In 2011, the National Football League endured a 130-day lockout when the NFL Players Association and the league couldn’t agree to terms on a new Collective Bargaining Agreement.
Later that year, the National Basketball Association suffered from a 161-day lockout and was forced to shorten the 2011-2012 season to 66 games.
When the National Hockey League’s Collective Bargaining Agreement expired in 2012, a 119-day lockout resulted in a 48-game season in 2012-2013.
The last time Major League Baseball and the MLB Player’s Association renewed the Collective Bargaining Agreement in 2011, they were able to do so without a work stoppage.
The new CBA was certainly controversial – owing mostly to the provisions adding a second wild card playoff team, and the 15/15 alignment which necessitates interleague play on every day of the season.
Less attention was paid to how the new CBA revamped the amateur draft spending system. Previously, MLB issued slot recommendations that most teams simply ignored – especially when it came to signing picks in the first few rounds.
The new system placed a cap on how much teams could spend on their first 10 draft picks, and placed harsh penalties on teams who exceeded the limit. A team has to pay a 75 percent tax if they go five percent over their bonus allotment, and pay a 100 percent tax and lose two future first-round picks if they go 15 percent or more above their allotment.
The CBA also revamped the free agent compensation system, abolishing the old “Type A” “Type B” in favor of a qualifying offer system. Under the new system, a team may offer a guaranteed one-year contract to one of their free agents worth the average of the top 125 player salaries.
If the player rejects the offer, they become a free agent, and the team who loses the player is compensated with a supplemental round draft pick. The team who signs the player loses their highest draft pick, if it is outside the top 10. That forfeited pick does not go to the team who lost the player.
“It’s a step forward because it suppresses the previous system that was based upon subjective valuation of how good players were,” said Dr. Andrew Zimbalist, a professor of ecomonics at Smith College and co-author of the upcoming book The Sabermetric Revolution: Assessing the Growth of Analytics in Baseball in a telephone interview. “The cutoffs [under the old system] were somewhat arbitrary as to whether you were a ‘Type A’ or ‘Type B.’”
Vince Gennaro, President of the Society for American Baseball Research praises the new system for its transparency.
“The whole ‘Type A’ – ‘Type B’ thing with the Elias [Sports] Bureau … was a little bit more convoluted,” Gennaro said in a telephone interview. “This comes down to a team just making a decision of what they want to risk in terms of signing this player. We’re asking a team to put a valuation on signing a player in the market.”
The system is still in its infancy, and both players and teams are trying to get a grasp on how to properly handle dealing with qualifying offers.
In the two years that the system has been in place, there have been 22 players who have received a qualifying offer. All have rejected the offers.
Some, like Josh Hamilton, B.J. Upton, Nick Swisher, Rafael Soriano, Curtis Granderson, Carlos Beltran, Robinson Cano, Shin-Soo Choo, Jacoby Ellsbury, and Brian McCann had no problems quickly signing with another team.
Others, like Huroki Kuroda (twice) and Mike Napoli turned down the offers only to resign with their respective teams.
Then there are the cases of Michael Bourn, Kyle Lohse, Adam LaRoche, Nelson Cruz, Stephen Drew, Ubaldo Jimenez, Kendrys Morales and Ervin Santana. They all suffered – or still do suffer – from extended periods of free agency, bolstered by teams’ hesitancy to surrender a draft pick in exchange for signing them.
“Teams are now giving players qualifying offers who are probably not worth the amount of a qualifying offer so that they can get draft pick compensation, and that ends up hurting the player in the free agent market,” Zimbalist said. “The thing players and agents need to realize about this system … is that maybe they want to take the qualifying offer.”
Perhaps the reason all qualifying offers have been rejected is that a team’s offer requires divergent interests between the two parties.
The team gives the offer is betting that either the player rejects it and they can get a supplementary round draft pick in return, or that they can secure another year of the player’s services at below-market value. If the team thinks that the amount of the qualifying offer is above what that player is worth, they have no incentive to make the offer because they run the risk of the player accepting.
On the other hand, if the player gets a qualifying offer, they have reason to believe that they are worth more than that – either in years, dollars, or both – on the market, especially considering Lewie Pollis’ work on the value of a win in free agency (more on that later). It would seem on the surface that accepting the offer is not in his best interest, because then he is selling his labor at below-market price.
