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February 23, 2009

Prospectus Today

First-Round Picks!

by Joe Sheehan

In the discussion of Type-A free agents this winter, the term "first-round pick" is used about as often as "the" or "of." The perceived relative values of major league talent and first-round draft picks have been moving in opposite directions for a long time, and it appears that this winter, the two have crossed. Teams are less willing than ever to sign players and sacrifice that selection in the upcoming draft, and they're becoming more aware of how important good young baseball players who can be paid well below market value are to a baseball team.

We hear about the importance of these picks during the season as well, when teams are often faced with the decision of whether to trade an impending free agent, or keep him for a run at the postseason. The latter choice is often labeled as coming with "two first-round picks," short hand for compensation for a Type A free agent. In actuality, a Type-A free agent returns the signing team's first-round pick if and only if that team was one of the 15 best in baseball the previous season. In other cases, the team losing the free agent gets the signing team's second-round pick. This is designed to allow lesser teams to sign free agents without giving up such a high selection, one that would be a near-total disincentive to the signing of Type-A free agents.

As Rany Jazayerli's work has shown, the value of draft picks drops off linearly throughout the first round, so our shorthand of "two first-round picks," with its image of Evan Longoria or David Price sauntering to the compensated team, has always been in error. The correct compensation description for a Type A is "two picks in the first two rounds of the draft, one in the compensation round, and the other usually in the last half of the first round or first half of the second round." Not so sexy. The use of the term "first-round pick" to refer to compensation picks has always puzzled me as well, given that the list of those start at 31 (later now that teams get picks for not signing their previous year's draftees) and can run for nearly an entire round in itself, as it did in 2006. In 2009, there are 13 supplemental picks, with seven remaining free agents who would generate one if signed by a new team. There's no way that a pick in the forties should be deemed a "first-round pick," and if you care to use the term, you have to qualify it.

Let's see how this works in action. The Dodgers got four good years from Derek Lowe, and when they couldn't reach agreement on a contract for his services for 2009 and beyond, their fans no doubt consoled themselves with the idea that they would get "two first-round picks" when he left. In actuality, though, the Dodgers received the 36^th and 53^rd picks in the upcoming draft—neither in the first round—because Lowe signed with the Braves, whose poor 2008 season left them with the seventh overall selection, a pick that cannot be forfeited. Throw in some compensation picks for failing to sign 2008 first-rounders and teams who had worse records than the Dodgers, and the compensation for Lowe is not nearly that impressive.

Consider the plight of the Brewers, who saw CC Sabathia, their mid-season trade acquisition, signed by the Yankees... but because the Yankees signed Mark Teixeira as well, the Brewers will get just the 38^th and 70^th picks in the draft. Those numbers could go lower if Juan Cruz, Manny Ramirez, and Orlando Cabrera sign, creating even more compensation picks. The Blue Jays were the big losers of the winter; in addition to watching their second starter, A.J. Burnett, opt out of his contract and go to a division rival, they got just the 37^th and 101^st picks in the upcoming draft—their compensation reduced to a supplemental pick and a third-rounder because of the Yankees' shopping spree.