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August 12, 2009

Future Shock

Fixing the Draft, Part One

by Kevin Goldstein

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Now that we're less than a week away from the August 17 signing deadline, we can finally talk about the draft again. Sure, we could discuss it, but what good would it really do? There are still 19 unsigned first-round picks with just days to go, and there simply hasn't been anything to report on regarding negotiations, primarily because there are no negotiations. While MLB has finally lifted the veil on their recommended slots system a bit earlier than usual by allowing for several slot-busting deals in the latter rounds, that's really only because there are so many signings lining up to go down to the final hours and it's possible that MLB simply wanted to clear some of their potential workload during the last 24 hours.

When Major League Baseball instituted the new signing deadline (with the approval of the Players Association) to bring a halt to the number of year-long holdouts, they didn't anticipate this new mess, with one general manager commenting, "We often make rule changes without understanding the consequences." During the first year, the players that waited until the last minute were the player who got paid, so naturally, other players followed suit, leading to where we are now. Recommended slots and new signing deadlines or no, the draft is still horribly broken, only in a different way now.

So how to fix it? To answer that question, I surveyed a number of agents, scouting directors, front-office people, and general managers to get their ideas. They were wide-ranging, at times logical, and at times maybe a bit idealistic, but all agree that significant changes need to be made going forward. "We're in a bad system, no doubt about it," said one front-office official. "There has to be something in place where the worst teams sign the best players, not just in the first round, but all the way down, and that's not happening under this system."

So what to do? Nobody has a perfect answer, but everyone agrees on the issues themselves.

Money Changes Everything

For most teams the biggest problem revolves around the recommended slot system, primarily the fact that these slots are merely recommended. With more over-slot bonuses each year, the draft simply isn't fulfilling it's primary purpose, a balancing of talent. "Look, we can get really philosophical here, and I'm a capitalist," explained one scouting director. "But in the confines of a sporting league, in order for that league to be equitable, we need some kind of fairer distribution of talent."

Another talked about it in comparison to the drafts in other major sports. "Everyone should recognize the need for a major fix when there is serious discussion this spring over whether or not Washington is going to take [Stephen] Strasburg," explained one front-office official. "If we're going to have a draft, it should be based on talent. That there's any team not taking the player they think is the best shows that we need a major fix here."

The problem all along of course has been that the Players Association has never been open to any idea of mandatory slots or spending limits, believing that any talk on that level begins the slippery slope to a true salary cap. However, recent developments in the way teams are spending may be lining up a change in stance by the players. "The impetus for change is definitely going to come from the big leaguers," said one official. "These zero through six[-year] guys [in terms of service time] are so valuable, and that's where teams are spending all of their money," he explained. "The issue here is that the economic model now encourages teams to spend on player procurement instead of on established big leaguers. What we're seeing is a collapse of the middle class, and the union is likely understandably concerned by it."

That doesn't mean that that the union will go as far as agreeing to a true slotting system or any kind of spending limits. "Let's forget about the argument as to whether it's right or wrong for a second," said one prominent agent. "You really think that, in his first collective bargaining, that Michael Weiner will agree to do this? In terms of just coming into the job, he's not going to agree to something that [Marvin] Miller and [Donald] Fehr were so against."

Obviously, an agent would have a vested interest in maintaining a system that had no spending limits, but his reasoning for being against capped dollars were far more philosophical. "I think the draft still serves a very good purpose if you act under the assumption that everyone is scouting as well as they can and that they are picking the right players," he explained. "I don't think every team is doing that, and there's your real problem. Look at what the Rays and Marlins are doing with their drafts, hell, even the Red Sox; how many teams walked past Dustin Pedroia?"

That's the issue for many. Even with no slot system, the draft should be self-regulating. "The good thing about baseball is that the system itself rewards preparation and intelligence and scouting, and punishes those who don't do a good job," the scout continued. "Teams always have a right to say no to a player, especially with the compensation system. There are always teams that stick to slots, teams that go over, and teams that are a mixture-and there are more and more of those every year. It's an imperfect system, but trying to make it perfect is just going to screw it up more."

Tomorrow in part two, insiders talk about the trading of picks, a world-wide draft, thoughts of a combine, and what the draft might look like in the future.

