Adjusting the MLB Draft

By Jack and Jeff Freedman

With changes sure to be made later this year as Major League Baseball reconstructs its collective bargaining agreement, here's a suggestion or two to amend the Major League draft. The draft is a device created by sports leagues to achieve two primary objectives: promote competitive balance and not so insignificantly, save the owners financially from themselves. While the effectiveness of a draft as a competitive balance tool can be debated, as it should and will be below, it is within the context of the later that the draft has its major faults. It really doesn't save the owners any money at all -- if fact, it's probably costing them needless dollars for players they might otherwise never sign.

As currently constructed, each team has a total pool comprised of the total dollars from each available drafting slot, rounds 1-10, supplemental and compensation picks included. Thus, a team with the No. 1 pick in the draft has considerably more pool money than the team picking, say 30th, which falls near the end of the first round. For rounds 11-40, any amount paid to a draftee over $100,000 also counts towards the total pool. (First way in which teams waste money: they are more than willing to sign these draft picks to contracts up to $100,000 -- thus over spending on players whom they probably don't think will make a future impact.)

NOTE: There is also a small percentage of over-pool spending allowed (5 percent), but it does not to effect the model, nor the discussion that follows.

Each year since the system was instituted in 2012 following the drafting of Gerrit Cole in 2011, Bryce Harper in 2010 and Stephen Strasburg in 2009, each of whom set bonus records:

2009 - Strasburg - $7,500,000 bonus - $15,100,000 total contract
2010 - Harper - $6,250,000 bonus - $9,900,000 total guarantee
2011 - Cole - $8,000,000 bonus - $17,000,000 if in majors by 2013
2012 - Correa - $4,800,000 bonus

Correa's bonus is the lowest since Luke Hochevar received $3,500,000 in 2006.

The No. 1 pick has had his bargaining power severely diminished by the new pool system. In 2012 the No. 1 pick was Carlos Correa by the Houston Astros. His bonus: $4,800,000 a decline of 40 percent! But there is a trickle down effect as well. Future No. 1 draft picks continued to sign (or not at all if your name is Brady Aiken) for less than the allotted dollar amount. Correa's slot value was actually $7,200,000. The Houston Astros, which selected Correa, saved $2,400,000 with that signing. This allowed the team to gain an extra advantage with its saved slot money.

Parlaying the saved dollars from the Correa signing, the Houston Astros were able to select and sign Lance McCullers (41st pick overall) to an over slot deal of $2,500,00 (nearly twice the slot value of $1,258,000) and Rio Ruiz (since traded), a fourth round pick to an over slot deal of $1,850,000 which was five times the $360,000 value for the slot -- an opportunity that was not available to other clubs with severely limited pools. So not only did the Astros benefit from getting a presumably better talent by virtue of their higher pick, but they gained an additional -- some my say unfair advantage -- by having funds available to select and sign an otherwise unsignable, and presumably better player in the later rounds as well, which is an unintended side benefit of a draft that is in theory constructed to have the best players taken in order of descending talent, and thus directly contrary to the goal of ensuring competitive balance.

Of course other teams are not totally without recourse when it comes to finding a limited way to combat this tactic. While their restricted pools make it impossible for them to totally compete in the later rounds, it didn't take teams long to figure out that by selecting college seniors, the group with absolutely no leverage, in rounds 6-10, teams are then best able to negotiate take-it-or-leave-it under slot deals, thus freeing money for use in the later 11-40 rounds.

Take the case of Shawon Dunston, Jr. In 2011 the Chicago Cubs selected him in the 11th round and paid him an overslot bonus of $1,275,000. They were able to do so by under paying their earlier round picks, including first round selection Javier Baez, who received $2,625,00. But that is not the most egregious example. In the same draft the Cubs also over paid Dillon Maples in the 14th round, giving him a whopping $2,500,000. Advantage Cubs, perhaps not. But wouldn't everyone in that draft have been better served in a free market system, especially perhaps surprisingly the Cubs.

