Signing-bonus constraints to impact Draft

Signing-bonus constraints to impact Draft

Signing-bonus constraints to impact Draft
Those who collectively bargained the new Basic Agreement are being lauded for maintaining a long stretch of labor peace. While it certainly accomplishes that, a good portion of it -- and the part that reportedly held up the deal for a while -- creates a much different system regarding amateur players, both internationally and those subject to the First-Year Player Draft.

The initial reaction of some was that the new system would create a disadvantage for the small-market/revenue teams that have aggressively used the Draft in recent years to try to gain a competitive edge. The Pittsburgh Pirates and Kansas City Royals are often mentioned in that conversation, as they -- along with the Washington Nationals -- have spent the most money in signing draftees over the past three years.

For example, the Pirates might not be able to draft and sign a first-round talent like Josh Bell in the second round, as they did in 2011, without being penalized. But the hope is that the new system will mean that players such as Bell will get drafted when they should, based on their talent rather than their signability. But comparing recent spending to how the signing bonus pools will be set up in the new system leads one to believe that perhaps these clubs won't be as bad off as some have thought.

Signing Bonus Pool

Each team's allotted bonus pool will equal "the sum of the values of that club's selections in the first 10 rounds of the Draft." The more picks a team has, and the earlier it picks, the larger the pool. The signing bonuses for a team's selections in the first 10 rounds, plus any bonus greater than $100,000 for a player taken after the 10th round, will apply toward the bonus-pool total.

Any team going up to five percent over its allotted pool will be taxed at a 75-percent rate on the overage. A team that overspends by 5-10 percent gets a 75-percent tax plus the loss of a first-round pick. A team that goes 10-15 percent over its pool amount will be hit with a 100-percent penalty on the overage and the loss of a first- and second-round pick. Any overage of 15 percent or more gets a 100-percent tax plus the loss of first-round picks in the next two Drafts.

According to Major League Baseball, the signing-bonus pool for 2012 Draft picks will range from $4.5 million to $11.5 million per team. The size of the pool will standardize more from club to club after next year's round of free agency, because the size of the pools will depend on the number of picks a club has in a given year and where those picks fall in each round. The club picking No. 1 overall -- in 2012, that will be the Astros -- will have the largest pool from which to draw.

The values set for each slot in the first 10 rounds of the 2012 Draft were based primarily on 2010, with the thinking that spending in 2011 was a bit of an aberration. Taking a look at some of those small-market teams that have been aggressive in the Draft shows they still will be able to go after high-priced talent.

For example, Tampa Bay spent about $6.2 million on their 10 highest bonuses in 2010, and its allotment for 2012 will be almost $7.7 million. Kansas City spent almost $6.2 million in 2010 and will be able to spend $7.2 million next year. Pittsburgh, on the other hand, spent $11.3 million in 2010 but will be allowed almost $9.3 million in 2012.

The Rays and Royals spent less on their 10 highest Draft bonuses in 2010 than they will be allotted in their 2012 Signing Bonus Pool, while the Pirates spent more.
TEAM 2010 2012
Rays $6,233,300 $7,674,600
Royals $6,196,000 $7,200,400
Pirates $11,374,900 $9,270,800

The Pirates would have gone over in 2010, but the hope is that in the new system, a player like Stetson Allie -- the Bucs' second-rounder in 2010, won't slide in the Draft because of signability concerns.

Need more? It's possible to think the 2010 Draft isn't truly representative because Christian Colon's $2.75 million bonus from the Royals was well below suggested slot for the No. 4 overall pick and the value of that pick in the new system will be $4.2 million. Take a look at the Royals' spending in 2008, the year they took Eric Hosmer with their first pick (No. 3 overall) and topped all spenders in the Draft. In the first 10 rounds that year, the Royals shelled out $10.2 million and went what would have been $150,000 over with their post-10th-round signings. Their pool would have been approximately $9.8 million, so they would have been about five percent over. But they probably would not have drafted and signed pitcher Tim Melville in the fourth round for $1.25 million in the new system. Like with Allie, the hope is that a player like him would go when he should based on talent. Hosmer signed for $6 million that year. The slot for the No. 3 pick is $5.2 million. Would the first baseman have walked away from that?

