It isn’t often that people can say this, but Kansas City Royals fans should be proud of their team.
In June’s MLB Draft, the Royals decided to roll the dice and use the fifth pick on Bubba Starling, a five-tool talent from the Kansas City area who also had a scholarship to play quarterback at Nebraska.
Starling’s status as a college football (and baseball) prospect—not to mention his status as a local icon—gave him an unusually high amount of negotiating leverage, meaning that he would be able to command a signing bonus that was much higher than the fifth pick in the draft would normally receive.
But to the Royals’ credit (and to the delight of their fans), the club manned up and signed Starling to a $7.5 million contract at the signing deadline. Kansas City fans now get the pleasure of watching a local hero rise up through the minor leagues and possibly play a role in a Royal resurgence.
But if Bud Selig and some MLB owners get their way, signings of top prep athletes could become a thing of the past, as numbers like Starling’s contract have renewed the calls for baseball to implement an NBA-style hard slotting system for draft picks.
By the Numbers
According to Baseball America’s Jim Callis, MLB spent about $228 million in signing bonuses in this year’s MLB Draft, with $84.8 million on first-round picks alone. The total dollar amount represents a 17 percent increase from last year’s record total, while the $2.65 million average for the 32 signed first-round picks is a 10 percent increase over the record average set in 2008.
In addition to Starling’s deal, top pick Gerrit Cole received a record $8 million bonus, fourth pick Dylan Bundy (another two-sport prospect) received a $6.22 million guarantee (including a $4 million bonus), and Josh Bell’s $5 million bonus as the 61st pick nearly doubled the previous record for bonuses given to non-first round picks.
The Pirates, who spent $17 million on the draft, obliterated the old record for signing bonuses, though the Nationals (who set the previous record in 2010), Royals, Cubs and Diamondbacks also broke the old record.
Clearly, the current slotting system, which lacks an enforcing mechanism, has been unsuccessful at keeping salaries as low as they would like.
An Unnecessary Risk
A tougher slotting system has been a pet project of commissioner Bud Selig for quite some time now, and many believe that he will push for an NBA-style system in which every salary spot is predefined in a take-it-or-leave-it manner. This system would not only do a more effective job of containing costs, but should also eliminate the sometimes intense negotiations between teams and agents that often result in a delayed start in the minors for the prospect.
However, the MLBPA is almost certain to oppose this, as it is tantamount to the type of cap on player salary that they have always opposed. This could very well be the biggest point of contention in the next labor negotiations.
But is this really a risk that baseball wants to take? Yes, $228 million sounds like a lot to be spending on bonuses, but it is actually accounts for only 3.2 percent of MLB’s projected $7 billion in revenue (based on last year’s numbers) and around 8.3 percent of the revenue spent on salaries.
This figure is actually a fairly low amount for any business to spend on the recruitment and training of new employees. And as I’ve pointed out before, the gap has actually been growing since 1999.
The costs of the draft are increasing, but MLB revenue has kept pace.
MLB vs the NBA
There is no question that the NBA’s slotting system has been wildly successful at reining in the salaries of young players. Prior to its implementation, the NBA was handing out ridiculous contracts like the 10-year, $68 million deal given to Glenn Robinson as the top pick of the 1994 draft. Costs for the NBA were clearly spiraling out of control, and this system brought those salaries back to earth.
But here’s the thing about the NBA’s slotting system: it is not necessarily cheaper than what MLB has right now.
It is true that the initial first-year costs for the NBA are fairly low; however, it is also important to remember that all first-round picks in the NBA are guaranteed for two years, every player also qualifies for two team options that are low-cost by NBA standards. This means that those initial rookie deals could have as much as a four-year commitment, and those costs add up.
For example, according to the 2008-09 salary scale, the costs for the first year salaries were a mere $48.70 million; however, when all four years are added up, the total committed salary maxes out at $235.97 million.
While this is the maximum level of the system and almost certainly will not be reached (not every contract will be renewed), it is also true that this is just the first round; second round picks, even at the minimum level, still cost nearly half a million per year.
Suddenly, MLB’s costs don’t seem quite so bad.
The Talent Advantage
Another thing to consider about the MLB when compared to the NBA is that they have different requirements for eligibility. Specifically, the NBA requires potential draftees to declare their eligibility while MLB does not. Additionally, MLB allows the selection of high school talent but makes them wait three years should they decide to go to college (with the exception of junior college players).
This gives MLB a huge advantage when it comes to securing superstar athletes like Starling, as they can offer these talented players millions of dollars right out of high school. However, the athletes themselves also have the ability to turn down those millions.
If a hard slotting system is put into place, baseball will not be able to offer as much money to these talented individuals—which will make it much easier for the players to go to college or play another sport instead.
An enforcement mechanism for the slotting system will almost certainly be put in place for next year’s draft, but that does not necessarily mean it needs to be a hard slotting system. My solution, which I mentioned in my last article, is to allow for periodic exceptions that are standardized for all teams.
My initial idea was to give every team one exemption per year (it can be used in any round), but it can only be used in a given round once every four years. This way, teams will still have the ability to secure talented superathletes while at the same time rein in the costs of the draft as a whole. It would also prevent one team from securing all of the top-tier talent, as nobody would be allowed to go over slot in the first round every single year.
I do not believe that this is an issue that either side cares enough about to result in a work stoppage. However, it is good to remember that the current system does have it strengths and does not need a serious overhaul. This is a modest reform that allows both sides to get something of what they want, which can only be good for labor harmony.
And if it leads to more Bubba Starlings in the baseball ranks, all the better.