Kevin Goldstein is an author of Baseball Prospectus. 
Click here to see Kevin's other articles. You can contact Kevin by clicking here

27 comments have been left for this article. (Click to hide comments)

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basejaw

Great stuff Kevin!

Aug 12, 2009 09:31 AM
rating: 0
 
Mountainhawk

Would a worldwide draft run afoul of EU labor laws, or would they not apply since the job is in North America?

Aug 12, 2009 09:36 AM
rating: 0
 
BP staff member Kevin Goldstein
BP staff

There are legal hurdles, but the NBA figured them out.

Aug 12, 2009 09:41 AM
 
wonkothesane1

NHL figured them out too.

Aug 12, 2009 10:05 AM
rating: 0
 
elm
(41)

I'm pretty sure EU labor laws do not apply to jobs not in the EU. Now, EU merger laws and anti-monopoly laws do get applied to U.S. companies, but the EU's only leverage there is to regulate the business done by those companies in the EU if they don't comply. It's possible, I guess, that the EU could rule MLB's actions to be anti-competitive and restrict their ability to air games in the EU. This wouldn't make Selig happy, I'd imagine, but it's a remote possibility anyway.

Aug 13, 2009 06:36 AM
rating: 0
 
mymrbig

Rather than hard slots for each draft pick, another option would be an overall draft spending cap. Something slightly above what most teams are spending today (maybe something like $15 million). This would give teams slightly more leverage in getting players signed early (tell a drafted player if they drag their feet until mid-august, the team might be out of cap money), but would still afford drafted players and agents negotiating freedom. It would need to be a fairly high cap to accomodate teams that have lots of early picks. I wouldn't mind a floor either (maybe $3-4 million), which players might like since it would keep any team from being overly cheap.

An even better option might be to give each team an draft cap based on the number of picks and spot of each pick. Kind of like the hard slotting approach, but it applies to all picks combined, rather than each pick separately. Players ang Agents could still make the case for above-slot deals, because obviously a team won't sign every player they draft. Plus, if $150k is allocated for all later picks, that also leaves some wiggle room for negotiations with earlier picks.

Another idea might be for MLB to limit the number of draft signings it will process in one day, to encourage teams & players to sign earlier. That is kind of draconian though, since it would screw teams & players that came to an agreement, but were just too far back in the queue on deadline day.

Aug 12, 2009 09:46 AM
rating: 4
 
BP staff member Kevin Goldstein
BP staff

This is a real idea getting bandied about at times. Idea one is a draft cap like you explain, but there's an even more interesting proposal that involves simply a player procurement cap. Where in one year you can spend a maximum of $X million on the draft and international signs.

Aug 12, 2009 09:56 AM
 
ostrowj1

That would suck to be Drew Storen. "Yes, you were good enough to be picked 10th in the draft, and people who are not as good as you are getting 7 figure bonuses, but we only have $15 million to spend, and Strasburg is taking $14.999 million of that. You will be fine with a $1,000 signing bonus, right?".

It would seem strange that one person's bonus will be so directly related to the quality of potential teammates agents...

Aug 12, 2009 10:09 AM
rating: 4
 
mymrbig

Actually, the idea is that Storen wouldn't hold-out until mid-August, knowing that Strasburg might suck up the rest of the budget. Of course, this wasn't a concern anyway since Storen signed early. In fact, it would incentivize Strasburg/Boras to not wait until the signing deadline, because then the pot would be even smaller at that point.

Another big thing that could help would be requiring players to declare for the draft, like they do in other sports. If a HS player declares, then he wouldn't be holding out and using potentially going to college for leverage.

Also, don't misunderstand my motivations. I'm fine with amateur players getting lots of money to sign. With the attrition rate amongst draftees so high, this might be their one payday for years of hard work and toil. So my suggestions aren't really meant to limit the amount players are signing for. Rather, I'm just making suggestions to hasten signings (which is both in a team's best interest (keep the player in shape, start coaching him their way, etc.) and the player's best interest (quicker path to the majors, better coaching, don't try to start pro career out of baseball shape)). But as long as there is absolutely no cap of any kind, players and agents will have at least some financial incentive to drag things out until the end, hoping the team caves out of nervousness.