What this has done is create a draft not based on talent and merit, but on signability. Picking future Major League contributors on any level is hard enough and picking star players naturally even harder. When these factors are not the primary driving force in a potential player's selection, then the draft is not longer achieving its enlightened purpose of enhancing competitive balance. While the risk of a misfire on a draft pick is both prevalent and inescapable, it is a risk that every team shares.

Picking higher in the draft does not necessarily mitigate that risk. For every Bryce Harper and Stephen Strasburg, there is a Matt Bush, Bryan Bullingon and Brien Taylor. Sometimes it just depends on the year a team is selecting and how deep the talent pool is that year; sometimes it's just luck. Todd Van Poppel didn't want to play for the Atlanta Braves, so with their pick they took Chipper Jones instead. That's how it goes. In all, for a period of 25 years from 1988 (Andy Benes) through 2012 (Carlos Correa) half of the selections (12) didn't make a meaningful contribution on the Major League level. One player, Josh Hamilton, finally achieved success after a tortured detour and with a team other than the one that originally selected him. (NOTE: Players selected in 2013-2015 were not included as it is too soon to judge their success/failure on the Major League level).

One other note, Ken Griffey Jr. this year becomes the first No. 1 overall selection to enter the Hall of Fame. Of all the picks taken subsequently, only Chipper Jones is a sure future member of this group, with Harper and perhaps David Price and Cole and Correa having possible careers to merit such an honor. Obviously, as the saying goes, money doesn't always buy happiness (or stardom).

Given the system as above, and with the collective bargaining agreement up later this year, there are doubtless going to be tweaks to the draft process. One, not discussed here, will deal with the qualifying offer and free agent compensation picks. That is another discussion. But the whole notion of a fixed amount of pool dollars, in place ostensibly to save owners from themselves, otherwise needs to change as well since the draft's so called lofty goal of competitive balance is being so blatantly compromised. So what's the solution?

In advance of this year's CBA negotiations here are some suggestions: What if a the draft was limited to 25 rounds (roughly players rated 300 to 750), with all eligible players fitting under a hard cap signing bonus of $100,000 (which is what the current rule intended to establish)? Although a team cannot be forced to spend the full amount of a draft slot on a player if he agrees to a lower bonus, the dollars saved could not applied to future picks after round 10. This would further cause teams to pick the best players in the beginning rounds, rather than a better player in round 11 rather than in say round 7. In addition, a secondary pool of $1,000,000 per team would also be available for use on selections made after round 5 -- thus mitigating against a team's incentive to save dollars for use later on. Hopefully it would act as at least a small deterrent against undercutting the bonus payment to the top picks, thus both providing the best players with maximum earnings and not over penalizing the successful clubs who have extremely small bonus pools with no extra dollars for use in later rounds. It would also force the teams to spend more money in the later rounds, not necessarily a bad thing since judging baseball talent is often literally a crapshoot. After the 25th round, teams could sign as many players as they wished; expectations are that bonuses would largely remain consistent with what they are now, which is extremely minimal.

Thus a hybrid controlled-free market system is created. The owners still maintain prior financial restraint and the drafted players actually have a better chance of getting full slot value for their talent.

Furthermore, to go back to the case of Carlos Correa: is there any doubt that he would have received a larger signing bonus if the Astros had no incentive to pay him any less than his slotted value? The team is still protected by the slot's cap value and the player gets the dollars more aligned with his perceived value as the No. 1 pick.

It may be counterintuitive, but the owners would save money if such a system existed. Lance McCullers might still receive his $2,500,000; it just wouldn't be from the Astros. That's precisely what the draft intended, not for a team to be able to divert money from one player to leap frog over other teams because of a contrived financial advantage.

There's nothing like prior restraint and blaming the rules as a hedge against lack of pocketbook willpower and expensive over reach. Dollars are, and will probably always be, the bottom line. Still, without upsetting the applecart in too big a fashion, some changes should and need to be made -- and the closer the draft becomes to a free market system the more cost effective and equitable it will be.