March 24, 2015
Every Team's Moneyball
Pittsburgh Pirates: MLB's Apple Watch
Every day until Opening Day, Baseball Prospectus authors will preview two teams—one from the AL, one from the NL—identifying strategies those teams employ to gain an advantage. Today: the market-understanding Pirates and Mariners.
Something isn’t technically a new market based on an idea alone. Just look at the Apple Watch. Until it’s proven successful, it’s market remains conceptual. We anticipate its success and the creation of yet another market, but as the most prominent commodity to date, there will be no market without its success.
It’s not fair yet to say the Pirates have cornered the market on the transfer of players from the Korean Baseball Organization to major league baseball, because thus far there is no market. The existence of that market hinges, to a large extent, on the success this season of Jung-ho Kang. But if the Pirates newest acquisition produces like Ichiro Suzuki, they will have not only beaten the rest of major league baseball to a new pipeline of talent, but they will have gotten much more value for their franchise than their $11 million investment.
Pardon the crudity of this analogy, but Korean professional players are, as of March 2015, the Apple Watch of major league baseball, and the existence of their eventual market as a pool of desirable major-league talent depends on the success of version 1.0—in this case Kang. We anticipate that Apple has once again given us a product that we can’t live without, just like we believe that Korea could be the next untapped source of major league talent (much like Japan and Cuba before it). Until we see a successful initial product, we won’t know for sure.
Much like its international predecessors, Korea served as a natural stepping stone for teams looking for an influx of major-league talent. While the overall talent pool isn’t as deep as Japan or Cuba (making for a more treacherous jump directly into the major leagues) the Korea Baseball Organization has lived since 1982, giving data-friendly teams like the Pirates over twenty years of statistics to help scouts predict how a player like Kang will transition to the big leagues.
We know that the offensive environment in Korea is extreme, especially compared to the current major-league landscape, but Pirates GM Neal Huntington was intrigued by Kang’s raw power:
The raw power is obvious. Ballparks are configured differently here, but some of the balls that he hit out over there would leave any ball park in America. His raw power is legitimate.
Huntington was not alone in his assessment of Kang’s raw power, but there were, and still very much are, questions surrounding how well Kang’s offensive dominance in Korea will translate against major-league pitching. Nevertheless, he was a hot commodity this offseason, generating interest from over half the league. When the Pirates landed the infielder, it was a moderate surprise—after all, they are rarely considered a candidate for any process that involves the highest bidder.
But upon a closer look, the Pirates involvement and ultimate triumph in the bidding process shouldn’t come as much of a surprise. The Pirates, despite (or perhaps more accurately, because of) their financial restrictions, have always looked in unique places to outspend their competition.
When current no. 5 prospect Josh Bell was expected to go to college, the Pirates ponied up $5 million to buy him out of his scholarship, a record for a second-round pick that is sure to stand for some time thanks to compensation restrictions since put in place. Years before that, the Pirates became the first, and to date only, team to sign players out of India. Some of these risks have paid off more than others, but the Pirates’ willingness to think outside the box and, at times, spend money outside of it, has been a staple of the Neal Huntington era.
The Pirates, for quite some time, have understood their financial limitations. They refuse to go the extra year or dollar for aging players, allowing prime players like A.J. Burnett and Russell Martin to leave in consecutive years of free agency and deal with a drop-off in production rather than overextend their budget and handcuff themselves in the future.
Instead of accepting their fate as a second-rate team, however, the Pirates take chances in places where an investment won’t limit them in the future. Bell’s aforementioned bonus was a one-time fee that netted them a top prospect. Even if Bell fails, the money would just be a sunk cost, not hindering future spending. The same applies to Kang. The upfront posting fee goes down as a loss, but the long-term investment of $11 million over four years will hardly restrict even a small-market team like the Pirates, even if he never becomes more than a backup.
If Kang is successful, other teams will follow suit and the prices will rise for other Korean players, likely taking the Pirates out of the running for their services. We’ve seen the same happen with both Japanese and Cuban players as their predecessors have established a track record of success. If Korean players follow suit, the Pirates won’t stay in the market for long, but by beating the rest of major league baseball to the punch, they’ve set themselves to benefit from the initial market share until they find the next untapped resource to exploit.