There were some definite outliers, and those will be the most interesting test cases going forward, with almost everyone agreeing that the industry will have to go through a Draft or two to truly understand how things will work. In 2010, the Red Sox would have had a pool of $7.1 million. They spent $9.9 million on the top 10 rounds and then went $400,000 over after that. That's an overage of 45 percent, meaning they'd have incurred a 100-percent tax and the loss of multiple first-round picks. Ditto the 2009 Nationals, who would have had a $13 million pool to work with but spent $17.5 million in the top 10 rounds, thanks to the record deal signed by Stephen Strasburg, and went over by $125,000 after the 10th round. That would have been 35 percent over their allotment.

What does all of this mean, aside from "We'll have to see how it plays out" response? Here's what some of the key players have to say.

The general manager

Dayton Moore is supposed to be in a panic about this new system. His Royals, after all, have been as aggressive as any team in the Draft and the new system will supposedly hamper them from doing business in this manner. But Moore, who's been a college coach, an area scout, a farm director and now a GM, was far from being in "freak-out" mode.

"Give us the rules and let us compete for players within the rules," said Moore, whose Royals will pick fifth in the 2012 Draft, behind the Astros, Twins, Mariners and Orioles. "That's been my mindset all along. I've never been concerned with what's perceived to be fair or unfair, because this game is so unpredictable. No system is going to be perfect. If you have good area scouts and good Minor League managers, you can be successful, no matter what the system is."

Moore has opened Kansas City's wallet to sign players like Hosmer in 2008 and two-sport star Bubba Starling, who walked away from a football scholarship in 2011 for a $7.5 million deal. There are those who feel the new system will make athletes like Starling look to other sports.

"We are always willing to pay for talent, but we believed that Bubba Starling's first love was baseball," said Moore, adding that it's important for scouts to establish relationships, perhaps even more so in this new system. "If his first love wasn't baseball, not only would we not have given him $7.5 million, we wouldn't have given him one dollar. We felt he wanted to play our game.

"There's a price they all require to forgo another alternative. The bottom line is the players who want to play, who have a passion to pursue a Major League career, they will sign. When they're 11 and 12, they don't say, 'I want to grow up to be a Major League Baseball player, but only for a large bonus."

The scouts

The scouting industry initially was split on what all these changes will do. Knowing an amateur player's desire to sign, as Moore said, will become more important. On that virtually all scouts can agree, along with the belief that it's a big positive that the signing deadline is being moved from mid-August to mid-July. Beyond that, there was a vast array of opinions about how the new agreement will impact the Draft.

"It looks like it will penalize the small-market teams in the Draft," one National League scouting executive said. "Large-market clubs will continue to spend if they spend in the Draft. The way the small-market clubs have been bettering themselves has been in the Draft, it's been proven."

The scout went on to say that assessing the Draft will become more crucial than ever, and that's something others agreed with, though many used that as a reason to express support for the new system.

"Does it fix everything? No. there's no way to fix everything," a scouting director said. "It's an attempt to somewhat level the playing field. It's never hard to give a kid $1 million in the seventh round. We all want to do that. It's a market correction. The teams that scout real well will do well."

Another scouting director agreed: "You have to evaluate the talent. We're opening up next year. It's the first time I don't have a board of names that I can't even discuss [because of signability concerns]. To be able to rank the board by talent and not just money, I think it's huge."

And what of the high school player? Will he be more apt to head to college instead of going pro right away? That might happen initially, especially if players and advisors compare 2012 to last year's numbers. But eventually, many believe, things will even out.

"Guys are going to go to college if they want to go to college," the NL scouting executive said. "If they want to play, $1 million is plenty. Maybe in year one, because of the general correction, [more will go to college]. In the long haul, I think you'll get roughly the same. It's going to correct itself."

The agent/advisor

Finally, there are those whose jobs it will be to correctly advise amateurs about what to do in this new system. Like him or not, there is no question that Scott Boras has impacted the Draft more than any agent.

Boras said the agreement inflicts a static system on a Draft that fluctuates greatly from year to year in terms of talent. He believes there still will be players from time to time who will slide down a draft board to a big-market team that will be willing to overspend and forfeit a future pick, if the talent pool will be shallower the following year. Could that be a strategy in this new world order? Only time will tell.

"Other teams can't afford to pay the tax or give up their No. 1 pick," Boras said. "The next star player will most likely not be the guy going in the top picks. The bottom teams will spend big money on a [Bryce] Harper or Strasburg. It's good business if that guy exists. That could not happen now, because [the teams picking early] were going to spend the money."

Jonathan Mayo is a reporter for and writes a blog, B3. Follow @JonathanMayoB3 on Twitter. This story was not subject to the approval of Major League Baseball or its clubs.