What we’ve seen play out is that players and agents seem to have underestimated what the cost of that surrendered draft pick is to teams. This is where the new draft rules play a role.
Teams care a lot more now about surrendering draft picks to sign free agents not because of some renewed interest in trying to build through the draft, but because when you surrender a pick, you’re also surrendering the bonus allotment associated with that pick.
If the Mets had signed Michael Bourn last year and surrendered their first-round draft pick, they would’ve given up $2,840,300 from their total allotment for the first 10 picks, dragging their pool down from $6,990,000 to $4,149,700. The Mets spent $6,907,400 on bonuses for their first 10 picks in 2014.
Removing Dominic Smith’s $2.6 million bonus, the Mets would’ve spent $4,307,400 on the remaining nine picks where they were allotted $4,149,700.
Retaining the first-round pick gave the Mets a larger bonus pool and more wiggle room to go over slot to sign players selected in later rounds. Obviously, the Mets are not alone in their desire to hang onto as much of their bonus pool as possible.
As a result, this new rule has created a distortion in the free agent market where players with draft picks tied to them are penalized for pursuing free agency. But it’s not just the players being harmed.
“For large market teams, taking the risk of having a player come back at $14.1 million is one thing,” Gennaro said. “For a small market team to do that is another thing entirely.”
Gennaro cites the Pittsburgh Pirates declining to give A.J. Burnett a qualifying offer as evidence that small market teams are unfairly harmed by the system.
“You had the sense that he was the kind of a guy that could/should get this kind of offer, but they weren’t in the position to do it, because what if they got hung with the player?” he commented.
Of the 22 players to receive qualifying offers, 16 have played on large market teams.
Last year, the New York Yankees offered three free agents qualifying offers – Kuroda, Soriano and Swisher – and this year, the Boston Red Sox did the same with Ellsbury, Drew, and Napoli.
No small market team has offered more than one.
Dr. Mark Thornton, a Senior Fellow at the Ludwig von Mises Institute, has a different take.
Thornton believes the new system in the long run will work for the benefit of the small market teams, by not allowing the large market teams to outspend them more than they already do.
“[The new rules produce] a system where small market teams can win or lose and big market teams can win or lose,” Thornton said in an email interview. “What it prevents is a system where small market teams cannot win and where big market teams always win. … It also maximizes profits for the overall league and its franchises.”
In a league where profits are high for the league and its franchises, the wage pool – that is to say the amount of money being paid to players – is larger as well.
“It may hurt a few stars in the short run, but the players as a whole are better off in the long run,” Thornton said, praising the efforts of creating a competitive balance.
The effects of this are already being felt across the league in the form of larger regional and national cable contracts, though this process began before the new CBA was ratified.
This has already had an effect on the size of contracts handed out to players.
Lewie Pollis of Beyond the Boxscore determined the cost of a win at about $7 million in 2013, up from $3.2 million 10 years earlier. That figure will likely be larger in 2014 because of the absurd amount that teams have spent this offseason – $2.258 billion was spent on free agents (not counting Drew and Santana) this year, up from $1.31 billion in 2013, and shattering the record of $1.313 billion spent in 2008.
While the growth in salaries for players and revenues for the league and teams is good, Gennaro warns that this growth could just be parallel to the new CBA.
“[The cable contracts] have probably had a bigger impact on teams’ ability to spend money than any of these other factors,” Gennaro said. “We have to be careful not to over-read what the CBA has done, and make sure that we attribute enough of the changes that we’re observing to some of these other factors including the regional sports networks and how they’re infusing capital and dollars into the marketplace.”
These things do go hand in hand – as the CBA works toward its goal of creating more of a competitive balance, league revenues will increase and players will make more, as Thornton mentioned. There may be some short-term growing pains to work through, but everyone involved should benefit in the end.
“There’s times where I’m convinced the CBA favors the small markets, then there’s times where I’m convinced it has favored the large markets. It’s not just me being convinced, it’s the chatter you’re hearing.” Gennaro said. “There are credible arguments from teams on both ends of the food chain claiming that this has disadvantaged them. I suppose if the chatter’s pretty balanced, then you’re really right where you want to be.”
Joe Vasile is the voice of the Fayetteville (NC) SwampDogs. Follow him on Twitter at @JoeVasilePBP.
