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Friday, August 17, 2007
MLB Can't Contain Draft Bonuses

The newly-imposed Aug. 15th signing deadline for drafted amateur baseball players and league-recommended slot bonuses that were 10 percent lower than last year couldn't contain the dollars dished out this week. Three weeks ago, I questioned what these league-recommended bonuses really mean legally and whether they have any teeth when the clubs are not penalized for paying more than slot money. At the time of my post, half of the first rounders had already signed and they all actually signed for slot money or less. Well, on the Wednesday signing deadline this week many of the clubs broke the bank and doled out some record bonuses to the remaining unsigned picks. According to Baseball America:
For all the effort MLB put into reducing bonus slots by 10 percent from a year ago and trying to strong-arm teams into toeing the line, the average first-round bonus went up anyway. All 30 first-rounders signed in both years, with the 2006 crop averaging $1,933,333 and this year’s group averaging $2,098,083. The 2007 average is also the highest since 2002 ($2,106,793).
The average increase in bonuses this year went beyond just the first round. Baseball America also reported that the recommended slot bonuses for the first five rounds this year averaged $568,944 (down 10 percent from last year's slot money for these rounds which averaged $631,870). However, the picks in the first five rounds this year actually received an average of $685,328 (up 3 percent from the average received last year which was $662,531). Keep in mind that this 3 percent jump occurred despite the fact that half of the first rounders signed for 2007 slot money or less! What does this data say to all of those first rounders who hastily signed this year for slot money or less?

Unsurprisingly, no Scott Boras client received slot money, or even close to it. One of his clients even received the highest up-front bonus in draft history at $6 million. Every year there are clubs that voluntarily and knowingly draft his players and then mumble under their breath as they voluntarily sign the bonus checks: "That $*%$*@$!#&*$ Boras!". So the new draft rules this year designed to give the clubs more leverage, combined with recommended slot bonus amounts that were 10 percent lower than last year, couldn't control the purse strings of many teams, including the Yankees, Tigers, Orioles and Devil Rays. But they did prove to be effective in reducing the bonuses paid to half of the entire first round class this year. On the other hand, we'll never know whether those clubs paying slot money (or less) a month ago would have ultimately decided on Wednesday to pay substantially more than slot money if faced with the prospect of failing to sign their first rounder.

A draft in and of itself operates as a restraint on competition among the teams for the top amateur players. But what this year's baseball draft demonstrates to me is that there is still a viable market for the top amateur players, and there always will be as long as competition among the teams for the top talent is not further impeded by restraints in the form of rookie bonus pools and caps. In my opinion, slot money should be universally viewed by agents (sorry, "advisors") as representing a dollar amount proposed by the club as merely a starting point in the contract negotiation process between the two sides. It will be interesting to see next year what the league "recommends" as slot money -- Maybe this year's draft will cause players and their advisors to be a little more skeptical about it next year.


I think that the players' union is being short-sighted in conspiring with the league to keep draft bonuses low. So long as teams have a secure and well-stocked source of comparatively cheap labor through the amateur draft, they will have less need to pay market rates for veteran players. While keeping draftees' bonuses down theoretically leaves a bigger slice of the pie for the veterans, it actually lowers the veterans value and potentially shortens their careers when they are competing against young players who cost the teams so little money.

Anonymous steve -- 8/17/2007 10:10 AM  

Very interesting point, Steve.

Also, it should be noted that the Detroit Tigers, who "abused" the slotting system second only to the Yankees, have come out and blasted the current system:
"Most clubs probably think the system isn't working because the top talents aren't being taken by the clubs that are drafting first," says Detroit Tigers general manager Dave Dombrowski. "That doesn't correlate with what a draft should do."
"In our situation, we drafted a high-profile player (who) surprisingly fell to us because of signability," Dombrowski says. "We signed him because we think he's talented, but if the whole system was working as it normally should, we wouldn't have that player available to draft (27th). The top talent should go to the teams drafting 1-2-3, etc."

Sounds like someone is reading talking points from the Commissioner's office?

Anonymous Anonymous -- 8/17/2007 10:30 AM  


You raise a good point. But I think it's a bit of a stretch to say that the MLBPA is conspiring with the league to keep bonuses low. Unlike the unions in the other sports, the MLBPA is the only one that has held firm in not agreeing to a bonus pool or formalized slotting system.


Thanks for providing that interesting quote. I wonder how Dombrowski really thinks the draft system "should" operate? I can't tell if he's happy or upset. If it operates the way it "should," then he doesn't get the player he drafted with the 27th pick. In other words, I can't figure out why he's blasting the current system.

When you think about it, the current system really provides the best of both worlds for the clubs. The clubs that don't want to spend much are not required to do so, and the clubs that want to spend money to get the top talent are not prohibited from doing that either.

Blogger Rick Karcher -- 8/17/2007 11:30 AM  

Not sure that the teams who passed up the top talent because they didn't think they could afford to sign them would agree that they're getting the "best" of any world. If the worst teams can't draft the best players because they can't (or won't) pay them, isn't the system broken? That at least seems to be what Dombrowski is saying...

Anonymous Anonymous -- 8/17/2007 11:47 AM  

If that is what Dombrowski is saying, then the "broken" system works to his benefit, does it not?

Secondly, do you feel any sympathy for teams that can't (which is speculative) or won't pay for top talent? It could be worse -- these teams could be forced to pay a lot more under a true slotting system then they currently are.

Blogger Rick Karcher -- 8/17/2007 12:10 PM  

It does benefit Dombrowski, at least in the most immediate sense of "benefit." This gets us back to the competitive balance argument-- if competitive balance benefits MLB (by leading to a better overall product), and what benefits MLB in turn benefits the individual teams, then MLB and all of its teams are hurt if the draft is not working (assuming, for the sake of this argument, that the draft helps achieve such balance).

