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November 1, 2006

Future Shock

The CBA and the Draft

by Kevin Goldstein

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When the summary of the new collective bargaining agreement was released during the World Series, some minor changes in the free agent compensation rule were noted, but only two lines covered some significant new changes to the amateur draft. Those 61 words have sent some shockwaves through the scouting and player development departments of several teams, as it's fairly clear that the draft will never be the same. To get a sense for how the industry is reacting to these new rules, I spoke to several scouting directors, front office personnel, area scouts, and agents to get their initial thoughts on the new player development landscape.

The Deadline

The biggest changes revolve around a new signing deadline, as all draft picks other than college seniors must sign by August 15th or the team loses their draft rights and the player enters the next year's draft pool. This has many implications, but on its most basic level, it means no more extended holdouts. No longer will we see protracted negotiations going into the following season, a tactic often used with success by top college players such as Stephen Drew, Jered Weaver, and Luke Hochevar. This year's top unsigned pick, righthander Max Scherzer, was selected with the tenth overall pick by Arizona; he will effectively become the last draftee to use this tactic.

"The player has the same options he had before, but this creates a positive sense of urgency on both sides," said one scouting director. "Before kids could string things along, or even enroll in college and not attend class and it was a complicated thing to monitor. This clarifies the process, so it's a good thing for both sides."

End Of An Era

With the deadline applying to all but college seniors, the draft-and-follow is dead. In the past, the signing deadline was one week before the following year's draft, unless the player attended classes at a four-year college. This allowed for the draft-and-follow, officially designated as "DFE": draft, follow, and evaluate. The process allowed teams to select a player who might be low on polished skill but high on projection, and then monitor his progress for a season at junior college before signing him the following year. The system created precious few hitting stars, but several top-of-the-line pitchers, including recent stars Mark Buehrle, Rich Harden, and Roy Oswalt. Despite these recent success stories, members on both sides of the negotiating table seem happy to see the system go away.

"The rule was never fair to the kid in my mind," said one scouting director. "For a whole year the kid would be under control and he couldn't even say hello to another team without it being tampering--many of them would go into the next year's draft without realistic expectations about their status."

"The process became this runaway freight train over the last seven or eight years," agreed another scouting director. "The rule wasn't really being controlled properly and it became its own little cottage industry."

Agents also seem happy to see the signing process simplified. "I always thought the process was inherently unfair, as clubs would have control over players without ever having to contact them or show any interest in the player," said one top agent with a stable of major leaguers and former first-round picks. "It prevents other teams from properly evaluating that player's makeup and skills, and now it makes everybody fair game."

But for those beating the bushes and finding high-ceiling talent, the process makes it more difficult.

"I think it's unfortunate that this is no longer an option," said one area scout. "It takes away the ability to take these projection guys and follow them for a year. For these kinds of players, you might be on the fence as to whether or not he's ready for pro ball, but now we can't wait and see, we have to make a decision earlier, and that could lead to more mistakes."

Many sources were surprised that a shorter draft was not a by product of these new rules. The second day of the draft is filled with draft-and-follow selections, and most agreed that the draft will be shortened to one day and 30 rounds or less within a few years.

"I can imagine half of the teams gone by the 30th, maybe 35th round next year," said one scouting director. "In general, we sign 17 to 25 guys out of one one draft to get out there and play. With no draft-and-follows, what am I going to do with the other 30 picks?"

Compensation

The most radical change when it comes to impacting negotiations and attempting to curb bonuses, the new compensation rules for unsigned picks could dramatically change the manner in which team's deal with drafted players. From the agreement:

1. Clubs that fail to sign a first- or second-round draft pick will receive the same pick in the subsequent draft as compensation. A club that fails to sign a third-round pick will receive a sandwich pick between rounds three and four in the subsequent draft as compensation.

While few believe this will affect the bonuses of elite players, for those that get drafted in the late first round or after, teams will be much more leveraged in negotiations, with many feeling that those later high picks were more difficult anyway. "I've always believe that the second round pick is a tougher sign than the first rounder," said one scouting director. "They're disappointed that they didn't go in the first round and they still want their seven-figure bonus."

But some teams see added leverage with the upper picks. "Right now, if you are picking fifth or something, and you're having trouble, it's impossible to walk away knowing that your compensation pick is in the 30s next year," said another scouting director, referring to the old system of compensation for unsigned first-round picks. "Every team is going to want to sign their players no matter what, but if you get into a situation where everything blows up, (the new system) does make it easier to punt, knowing that you're picking there next year."