Great article, Joe! Fantastic. Regarding the value of a win: back in December Dan Szymborski stated (via twitter conversation) that the new number ($7 million) was too high and “calculated using a poor method.” He said it’s actually more like 5.5ish. I thought this was interesting.
Your thoughts?
The Mets have gone (relatively) cheap in the first round and used money saved for picks lower in the draft. But that’s not the only way to approach things and likely not the one I would take.
This approach looks like it worked out well with Dominic Smith but let’s say the jury is still out on how it worked with Gavin Cecchini.
Is Cecchini and Chris Flexen (who I’m bullish on) better than Courtney Hawkins or Lucas Giolito or Michael Wacha and random 13th-round pick? All three of those guys were taken after Cecchini and both Hawkins and Wacha were rumored to be on the team’s radar. I was hoping they were going to take Giolito but understood that the combo of his asking price and his injury history were enough to make that a virtual impossibility.
I dislike the idea that you don’t want to sign free agents because you’re afraid of losing the ability to go cheap in the first round and use money later in the draft. But that’s just a personal preference.
Look, Giolito was hurt, many thought he needed Tommy John, and he was rumored to be going to college and have insane signing demands if he were to go pro. It’s a risk assessment and it wasn’t just the Mets who passed on him. Hawkins was the guy I wanted. Wacha fell for good reason. I watched him plenty in college and his fastball has gotten harder and his breaking pitches have gotten more bite. It was excellent scouting by the Cardinals but again..there’s a reason many teams passed.
You cannot look at the drafts and go “We could have had Jose Fernandez, Michael Wacha, and Lance McCullers.” Sure, you could have, but the Marlins were the only ones to have Fernandez that high and trust me, that scout got a huuuuge raise. Wacha was supposed to be a solid mid-rotation starter–not an ace. McCullers said he was going to college. Ditto Giolito. I questioned the Cecchini pick as well but Hawkins came with considerable risk as well. We’ve already seen that he’s had to move to a corner and struggles with breaking pitches. The draft is so tough that you see some of the best minds in baseball scouting and management whiff on picks.
It’s really easy to Monday morning QB the draft and many fans do. I do a mock draft every year and I’m lucky if I get three picks right in the first round. Most first round picks don’t amount to much more than average or replacement level players. I was wrong on Wacha. I was dead wrong on Addison Russell. Saying, though, that Giolito was the right pick two years ago overlooks the fact that there was little indication he was going to sign. It’s really tough to condemn a GM and his crew for not picking a player who was saying, “look, I’m a bit hurt, I’m going to rehab, go to college, then go #1 overall in three years”.
Thing that kinda sucks though is Lucas grew up a Mets fan as his dad and family are from Queens. I got an email once from Mr. Giolito because I quoted his coach saying he tore his UCL, which his coach got wrong. His father is very invested in his son’s career and everything coming from that camp did not make it seem like he was signing with a club. I’m still shocked he did and the Nats got a great pick.
If you check our archives, you’ll clearly see me advocating for Gioltio before and right after the draft. The actual article I wrote acknowledged the risks with Gioltio and I predicted that the Mets would take Wacha, who several people much more knowledgeable than me had the Mets taking. There were also plenty of people who advocated for Hawkins. To declare this as some sort of revisionist history on my part is erroneous and unfair and I would like an apology.
I was not declaring anything revisionist. It was a general statement about the MMQBing that happens after every early pick of every draft without fail. You already acknowledged the risks with Giolito and I am reinforcing that it is problematic to look back at draft picks after seeing who signed and who didn’t, who was good and who isn’t, to say that it should have been a certain way. It’s very very difficult to properly scout and draft amateur baseball players. Very difficult.
Brian, you have gotten extremely sensitive recently towards my comments. I would ask that you breath a bit and realize I’m offering perspective and discourse, not personal attacks. My remarks above were about fan opinion, not yours specifically. I had to field aggressive questions after each of Sandy’s drafts from fans living and breathing hindsight bias and yet few acknowledge just how difficult it is to balance signability, projection, pool money, and input from many different places. I wasn’t a member of the M360 community when you made your draft projections and I’m impressed you had Wacha. I didn’t personally like him as a collegiate pitcher. Props to you for getting that one right–I didn’t. The point I’m making is that just like you and I, both people who follow the draft closely, disagreed on players and picks, you bet the scout and draft teams on clubs do that as well. It’s so fruitless to hindsight drafts. Sandy’s team does their due diligence, and unlike the Minaya regime, they do invest plenty of money in it. I can understand your questions about pool allocation/strategy and that’s definitely a conversation worth having but fans should also be aware of what it takes to draft successfully. (So there’s no confusion or sensitive response to this upcoming statement, realize that this is about fan bases in general, and not specifically Brian Joura) This-player-that-player comments years after drafts don’t do much good other than “I told ya so” from fans to one another. I’m proud I correctly predicted Carlos Correa #1 overall but you bet your butt I’d rather have Buxton. I don’t think the Astros made a bad call there either but it’s cool I was one of the very few who got that pick right. We can chat about it casually as fans about the merits of the early draft choices that year, but there’s little merit in it. That’s my opinion. Please do not take offense to it.