Aug 12, 2009 11:28 AM
rating: 1
 
bisanders
(329)

Love your work, Kevin. Thanks. I've got to question, though, the contention that the draft's primary purpose is "a balancing of talent." I've always thought that its primary purpose is cost control. Looking forward to Part Two.

Aug 12, 2009 09:49 AM
rating: 3
 
Evan
(47)

Rather than capping spending at all (which will ultimately serve only to transfer wealth from labour to management), let's just let the teams trade draft picks.

Then, if Kansas City doesn't want to spend $6 million on the top guy, but the Yankees do, KC can trade that pick for something tangible rather than just picking someone else they can sign for less and letting the top pick fall while getting nothing in return.

Letting the teams trade draft picks solves all of these problems. Looking for other solutions only muddies the waters and might convince MLB there's another option. But there isn't. Trading picks is the only way to fix this in a way that will have predictable consequences and serve to solve the problem we actually have.

Aug 12, 2009 09:59 AM
rating: 1
 
thenamestsam

I agree with this, these problems are the creation of artificially limiting the ability to move these players. If it were possible to trade picks noone would have to worry about not picking the best player since they wouldn't have to sign him, and they could always trade him for a more affordable player and another asset so that they get fair value and the talent is fairly distributed.

Aug 12, 2009 11:11 AM
rating: 0
 
mymrbig

This might be a risky proposition though. I mean, if every year the Yankees went to the #1 overall team and offered $15 million, plus the Yankee's 1st round pick (or something), then a lot of teams might be willing to do that. I don't see the equity in letting big market teams buy their way to the top of the 1st round. I realize that is happening to some extent already when players have dropped because of bonus demands. But tradeable draft picks isn't a guarantee to alleviate any perceived inequities. And it certainly won't help level the playing field if ownership pockets the money, rather than re-investing the money in the franchise.

Aug 12, 2009 11:34 AM
rating: 0
 
fireorlime

Would that be so terrible though? The crap team could use that extra 15 million towards later picks or international signings or free agents and they could still get NY's first round pick in return as well. 15 million means a lot more to a small market team than it does to the Mother F'ing Yankees.

Aug 13, 2009 08:44 AM
rating: -1
 
Kampfer

I agree with you. There is no rule that says the 1st overall pick must be better than the Yank's pick. 15 millions could mean more payroll to extend a veteran, which could prove to be more valuable than the difference between picks.

Aug 13, 2009 10:45 AM
rating: 0
 
mattoves

Except the primary purpose of the draft ISN'T to equitably distribute talent - it's to artificially hold down the money paid to young baseball players.

Here's a better question for you to ask - who is more entitled to a large pay day, Strasburg or Lerner? Lerner's made $40-50M profit every year on the Nationals, but has done absolutely to add value to the club - he didn't build the stadium, he doesn't spend on free agents and doesn't spend on prospects, etc. Nobody comes to the ballpark to see Tom Lerner.

So why is it more justified for him to make $50M than Strasburg, when Strasburg's someone that WILL actually bring people to the park and help generate revenue?

Aug 12, 2009 10:06 AM
rating: 5
 
ostrowj1

I don't thin that is a fair characterization of the draft. Yes, the draft does artificially hold down wages, but is that its primary purpose? I think one would have a hard time making the argument that wage suppression was even a consideration when the draft began in 1965. Its primary purpose is equitable distribution of talent. It results in artificial wage suppression.

Regarding Lerner, didn't drafting Strasburg add value to the club? He might not have laid the bricks, but the stadium is there (and might not have been if it weren't for Lerner's efforts). Strasburg throws a baseball, does that make him entitled to 50 mil? Lerner invested a LOT of money buying the team and he should expect some sort of return on that investment.

Aug 12, 2009 10:26 AM
rating: -2
 
mattoves

How would you have a hard time making the case that wage suppression was a primary factor? Pretty much the entire history of MLB is the history of the owners singlemindedly searching for ways to suppress wages of players. We know that the bonuses for prospects were halved the first year of the draft. We also know that the year prior to the decision made to hold a draft that the top prospect received a $200,000 bonus at a time when even the game's superstars were lucky to get $100k in salary.

