Even though the deal was just finalized recently, there has already been a lot of discussion on whether or not the new Collective Bargaining Agreement is an improvement for small market teams, or a detriment.
In addition to the hard slotting dollar amounts figured into the deal, there will also be a signing bonus pool – anticipated to be between $4.5 million and $11.5 million depending on the team and their individual circumstances. (How many picks they have, and where they select in the draft order)
Teams will have the option of blowing that entire bonus pool on one player, or spreading it out between several different draftees.
Even though a salary cap was put into place several years ago by Major League Baseball, you still see teams like the Yankees flaunt the rules. They prefer to just go over the cap and pay the penalties. The penalties are quite stiff for going over your allotted bonus pool amount; in fact some think it’s stiff enough to deter teams from flaunting the rules.
- Exceed the threshold by 0-5%: Pay a 75% tax on the amount you exceed it.
- Exceed the threshold by 5-10%: Pay a 75% tax on the amount you exceed and lose a first round draft pick.
- Exceed the threshold by 10-15%: Pay a 100% tax on the amount you exceed and lose a first and second round draft pick.
- Exceed the threshold by more than 15%: Pay a 100% tax on the amount you exceed and lose your first round pick in the next two drafts.
While some of the big market teams may be willing to flaunt the dollar penalties in this agreement, they may be hesitant to lose draft picks for going over their total.
There are more draft and international signing issues involved as well:
- International signings will now have a bonus pool and penalties as well. For 2012, the pool will be $2.9 million for each team; in 2013 it will range from $1.7 million to $4.5 million.
- Ten clubs with the lowest revenues, and ten in the smallest markets will enter a lottery for the six additional draft slots right after the first round selections.
So the one school of thought argues that this actually helps small market teams. Now that the draft slot/bonus amounts are fairly pre-determined, it will keep teams from letting high priced draftees slide down the draft order to teams like the Yankees and the Red Sox. Those teams supposedly won’t want to go over their allotted amount, because they don’t want to lose draft picks. With limits to international players, this school of thought also argues that it allows the smaller market teams to better compete with the big markets.
Ken Rosenthal of Fox Sports highlights the other school of thought in this debate – that this deal is actually damaging to mid and small market teams. In fact the Indians makes his list of eight teams this deal damages the most (Rays, Pirates, Reds, Indians, Diamondbacks, Royals, Athletics and the Padres).
As he argues, the one way that small market teams can compete is to spend their money in drafting and player development. They’re not going to be able to afford to go out and sign a Prince Fielder or an Albert Pujols, so they invest in the draft and international signings. For example, this past year the Pirates spent $17 million on their draft picks, a figure that led the league.
The Indians went over slot on a number of their high-profile recent draft picks. Alex White ($2.25 million), Drew Pomeranz ($2.65 million), and Francisco Lindor ($2.85 million) were all above their slot recommendations. Even the Indians second round pick in 2011, Dillon Howard, received a bonus of $1.85 million; well above the recommended bonus of $545,000.
Jim Callis of Baseball America looked at team signing bonus totals from 2007-2011 and the Indians spent $33,179,300; 12th most among MLB teams and above the league average of $31,775,174. Cleveland’s AL Central counterpart, the Kansas City Royals, spent third among teams at $45,204,900; behind just the Pittsburgh Pirates and Washington Nationals (who had top five picks many of those years). As Callis points out here, if these penalties were in place for the 2011 draft, 20 of 30 teams would have paid a 100% tax on their excess and lost two first round picks. (Although he points out that the draft dollar limits may not be as severe as initially feared).
I think that it may be too soon to say this is beneficial to small market teams, or that it spells their doom. I think it will come down to whether or not these small market teams can manage to sign their targeted players for the recommended amount. One could argue that this cripples teams like the Pirates, Nationals and Royals (the top three in draft spending over the past four years), but is it possible they manage to sign all of the same players for less money? I guess that’s how you’ll determine whether or not this helps or hurts small teams. If small market teams can sign all of the same players for even less cash, it may mean they can improve their teams for less money. If nothing else, small market owners could use it to avoid accusations of being cheap – saying they’re not allowed to spend money is a better excuse than just not spending it.