Sekimoto's Salary Snubbing

Given Toritani's error ridden performance last year - it is surprising that he's getting so much. Part of Sekimoto's chagrin was that as he was presenting his justification for a bigger salary the negotiators were visibly yawning. Imaoka took a salary cut, but the exact amount escapes me.

Sekimoto did very well at third and second, and to my mind, made a good case for starting in either position. However, his batting still needs to improve, and because of this, Imaoka will always be preferred at third even though defensively he is weaker.

Interestingly, Imaoka was a very good second baseman. I think Sekimoto is probably being offered a fair amount, but I wouldn't have given Toritani so much though.

Looks like Hanshin has a tendency to be pretty cheap. I checked out Hiyama's salary. He was paid 5,000-man after hitting 22 homers, then he hits a couple more the next year and barely sees a change. Yet they spent all that money on Kataoka. With the money they're going to make on the Igawa posting, you'd think they could at least give Sekimoto a decent enough salary to keep him from crying like a baby.

Fujimoto has been getting paid just a bit more, despite poor batting statistics.

You want to talk about unfair, how about young MLB players who have very little room for negotiating? David Wright and Jose Reyes played for almost league minimum, I believe.

- You want to talk about unfair, how about young MLB players who have very little room for negotiating? David Wright and Jose Reyes played for almost league minimum, I believe.

But those large contract negotiations they got look very nice in the eyes of Reyes and Wright. They're not playing for league minimum anymore. Far from it now. Reyes will be making $22.5 million over the next 4 year and Wright will be making $55 million now over the next 6 years.

NPB salaries don't make any sense because they're generally not tied to club revenue or balance sheet (maybe except Hiroshima). Are most salaries determined solely by other players' salaries? (It seems like it.)

The Tigers actually link revenue and salaries as well. They can afford to pay high salaries because their merchandising is very good. I am not sure how they rate the players, but popularity seems to play some role as well as performance.

I'm not wishing to cause another altercation of course, but I would have thought the Tigers can afford to pay high salaries mainly because of ticket sales, which of course translates into higher revenues for the railway as well.

I'd imagine the revenues from merchandise sales would be lower than these two streams, because they're mainly based on license fees. For example, the Tiger Shops are not actually owned by the Tigers, so the profits are shared with the owner of the stores, the manufacturers of the products, the costs of materials, etc.

On the other hand, any additional train tickets and stadium tickets sold are almost pure profit. I haven't ever seen a breakdown of these figures, but I would think merchandise revenues, while substantial, are not as important to the organization as the other two.

Does anyone have the a copy of the balance sheet?

Normally it's the reverse. Merchandising, even with built in overheads, provides the profits. (For example, George Lucas retained the merchandising rights to Star Wars. This is what gave him the enormous profit.) Given the volume of merchandising the Tigers organization shifts I think we can assume a very high revenue stream. Rail tickets wouldn't go to the Tigers but to the railway company and through them the group. Ticket sales for games would be very much a fixed profit - they can guarantee around 80% full, say, and then they can plan on that basis after the overheads have been deducted. Where the variation is possible is all the extras like merchandising and licensing and the sale of advertising. Entertainment profits are very much based on the sale of merchandising (at least for the big franchises). If you can make them in large quantities you generate economies of scale (it is cheaper per item to make more) and the Tigers definitely have the fan base to sell these quantities.

I appreciate what you're saying, but I have the feeling that the Star Wars example is a different kind of situation, as that franchise revolves around merchandising, unlike the Tigers.

So when you say merchandising normally provides the profits, well, you're right, but for a normal western-style operation. But this is Japan, it's yakyu, and things may well work differently.

You say the rail tickets go to the railway. Yes, indeed, but the merchandising is handled by the department store, so that revenue doesn't go to the Tigers either. Even the stadium ticket sales are managed by another company within the group. Basically the ballclub creates the revenue, but other parts of the group collect it.

At least that was the situation two years ago. Of course the whole thing is now owned by Hankyu, so the organization may have changed a little.

Anyway, do you actually know the figures? That would be helpful. I'm not going to say you're wrong, but based on my experience of the merchandising side, I have a feeling you may be overemphasizing the effect of merchandising on the organization's bottom line. The profits are probably smaller than you realize. (Although I must say that the licensees I speak to are always complaining about how much their license actually costs them! But this is Osaka - we're always complaining about something.)

The Star Wars franchise wasn't meant to revolve around merchandising which is why they studios didn't bother about the merchandising rights. This was their big mistake but showed Lucas' perception.

You're right of course about the other clubs - but Tigers look to be different. Maybe though we are wrong in looking at Tigers as a separate entity and should be looking at the contribution it makes as part of the group.

The only figures I have managed to find are for 2003 and these cover just licensing when about 10,000 companies applied for licensing rights for victory goods. Those that were approved would have paid a fee and extra revenue was calculated at around 4 billion yen. For 2005 and 2006 extra revenue was also around that amount - though this is a rough estimate of the income from licensing and excludes royalties (if they exist). Unfortunately, I haven't found a detailed breakdown. The actual figures may be something different.

It's important to remember the sheer volume of goods being sold (for example at least 30 to 40 thousand balloons each match on which the club should be taking a royalty). A lot also depends on how the club takes its fee - whether as a fixed amount per item sold or a lump sum for the product. One thing is certain, the club is a contributor to group profits in a major way, so much so that the group was prepared to fight hard to retain the club when Murakami tried to float it.

