Monday, December 21, 2009

By Steve Bartetzko - Contributor

On December 16, 2009, the Los Angeles Angels of Anaheim officially announced the signing of World Series Most Valuable Player Hideki Matsui. Perhaps the threat of an experienced middle-of-the-order bat with a career line of .292/.370/.482 enticed the Angels to make the move. After all, the Angels needed a bat to replace Vladimir Guerrero, especially a left-handed bat with power. However, their interest may have been piqued by a different line of numbers—one that looks like this: 50/100/350/15/14.6.

As in the discount percentage the Angels will be getting from Matsui’s salary compared to his salary with the Yankees. With the Angels, Matsui’s salary for 2010 will be $6.5 million. While in and of itself, this number is not necessarily enticing, think of it this way: in 2009, Matsui was paid $13 million by the New York Yankees—the year in which he was the World Series MVP. The Angels will be getting the same slugger for 50% off from what the Yankees paid. Furthermore, with Matsui as the primary DH, the Angels will be realizing an even greater savings over the $15 million that they paid Guerrero to be their primary DH last year. And, arguably, the production should be better by Matsui than that provided by Guerrero last year.

Bobby Abreu showed that the Angels could experience a fantastic return on a similar contract last year. The same should be likely for Matsui.

As in 100% growth and 100 requests. Yes, Matsui will be 35 years old at the beginning of the 2010 season. But, Matsui still remains a larger-than-life figure in Japan. How popular is Matsui? Well, you would have to figure his presence had something to do with the phenomenal growth in the Japanese ratings of the World Series this year, which grew by over 100% as compared to the 2008 ratings. As the analysts at NPB Tracker said:

"[Since winning the World Series MVP] Media demand has also rocketed for Matsui, as he has received an estimated 100 requests for television and event appearances in his home country. Even though his home for next season has yet to be determined, it’s not an understatement to say his new team [...] will have an opportunity to develop a big presence in the Land of the Rising Sun.”(1)

When Matsui originally signed with the Yankees, they realized a 10% increase to their merchandise sales.(2) It stands to reason that the Angels should experience a surge in sales now that they have signed Matsui. This increase in merchandise sales will go a long way to offset the loss the Angels merchandising might experience with the departure of popular players such as Chone Figgins, Vladimir Guerrero, and John Lackey.

As in the approximate number of Japanese-Americans and Japanese tourists (in thousands) living in or visiting Southern California. According to the U.S. census in 2000, there are approximately 350,000 people of Japanese descent living in Southern California. Additionally, according to research in 2004, approximately 350,000 Japanese tourists visited the area. The average length of stay was 7.5 days per tourist, and the average tourist spent $158.00 per day.(4) This is largely an untapped market for the Angels. And yet, this demographic is generally very much aware of baseball.

Any time a demographic is largely untapped, it behooves a business to explore ways to open this market. At the risk of sounding jingoistic, the Angels can likely find some new patrons for their ballpark from the local Japanese-American population or from the large number of Japanese tourists. The combined draw of Matsui and Disneyland in Anaheim could bring in an additional number of fans to the ballpark, some of whom may remain Angels fans once they’ve seen the whole product on the field.

As in the potential economic boon that Matsui can bring to the Angels. Shortly after the conclusion of the World Series, the Japanese media outlet Sanspo speculated that the Yankees stood to lose as much as $15 million worth of revenue by letting Matsui leave.(5) While the Yankees may have enough other interested parties to fill that revenue loss (especially after winning the World Series in 2009), every other team in the Major Leagues would be happy to earn this additional revenue.

How would the Angels capture this revenue for themselves? Quite simply, advertising. Advertising revenue from ads in the stadium is not shared in the MLB profit sharing pool, so any increase in advertising remains with that team. Many sources have speculated as to the value that Matsui, or more specifically the Japanese advertisers, will bring to his new team. In the very least, this pending Japanese advertising revenue appears to be worth several million dollars. The aforementioned NPB Tracker explains,

"That opportunity sets Matsui apart from the rest of the free agent pool, in some regards. The Japanese-language signage we’ve been seeing in Yankee Stadium during Matsui’s tenure with the Yankees is sure to follow him wherever he goes. Every news program in Japan will show highlights from Matsui’s game, so a well-timed advertisement behind the plate will reach millions of Japanese homes on a nightly basis. With this comes a revenue opportunity that teams won’t get with, say, Jim Thome."(1)

According to Matsui's agent, Arn Tellem, Matsui helped bring the Yankees six different Japanese companies as sponsors, each adding $1 million in yearly revenue to the team.(6) Now, it may be in our best interest to do our own economic assessment rather than simply believe the agent of the player we are talking about. We all know that Arte Moreno and Scott Boras have had an interesting history trying to measure a player’s total economic value.

So here's the real question - how much revenue can the Angels expect from Japanese advertising? Back in 2003, the Toronto Blue Jays learned for themselves that Japanese companies were willing to pay for advertising that would be featured just on the days that Ichiro Suzuki's Seattle Mariners visited the SkyDome. The Tampa Bay Devil Rays joined the party the next year, bringing in six-figure deals for Japanese advertising into Tampa's Tropicana Field simply because they played against teams with popular Japanese players.(7)

Now imagine what Matsui can do for the Angels. So far, the Angels haven’t really tapped into the Japanese advertising market. The last Japanese player who played for the Angels was Shigetoshi Hasegawa, and he last played for the Angels in 2001. But, if facing a popular Japanese player can bring in six-figure deals, and having a popular Japanese player can bring in seven-figure deals, imagine what the marketing will be like when Matsui pairs off against Ichiro!

Can the Angels’ ownership and management make use of billboards and signs effectively? If there is any MLB team owner who knows the potential revenue of billboards, signs and advertising, it’s Arte Moreno. After all, he was able to buy the Angels with the profits he made from selling his outdoor billboard company.

As in 14.6 million television viewers for the All-Star Game. In 2009, the All-Star Game in St. Louis generated 14.6 million viewers. This was the highest number of viewers for the MLB All-Star Game since 2002.(8) If advertisers expect the same sort of viewership this next year, you can bet that Arte will use this to his advantage when valuing the signs that at the stadium. Add in the potential for international advertising and viewers, and you have the makings for an attractive advertising bonanza.


For fun, let's also mention that the number 5 in Japanese is “go” (pronounced gOH). It may be just a fun coincidence, but the 55 freeway (like Matsui's jersey number) is close by, which could lead to some fun with advertising. Let's Go! Go! 55 freeway, anyone?

From all this, that the numbers line up perfectly for the Matsui deal. One thing I will never fault an owner for is making a profit. That is the goal of every business. More importantly, though, as an Angels fan, I prefer to focus on the more important Matsui numbers – his career line of .292/.370/.482. Having a left-hander post those numbers in the middle of our lineup will give an already potent lineup an extra boost.
Love to hear what you think!



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