It was apparent to many that the MLB amateur draft needed some fine tuning to ensure that teams cut down on signing bonuses. For those of you unfamiliar with the draft system make sure to check out my paper on the evolution of the draft here.
Basically, each pick was assigned a recommended bonus by Major League Baseball as to what was deemed the appropriate amount of money that the player selected with that pick is to receive as a signing bonus. This amount is called “slot”, therefore the player who is drafted 1st overall will receive more than any other player with the amount becoming lower with each pick. For example the 1st overall pick in the 2011 draft was Pittsburgh’s Gerrit Cole (out of UCLA) who based on slot should have received $4,000,000, but in actuality he got an $8,000,000 bonus from the Pirates. The first 50 picks of the 2011 draft were slotted to receive signing bonuses that totaled $70 million; however in reality the total spent on signing bonuses out of the top 50 players signed was $120.5 million or 72% above slot. The previous system that was in place clearly was not working as it was designed, mainly because of the fact MLB did not enforce any penalty for spending more than what was recommended. The slot system was merely a suggestion.
The new system allows each team to spend a predetermined amount on the signing bonuses of all players selected in the first 10 rounds of the draft. The total amount will vary based on where a team selects and how many total selections it holds within the draft. The slot for the 1st overall pick of the 2012 draft is $7.2 million; however, the Houston Astros who hold the top pick can spend more or less to sign that player but will only have a total of roughly $11.2 million (there are still competition eligible free agents and until they sign the number is not exact) to sign all of their picks within the first 10 rounds. In order to keep teams from increased spending on players selected past the 10th round, each slot has a maximum value of $100,000 of which anything over will count towards the total available amount for signing bonuses. The key to the new system isn’t the actually slots themselves but rather the penalty for going over your amount to sign players. A team that goes 0-5 percent over their allotted amount will pay a 75% tax on the amount over. If a team spends 5-10 percent over then they will forfeit a future first-round pick and pay the 75% tax. In the case of a team spending 10-15 percent over, they will pay a 100% tax plus forfeit a future first- and second-round pick. Should a team decide to spend 15 percent or more they will have to pay the 100% tax and forfeit two future first-round picks. No longer can teams just spend at will.
What does it all mean? At the end of the day, those players that have more leverage when signing will put pressure on teams to either pay them and risk potentially not being able to sign as much depth (put less eggs in the basket) or simple not select those players in the first place. I don’t see as many gambles on high school players simply because they have options and therefore will cost teams more to sign. A prime example from the 2011 draft would be outfielder Josh Bell. The Pittsburgh Pirates selected Bell with the 61st overall (out of Dallas Jesuit College Prep-Dallas, TX) and gave him a $5,000,000 signing bonus which was the tied for the 5th highest in the entire draft. Many considered Bell a top ten talent but teams stayed away because of his high price tag and strong commitment to play at the University of Texas. It would have been extremely difficult for the Pirates to sign both Bell and top pick Gerrit Cole while staying under their total slotted amount. In all likelihood, Bell would have either had to have signed for less in order to play professional baseball or currently be playing at Texas. The point being that high school players who are picked outside of the first five picks will not receive substantially more than their college counterparts, should they decide to turn pro. Some MLB teams might stay away from high school players altogether, while others will be sure of the individual demands before drafting him. This could result in more high school players attending college which would improve the level of competition at the NCAA level over the long haul.
In terms of the college players, I don’t see their being any major change other than potentially more college players being selected higher in the draft once that top tier of high school players is off the board. Reason being that MLB teams will view the college player as a safer bet to sign and at a more affordable price.
Regardless of which route a player chooses to take in order to become a professional player, there are positives and negatives to each option that must be discussed by each player and his family. Each player has a different set of circumstances to consider when deciding what is best for them both as players and as people.
It will be interesting to see how teams approach the draft and what strategies they will use when selecting and signing players. General Managers and Scouting Directors will have to continue to do their homework on players, possibly even more so under the current system. It will take a few seasons to make an accurate assessment of the new system. One thing is clear, however, the MLB teams that are able to adapt and transition to the new landscape will see the greater benefits over the long-term. There is no question of the importance of having a strong farm system in order to remain a competitive team in the game today.
For more on the Pirates, check out Rum Bunter.