Back to Lerner, drafting Strasburg adds nothing to the club if he doesn't sign him. And yes, the stadium would absolutely be there with or without Lerner. Financing and groundbreaking had already occurred prior to Lerner owning the club. He added nothing to the process.

If Strasburg throws a baseball and it brings in more than $50M in revenues, then absolutely he's entitled to the vast bulk of that money. Certainly much more so than Lerner who has done absolutely nothing to add any value to the club or attract fans.

Aug 12, 2009 11:15 AM
rating: 3
 
dwinning

*Banging head on desk* OF COURSE wage suppression is the primary purpose of the amateur draft, and it most certainly was in 1965. Everything was about wage suppression in 1965 (read Ball Four, for example), the reserve clause dominated players' lives. The players' union sort of cracked that nut when they won free agency, and eventually they get a shot at their true market value.

Fundamentally, the draft is about taking away an amateur player's leverage: instead of negotiating with 30 clubs, you get to negotiate with one. For six weeks. If you don't sign, you get to do it again next year, with a different team and even less leverage. Good luck! And since amateur players don't have a union, they've got no leverage in changing the system.

Honestly, what do you think owners care more about: (1) saving $10 or $20 million a year on prospect salaries/bonuses or (2) making sure amateur talent is fairly distributed among all the teams? If you say 2, that's adorable, I want to put a red ribbon in your hair and drive you around town with the teddy bear in the basket on my bicycle.

If you approach this from the perspective of "what's fair for the players" the answer is "abolish the draft". But to fix the draft - to make it more equitable while realizing that yes, the players are getting screwed - trading draft picks fundamental.



Aug 12, 2009 11:43 AM
rating: 14
 
brain1081

Overall though, isn't the point of wage suppression to help talent distribution? Trading draft picks would hardly help. Teams that want to be cheap could give up a better shot at improving the team with one player to get several picks down the line that sign for practically nothing hoping to get lucky. Also, it could really screw a team picking at the top of the draft. They could make a reasonable offer to a drafted a player only to be told that the player is demanding to be traded to specific teams knowing they will shell out more money. The team would practically have to trade or risk losing a top round pick for a year. Without a hard slotting system trading draft picks looks like it breaks the system even more.
Can't wait to see the thoughts on a potential world draft. Even beyond a hard slotting system and trading picks, putting in a world draft would create better talent distribution right away.

Aug 12, 2009 12:27 PM
rating: 0
 
mattoves

Brain1081, no, the point of wage suppression isn't to help distribute talent more equitably, it's to help guarantee large profits. Don't you ever find it odd that the discussions regarding competitive balance only ever revolve around forcing the players to earn less and never the owners? Why is it that owners like Loria, Lerner, Glass, etc should be rewarded with eight digit earnings every year as a reward for putting garbage on the field?

Heck, look at what's going on in the other leagues right now. By all accounts, the NFL does a good job in terms of distributing talent - but the owners still might try to lock out the players to force them to take a lower salary cap because they want to make more money. If it's about talent distribution and not profits, then why is that?

Same in the NHL. The lockout forced players to take huge reductions on pay, but did nothing to fix the massive revenue disparities, with the result that the truly poor teams still can't afford good players, but most of the owners are guaranteed larger profits.

Owners don't care about competitive balance. The worst team owners don't care about whether their team is good or not - just whether they make the maximum profit.

Aug 13, 2009 10:28 AM
rating: 0
 
ostrowj1

I must admit that it has been more than a decade since I read Ball Four. I'll admit, a lot of what I said was wrong. But... I don't think it is entirely fair to villainize the draft as something whose sole purpose is to deflate salaries and that the "fair distribution of talent" was just a side effect. After all, prior to the draft, there were mechanisms in place (with varying degrees of effectiveness) to deflate signing bonuses. I don't think the draft was meant to be a sneaky way of deflating wages mostly because more blunt ways of deflating wages were available.

One impression (and maybe a wrong impression) I got from reading Lords of the Realm was that until only (relatively) recently have owners ran baseball like competent businessmen (at least some owners).