- The Star Wars franchise wasn't meant to revolve around merchandising ...

But Star Wars was created by Lucas! It was his baby, so obviously it was meant to revolve around merchandising! That's why he only accepted $175,000 as his fee for writing/directing the movie in return for 40 percent of the merchandising rights. He planned it that way.

- The only figures I have managed to find are for 2003 and these cover just licensing when about 10,000 companies applied for licensing rights for victory goods. Those that were approved would have paid a fee and extra revenue was calculated at around 4 billion yen.

That's all very interesting, but you need to remember that 2003 was an exceptional year. I remember it well - loading boxes of t-shirts on the night of the victory ready for the sale the next day. But this extra revenue all but evaporated the next year. And 2005 was not nearly as lucrative for everybody concerned. A couple of franchisees got burned expecting another 2003. The demand simply wasn't there the second time round.

- It's important to remember the sheer volume of goods being sold (for example at least 30 to 40 thousand balloons each match on which the club should be taking a royalty).

That's nothing, though, in terms of revenue. Jetto fusen cost around 14 yen wholesale, so 40,000 balloons are worth 560,000 yen. If Hanshin's taking 10%, then that's 56,000 yen per game. Roughly equivalent to an additional 24 fans turning up. No, the real money is generated getting the fans onto the train and through the turnstiles.

You'd be surprised at the low markups on official goods. I won't give you the figures (don't want to give away too many trade secrets ), but the markups are lower here in Japan compared to similar products overseas. The whole process is filled with middlemen - from design, through production and sales. You've got people taking their cut at every stage, which means Hanshin is limited to how much they can take themselves.

It's serious money, to be sure, but I wouldn't think it comes anywhere near the revenue from straight ticket sales and railway fares.

If only we could find that balance sheet.

For Lukas the merchandising was important and this demonstrates his foresight. However, the distributors and studios didn't attach the same value and so lost out. They planned it to revolve around ticket sales.

I used jettos as an example as it was fairly easy to come up with some rough figures. If we calculate on the basis of 70 games in Osaka (60 at Koshien, 10 at Osaka Dome - figures taken from Michael's earlier post about attendance figures) and use your figure of 56,000 yen per game we get an income of 3,920,000 yen over the season. Note we haven't included other stadiums, but it is easy to postulate an income of around 5 to 6 million yen on what is a cheap bulk product.

Not all products will sell in such enormous amounts of course, but the sheer range and volume of a lot of the products adds up to considerable sales income. This is really my point - it is not the amount Hanshin takes from each product. I am well aware that the actual percentage will be low (I am a published author), but the numbers sold which generate the income. The amount the club gets from these products is pure profit, everything else has been factored into the overall purchase price.

The balance sheet would be interesting, but only provides a snapshot of a business at a certain point in time. It would be more productive to see detailed cash flow statements. However, I suspect that these only exist for internal use (if you do locate them let me know).

I know that parking and concessions play a big role in MLB clubs revenue streams. But most Japanese stadiums don't have massive parking lots and the concessions aren't as hideously expensive (thank goodness) and probably there are more middlemen taking their various cuts. Plus NPB teams don't have sweetheart stadium deals like in the MLB where teams pay nothing and get all the revenues (in the extreme cases). Then there's the luxury boxes (or the lack thereof in NPB), as well as lack of broadcast and new media revenue. So, we're back to most NPB teams being mere advertising bodies for their parent companies instead of independent businesses. Since revenue and expenses are dispersed throughout group companies, it's difficult to determine whether a club is profitable or not, and in turn what realistic player salaries should be relative to the club balance sheet (which there doesn't appear to be one).

Yes, as a published author, you'll realize how small those royalty checks can be (unless you're a J.K. Rowling or a John Grisham I suppose). I used to own a publishing company so I know what you're talking about. You have my sympathy.

But you know, 5-6 million yen income over a season is chicken feed. One extra fan at each of those games generates something close to 160,000 yen in ticket sales and railway fares - and that's if they sit in the bleachers. That's also pure profit.

Of course you're right to say that merchandising is a growing source of revenue, but my view is that it's nowhere near the revenue from the other sources. Plus TV rights, too, which I didn't mention before. As you say, the balance sheet may not show it, but the annual report just might. They're a public company so the numbers must be out there somewhere. Although as Something Lions suggests, finances in this industry can be murky.

Well, the financial information on the web is not detailed enough to give any indication. Income from the Tigers could fall into several of the categories they list. All we can say with confidence is that the club is a contributor to the group profits, but through which means, merchandising or ticket sales and train tickets, is just not clear.

A happy ending to the story. The Tigers offered Sekimoto 5,000-man yen, double what he had requested.

What have you published Christopher?

I'm just as curious - I googled his name and can't find a thing.

The Kelly's - British JKN Class Destroyers in World War II. (Note my name has changed since it was published.)

Management consulting and warship history - that's some combination! Thanks buddy, keep up the good work!

For anyone who's interested, the book can be found here at Amazon.

[Sorry to take this thread ever-further away from Sekimoto or any other NPB topic.]

Just out of interest, Christopher, how well has it sold?

About as well as any other specialist naval text. These are not best sellers (unfortunately), but I know it does sell well in Japan.