Are New Bonus Spending Limits Ruining the MLB Draft?
The Major League Baseball draft is about talent. It's also very much about money.
Obviously, the two go hand in hand, but the new draft bonus slotting system, enacted as part of the most recent collective bargaining agreement, has taken some of the fun—not to mention, some of the free market—out of the amateur player selection process.
Under the previous CBA, there was a "suggested" slotting system for draft bonuses, whereby the league would come up with a monetary value for each pick and "suggest" that clubs avoid exceeding that amount.
There was no penalty per se for spending more. Rather, it was more of an or-else situation, where the commissioner's office would give a warning and maybe a slap on the wrist.
That approach made things messy, though, as some teams chose to stick to their slots, while others basically ignored these not-all-that-hard-and-not-all-that-fast restrictions and chose to pay whatever it took to sign the players they drafted.
So while MLB was trying to prevent the money being thrown at unproven amateur talent from getting out of hand, what actually wound up happening on more than a few occasions was a top high school or college player dropping in the draft due to signability concerns (i.e. asking for several million dollars). That left him to be plucked later than he should have been by a team willing to meet his asking price.
The primary example of this was in 2007, when prep pitcher Rick Porcello, one of the highest-ranked players heading into the draft, slipped all the way to No. 27. The Detroit Tigers took him and then paid more than $7 million guaranteed to sign him to a record deal.
The "recommended" bonus amount for that pick? Try $1.17 million—only $6 million less.
That sort of scenario has more or less been wiped out under the new CBA, which was agreed upon following the 2011 season.
The current rules put an exact dollar figure on each pick in the first 10 rounds. If a team goes over the total amount allotted for Rounds 1 through 10, they incur very real penalties, including a tax on the overage and even the potential to lose future draft picks.
Baseball America spells out the details:
A team that exceeds its bonus pool by 0-5 percent must pay a 75 percent tax on the overage. The penalties get much harsher after that: the loss of a first-round pick and a 75 percent tax for blowing past a bonus pool by more than 5 and up to 10 percent; the loss of first- and second-rounders and a 100 percent tax for more than 10 and up to 15 percent; and the loss of two-first-rounders and a 100 percent tax for more than 15 percent.
In other words, you pay what MLB tells you to pay.
The goal of this was to level the playing field by putting the all the teams—big-market, small-market and everything in between—in the same boat.
That was a good idea in theory, but not necessarily in execution.
There are a couple of reasons for this. The first has to do with the fact that we're now seeing teams "overdraft" players in the first round in order to save money to be spent later on.
This is, by all accounts, what happened when the Kansas City Royals surprisingly used the No. 8 overall pick in the 2013 draft to select college shortstop Hunter Dozier, who was considered at best a fringy first-rounder based on talent.
Knowing that they likely could get Dozier to sign for less than the $3,137,800 slot value, the Royals would then be able to put the money saved on that pick toward their next one (or ones).
The strategy appears to have worked, as Kansas City landed Indiana State left-hander Sean Manaea with the first pick in the competitive balance round (No. 34 overall). The Royals, in all likelihood, will be able to offer much more than the slot amount for that selection to Manaea, who was seen as an early-first-round talent until injuries and inconsistency knocked his stock down over the past several weeks.
Jason Churchill of ESPN (subscription required) wrote about this in a review of the first round:
Manaea is likely to receive a bonus well above the MLB recommendation for this pick, and it appears the Royals have planned for such, selecting Hunter Dozier at No. 8 overall, who will likely sign for well below slot. Expect Manaea to sign, but it could be a tough negotiation as he was considered a top-five talent entering the year who fell because of a nagging hip injury.
Essentially, the Royals saved money up front to be able to splurge a little later.
That's a perfectly legitimate strategy under the new rules, but also one that can easily backfire if there's no player worth splurging on when your pick comes back around or if either player decides he wants more money and chooses not to sign.
There's a second reason the new enforced slotting system is actually hurting the draft, and it's much more of a bigger-picture problem.
Simply, it's now more challenging for teams to improve themselves via the draft because they're restricted in the amount they can spend.
In the past, when teams weren't really penalized for going over slot, they could select and sign as many high-talent amateurs as they were willing to pay.
This was a strategy that any team could—and did—employ.
For instance, prior to the changes, both the Boston Red Sox and Pittsburgh Pirates, who are on opposite ends of the financial spectrum when it comes market size, became known for using the draft to acquire as much young talent as possible, as Joe Lemire wrote for Sports Illustrated.
That's possible because obtaining drafted talent only costs a fraction of what it takes to obtain free-agent talent.
So while the Pirates can't compete with the Red Sox for the top available names who command $75 million or $100 million during the hot-stove season, Pittsburgh can easily afford to spend $10 or $15 million on draft bonuses to lock up its selections of future stars.
By tying a dollar figure to each draft pick, the league was hoping to make things fairer, especially for the smaller-market clubs. Instead, the opposite has happened. The league has taken away the cheapest, most affordable way for these small-market teams to bring in new talent and get better.
While it was impossible to foresee how all the rules changes in the latest CBA would impact the various aspects of baseball, we've now had two drafts under this version.
Though it's a bit much to say that the new bonus slotting limits are ruining the MLB draft, it's becoming clear that the unintended consequences have altered the way teams can—and have—approached the draft.
Of course, we'll have to wait until the next time the league and the union are set to negotiate a new CBA (after the 2016 season) to see if any of these changes are, well, changed again.
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