And really now, are comments like, "I want to put a red ribbon in your hair and drive you around town with the teddy bear in the basket on my bicycle." necessary?

Aug 12, 2009 12:56 PM
rating: 5
 
Matthew Avery

Teams won't like to hear this, but the most direct way to stop the "death of the middle class" is to cut out the arbitration years teams get. So you get three free years when you bring a player up, and after that, it's time for free agency. Or maybe restricted FA like they do in basketball where the team that has "rights" can match any other deal and the player has to sign it.

'Course, then you have teams playing more games with service time and such....

Either way, allofasudden, that 4th or 5th year player is going to cost you basically the same as that 10-year vet, so why not get the "solid regular" vet instead of the younger kid? So you get your "middle class" back.

I'm of the opinion that the MLBPA has been overly-concerned with the salaries of their top earners and not concerned enough with what the bulk of the players, the bench guys, the borderline starters, etc. are making. Instead of arguing against salary caps and whatnot, they should be getting the minimum salary increased, limiting the control teams have over young players' salaries, and generally encouraging salary inflation for the mid-level players.

Aug 12, 2009 10:26 AM
rating: 2
 
R.A.Wagman

I'm a bit late to this party, but I think you may have hit the nail on the head. Any changes to the draft will very likely be tied into arbitration concessions. Maybe one less year of arbitration, or a form of restricted free agency.

One idea I've been kicking around would be similar to a salary floor in that teams have a maximum number of players on the 25-man (probably barring injury replacements) that are under team control years.

If a team had to roster at least, say 15 players, who are past the arbitration nexus, salaries will be there for established MLB players, without necessarily driving up salaries for replacement level types. A player past his 6 years may only be worth the MLB minimum, but can still count towards the vet rule. That would also serve to create a new potential market inefficiency for players who had washed out in one way or another.

Any thoughts?

Aug 13, 2009 08:52 AM
rating: 0
 
Randy Brown
(189)

Great article Kevin, I'm looking forward to the follow-on articles.

On a side note, although it wasn't meant to be a funny line, I laughed out loud when I read this: "the draft simply isn't fulfilling it's primary purpose, a balancing of talent." I got a vivid mental image of a certain Prospectus Today writer doing a spit-take when he read that line.

Next time someone wants to accuse BP writers of "group-think", please remember this line, and revert to accusing them of hating your favorite team!

Aug 12, 2009 10:41 AM
rating: 2
 
BP staff member Kevin Goldstein
BP staff

I don't have much to add here other than . . . our readers are really smart. Just outstanding discussion here folks, hope part two (just finished it, so coming tomorrow) will prompt just as much.

Aug 12, 2009 15:44 PM
 
Michael Bodell
(89)

I think the real "problem", such as it is, with the draft is the length of time (and the hits and misses as a result) between when a player is drafted and when they make an impact on the major league club. In many other sports draft picks can expect to have an impact the first year after the draft. The top 10 NBA picks will all be playing, and often starting, for the NBA teams. The top 10 NFL picks will be playing prominent roles for their teams the following year. Some of the top 10 MLB picks will never make the majors and it is rare for a pick to make an impact in the majors until at least a couple of years until after the draft.

As a result, the split for talent normalization isn't as good since Tampa Bay may have picked early in 2006 to help balance the talent but in 2009, when many of those 2006 picks are starting to bloom, Tampa Bay isn't a bottom wrung team.

One thing that might help with the talent balance would be for MLB themselves to draft the players and run the minor league levels (or at least the levels up to AA) and let teams draft more from the MLB pool of minor league players. Then when a team is ready to draft a player they have to place them on their 40 man roster (or whatever modified roster they get - maybe even signing them to major league deals). So if you are willing for a player to come to the majors early (because you are the Nationals or the Pirates) then you draft the guys slightly younger, get them on your clock, but are drafting older more mature guyrs. And if you are the Yankees or whoever and don't have bench slots or 40 man slots you can't take a young guy who is still 3 or 4 years from being ready because you can't protect them that long.

The owners may like this better because when most of the talent, even in the first round, is being drafted by MLB then of course they get exactly the slot amount. So you don't have these bonuses that owners have to pay out.

Aug 12, 2009 18:02 PM
rating: 1
 
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