I suggest that you go back and read your comments and try to think how they come across to others. It’s not just these two threads and it’s not just me.
The $5.5 vs. $7 million numbers I believe are more the difference of the value that teams believe they are getting when they hand out a contract ($5.5 million/win) vs. what they actually got when all was said and done ($7 million/win).
I don’t see a major problem with the qualifying offer for the most part. Stephen Drew, for instance, gave up $14.1 million for one year with Boston. By most accounts that was a nice sum for his services, and more than he’s been offered this winter. If he or his representation thought he was worth more, that’s the risk they took. The downfall with these offers is that it keeps players in a type of limbo between being signed and being a fully free agent. Maybe the punishment for the team signing a guy with a qualifying offer should be reduced, but I don’t have any sort of answer.
Like anything new, there’s always a transition period where the players in the game have to get used to. In this case, both clubs and agents are still trying to learn the best way to go about it, and sadly certain players have suffered due to this learning period. (aka they are the guinea pigs). Based on what happened to these guys, i’m guessing we’re going to see less QO to marginal guys in the future and if they are offered, will more likely to be taken.
I think in a few more years, everyone will have gotten used to it and there won’t be as much complaining from both sides.
Hit the nail right on the head, Name. Like Zimbalist said, some players should want to start accepting the offers.
I think Boras is just using the draft compensation as a scapegoa for his error not taking the QO. His remaining two clients are just not worth the asking price. Time will tell!!
Dave Cameron has an interesting article on the qualifying offer. http://www.fangraphs.com/blogs/a-suggestion-to-improve-the-qualifying-offer-system/
I think the ability to allow a player to accept the offer at any time or the team to pull it at any time allows for a freer market.
Attaching draft pick compensation was supposed to level the field for small market teams but it has done just the opposite as the majority of QO are from large market teams because the small market teams can’t risk tieing up a significant part of their budget on a QO if the QO were accepted. (Burnett @ pittsburgh) Maybe the QO price needs to be lowered also. It is still a flawed system.
That’s pretty a ridiculous suggestion in my opinion. The purpose of the QO is not to provide the player a safety net. The purpose is to compensate the team for losing a high level player. If you’re a fringe guy who know you’re being offered the QO just so the team can get the pick, just take the damn offer! As teams start seeing more players accepting offers, they will start to rethink about giving the offer to so many fringe guys.
I also think that it helps small market teams more than Cameron thinks. Small market teams are probably less willing to freely give out QO, which means that might be a more attractive place for a free agent to sign a 1-year contract because he knows he probably won’t get the QO next season.
I don’t think it’s flawed, we’re just in this transition period where everyone is still trying to figure out the rules and the best way to go about it.
Yes, but what quality free agent is going to sign a 1-year deal with a small market team? And also small market teams who have to rely on building through the draft more may be less willing to sign free agents with the pick compensation tied to them.
Hmm, i see your point. I guess my argument applies to guys who didn’t get QO the year before and are looking to rebuild value on a 1 year contract and looking to score next offseason. AKA what Stephen Drew did last offseason.
I guess the guy that i can see who best qualifies this season for that type is Josh Johnson and possibly Chris Young, and to a much lesser extent Gavin Floyd, Gutierrez, Hammel, Hart, Morse, Pierzynski
Absolutely, it’s better than the Type A, Type B system, but it still has it’s flaws. I can see in the next CBA the threshhold for the QO dollar amount being raised. Currently it is the average of the top 125 salaries, but I could see that getting pushed up to the top 175 or 180. Also I’d like to see the signing team not get punished with surrendering a draft pick, especially since the team who loses the player doesn’t get the lost pick.