WAR
Yu Darvish TEX 209 13 9 2.83 11.9 1.1 5.0
Derek Holland TEX 213 10 9 3.42 8.0 0.9 4.8
Doug Fister DET 208 14 9 3.67 6.9 0.6 4.6
James Shields KC 228 13 9 3.15 7.7 0.8 4.5
Mat Latos CIN 210 14 7 3.16 8.0 0.6 4.4
David Price TB 186 10 8 3.33 7.3 0.8 4.4
Jon Lester BOS 213 15 8 3.75 7.5 0.8 4.3
Jhoulys Chacin COL 197 14 10 3.47 5.8 0.5 4.3
Hisashi Iwakuma SEA 219 14 6 2.66 7.6 1.0 4.2
Jose Fernandez MIA 172 12 6 2.19 9.8 0.5 4.2
Cole Hamels PHI 220 8 14 3.60 9.9 0.9 4.2
Average   207 13 9 3.20 8.2 0.8  

Wins and losses are more arbitrary and have less predictive value, but let’s use Tanaka’s fellow countrymen as a measuring stick to see whether its reasonable to assume Tanaka falls into this group of pitchers:

Masahiro Tanaka (25-years-old when entering MLB)

  • Japan: 1.44 ERA, 8.7 K/9, 1.1 BB/9, 0.3 HR/9
  • MLB: TBD

Yu Darvish (25-years-old)

  • Japan: 1.64 ERA, 9.7 K/9, 1.9 BB/9, 0.3 HR/9
  • MLB: 3.34 ERA, 11.2 K/9, 3.2 BB/9, 1.5 HR/9

Daisuke Matsuzaka (26-years-old)

  • Japan: 2.40 ERA, 9.1 K/9, 2.1 BB/9, 0.5 HR/9
  • MLB: 4.00 ERA, 8.5 K/9, 4.3 BB/9, 1.0 HR/9

Hiroki Kuroda (33-years-old)

  • Japan: 2.86 ERA, 6.7 K/9, 1.8 BB/9, 0.8 HR/9
  • MLB: 3.60 ERA, 6.6 K/9, 2.9 BB/9, 1.7 HR/9

As shown, the strikeout rates seem to translate over from JPL to MLB, which is an encouraging sign. Home run rates definitely spiked by at least 0.5 HR/9, so we should expect Tanaka to surrender more than 0.8 HR/9. Same story for ERA. Tanaka registering a 3.20 ERA in his first full season is optimistic. 

Six-Year Valuation

Based on the information shown in Tables 1 and 2, teams are expecting Tanaka to return at least 17 to 19 wins over the course of six seasons. To put this into perspective, over the last six seasons, only six pitchers have return total WARs of 30.0 and over. Those pitchers are Cliff Lee (37.1), Justin Verlander (37), CC Sabathia (32.1), Felix Hernandez (31.8), Roy Halladay (30.0), and Zack Greinke (30.0). I’ll expand the sample size to include pitchers who have returned between 18 and 22 WAR.

Player Team Age Innings Wins Losses ERA K/9 HR/9 WAR
James Shields TB, KC 28-33 1343 82 66 3.68 7.8 1.1 21.9
Max Scherzer ARI, DET 24-29 1019 73 45 3.67 9.4 1.0 21.5
Matt Cain SF 24-29 1284 71 59 3.22 7.5 0.8 20.4
Josh Johnson MIA, TOR 24-29 813 46 35 3.38 8.4 0.7 19.2
Mark Buerhle CWS, MIA 29-34 1253 79 67 3.90 5.2 1.0 19.1
Hiroki Kuroda LAD, NYY 33-38 1120 68 70 3.40 6.8 0.9 19.1
Ricky Nolasco MIA, LAD 25-30 1151 77 62 4.30 7.6 1.0 19
David Price* TB 24-28 973 71 39 3.19 8.1 0.8 18.8
Anibal Sanchez* MIA, DET 25-29 906 50 55 3.59 8.4 0.8 18.8
Ryan Dempster CHC, BOS 31-36 1168 73 58 3.86 8.2 1.0 18.2
Average     1103 69 55.6 3.62 7.7 0.9  

David Price and Anibal Sanchez only have four full years of data in the sample set, so they probably aren’t the best comps. Outside of Josh Johnson, this grouping proves that durability, a modest ERA, strikeout, and home run rate will provide the biggest returns on investments. We’re looking at a split between AL and NL pitchers, so there isn’t a bias towards the NL.

In terms of contracts, Matt Cain, at Age 27, signed a six-year, $127.5 million extension in 2012. Cain was coming off a Top-8 Cy Young finish in 2011 and turned in a Top-6 Cy Young finish in 2012. Zack Greinke, who didn’t appear on this table, posted a WAR of 30.0 over the last season seasons. In early 2013, Grienke signed a six-year extension that put his total contract at $159 million. Greinke, the 2009 Cy Young Award winner, has been used as a benchmark for Tanaka’s contract negotiations. Any team that uses Greinke’s performance as a benchmark for Tanaka is foolish. 

Conclusion

After completing this valuation exercise, in the context of a rumor six-year deal, teams are expecting between 1,050 and 1,200 innings, an ERA between 3.40 and 3.70, a strike out rate between 7.5 and 8.0, and less than one home run per nine innings. Over the course of a six-year contract, these numbers appear very reasonable. However, I think it’s safe to assume that Tanaka will not come over and dominate right away. Alike Yu Darvish, he may need a year or so to acclimate himself to the MLB. Expect some struggles early on, but I think he should easily hit value on a contract in the six-year, $120 million range. Anything over that valuation may difficult to derive value from.