I don't necessarily feel sympathy for any of the owners, but I do feel sympathy for the fans of the teams who watch the best talent slide to the Yankees, Tigers, etc.

Anonymous Anonymous -- 8/17/2007 12:21 PM  

I think it's pretty clear that the Tigers heard an earful from the commissioner's office and they are now spouting the company line. Whether they actually believe it is another story. I'm sure they are dancing behind the commissioner's back right now having signed the players they did.

Anonymous Anonymous -- 8/17/2007 12:24 PM  


Must we debate the competitive balance issue in baseball? There simply is no correlation between spending the most and success on the field. And it's even more tenuous when you're talking about amateur players. The teams that have consistently maintained the best farm systems year in and year out are not the teams paying Boras what he demands. Speaking of feeling sorry for fans, I feel sorry for all the Yankees fans who have the "best" talent and can't win a World Series.

Roy Clark, the scouting director for the Braves, and his scouts find players that not only have talent but also have the intangibles necessary to be successful major league players. He oftentimes enters pre-draft deals with these players because it's a good business decision. You also can't discount the importance of making good scouting assessments, and some teams are simply better at it than others. Maybe sometimes the risk associated with paying a Boras player outweighs any potential reward.

My only point is that the current draft system in baseball provides the best of both worlds because it gives each club the flexibility to do what they want from a business standpoint.

Blogger Rick Karcher -- 8/17/2007 1:02 PM  


I don't want to get into a debate about statistical significance and definitions of "success," but I don't see how you can claim, under any reasonable definition, that "[t]here simply is no correlation between spending the most and success on the field."

I'm happy to dig up the specific stats, but are you really arguing that MLB teams with the highest payroll don't have a greater likelihood of making the playoffs (at least one measure of "success") than teams with the lowest payrolls?

Does spending the most guarantee success? Of course not. Is it a factor? I don't see how you can claim it is not. I agree that it gets more tenuous when you talk about amateur players, but I just don't see the argument that there is no correlation between spending and success.

As for the Yankees, they have made the playoffs each of the last 12 years, so I'm not sure any sympathy is in order...

Anonymous Anonymous -- 8/17/2007 1:24 PM  

Because I've demonstrated it each of the past two years:

And I'll do it again at the end of this season.

Blogger Rick Karcher -- 8/17/2007 1:44 PM  

Again, I don't want to debate statistics and sample sizes, but your study does not show that "[t]here simply is no correlation between spending the most and success on the field." Is there a perfect correlation? Of course not. Is there some correlation? Absolutely.

Let's look at a study covering the period from 1995-2004 that looked at teams in the top and bottom quartiles of team payroll and looked to see probability of them finishing in the top quartile in the standings. Here are the results:

Likelihood of top quartile payroll team finishing in the top quartile of the standings? NHL—54%; MLB—49.3%; NBA—42.9%; NFL—32.9%.

Likelihood of bottom quartile payroll team finishing in the top quartile of the standings? NFL—6%; NBA—8%; MLB—10%; NFL—21%.

Could Billy Beane take a bottom quartile payroll team and get them into the top quartile of the standings? Based on his success, the answer seems to be yes. But, wouldn't he have a greater probability of doing it with a payroll in the top quartile?

Anonymous Anonymous -- 8/17/2007 2:02 PM  


In all do respect, you are very mistaken with your analysis. First, the MLBPA has not "conspired" to keep draft bonuses low. As you well know in any collective bargaining negotiation there is a give and take. The Players were willing to give certain concessions with the draft in order to receive concessions on the major league side. Now, Fehr, Weiner, Orza, and the rest of the Union negotiators did not want to change the draft in any way, but the Players themsleves were adament that if they were going to give certain concessions, the draft was the area they were willing to give. In addition, the Union has been monitoring any instances where any GM or Scouting Director is telling agents that they "must" abide by the slotting system or risk being "punished" by MLB. The MLBPA has in no way agreed to any slotting or capping system. They did agree to a signing deadline and other draft rules changes, but NOTHING in the form of an outright bonus restraint. Furthermore, the pool of players that enter the game through the draft every year have very little impact upon decisions made at the major league level. The biggest impact that a drafted player can have on the major league level is one that is signed to a mjor league contract because that player occupies a spot on the major league roster immediately. In addition, all bonuses paid to a drafted player must be paid in one year aside from ceratin exceptions where a player is a two sport athlete or the player signs a major league contract. Therefore, the veteran players' value is NOT shortened because they are NOT competeing against cheaper labor.

Anonymous Anonymous -- 8/17/2007 2:10 PM  


With all due respect, the MLBPA may not have "conspired" to restrain draft bonuses, but they have certainly "allowed" it to happen.

And, are you really arguing that by keeping bonuses low that there isn't an "extra piece of the pie" available for the major league players? Every dollar spent on player development/draft signings is one less dollar for big league salaries, no?

Anonymous Anonymous -- 8/17/2007 6:26 PM  

Of course the teams ended up paying more.

If the draftee is a high school player he has likely also signed a letter of intent with a four year college and maybe also with a junior college. If he goes the juco route he can get better and be drafted again in two years, if he goes to a four year school he can be drafted again in three years.

If the draftee is a juco grad, he can turn it down and play a year of college ball and be drafted again as a junior. If he is a junior he can return for his senior season.

Only the college senior is under strong pressure to sign.

The MLB draft system favors the player and grants the player more leverage.

Blogger Mark -- 8/18/2007 1:10 AM  

More Dombrowski gold:

According to one major-league source, Dombrowski told Selig that while the Tigers are paying Porcello $7 million, "at least we didn't spend $50 million just to talk to a pitcher from Japan."

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