The question is whether or not this system ripe for abuse. What would have stopped the Padres with the number one overall pick in 2004, from basically passing, knowing they'll get Justin Upton or Alex Gordon the following year? Few think this scenario will happen, yet nearly all parties could come up with a scenario that bordered on abuse. Many recall the Reds selecting Jeremy Sowers in the first round of the 2001 draft with no expectations of meeting his clearly stated high bonus demands.

"I think there is an unspoken agreement that the top ten picks or so with have to be taken with every intention of getting signed," said one team official. "If you are a really bad team in a bad way, what's to prevent you from punting for three years and ending up with four or five first round picks in one year--I mean, you could start having scouts look at junior high kids for when a so-called 'best class' might emerge."

A nightmare scenario to be sure, but the official added that it's an unlikely one. "It could happen, but I think with the way teams are structured and how short the shelf life of a GM or scouting director is, they need to get guys in the system who can make their marks."

One scouting director agrees that abuse is unlikely. "The bird in the hand is always more valuable, but there might be an exception if there is some kind of, to make an NBA analogy, Shaq or Greg Oden situation," said the scouting director. "I still think teams will be fair and reasonable, but at least there's a Plan B now."

Another scouting director says than Plan B could come into effect with players at the end of the first round. "I think there is definitely more chance for abuse when you take a guy between 25 and 30 who really doesn't excite you more than your second round pick because the talent flattens out," said the scouting director. "If negotiations go backwards, you can say why are we going to pay a guy we don't like too much money when we can just pick here next year?"

However, one agent points out that it just takes one team to stray from the system to hurt one player's career. "Over the long haul, I don't think the process will be abused because there are always good players to be drafted, and teams want good players," said the advisor. "At the same time, there could always be one club out there that takes a player without ever making a real run at him, for whatever reason, knowing they'll be compensated with the same pick next year. An unlikely scenario, but right now it looks possible. We won't really know until we see the final agreement in writing."

More pressing is how this compensation could affect bonuses, with many teams seeing not only a holding of the line, but a possible reduction in money spent on and offered to players selected between the late first and third rounds.

"All of a sudden, teams have a lot more leverage with college juniors," said one team official. "Returning to college is their only leverage, and this signing date and compensation system shaves that down some... all the risk is his."

"If he goes back to school and is the same player, he's going to get only 75% of slot at best," continued the official. "So why not offer that now? He could still pass, but you can roll the dice a little more because you have this backup plan. If you don't have extra picks, you can't blow your second- and third-round picks and come away with nothing--this makes it more palatable to go after a guy and if you don't get him, it's not the end of the world. To not sign a guy right now is a huge deal--you only get so many chances at good players and the feeling is, 'you draft him, you sign him.' Some of that urgency is gone."

Another official agrees with that basic philosophy, but he believes bonuses will simply hold firm as opposed to rising or falling. "Guys will sign quickly on slot. A lot of teams say here's the slot, and it's not going above that, so don't ask for more. Now we can say that with less pressure, at least on our side. He really wants 500 [thousand], and you're offering 400, it's not as big a deal to just let him walk. That's a good prospect, to lose a $400K guy, but it won't hurt nearly as much anymore."

Player representatives are understandably concerned. "Teams are really going to have to do their homework on signability," said one. "We have to be very clear about what it takes to sign a guy. Once we express that, it's a matter of good faith--if that is still left in baseball. I just hope it doesn't come back to haunt some players."

In addition, one scouting director says the curtailed bonus money could lead to additional spending elsewhere. "I think you'll see many teams just play by the rules here," he said. "Then they'll go put that extra money into international signings. I think we already saw some of that this year."

A Win For Management

Overall, nearly all agreed that the new draft rules are an overwhelming win for the teams.

"All of these changes are about taking power away from agents, and giving it back to players and management," said one team official, who also brought up the fact that it's strange that the union even negotiates on this, as drafted players are not even in the union unless they sign the rare major league deal. "Of course this is where the concessions were made," he added. "When has the union ever cared about players in the draft?"

An area scout, says he's happy for the new rules, and hits on all the issues with one brief summary: "We take these guys, and we're the only team that has the rights to him and we're negotiating against nobody but ourselves and the bonuses keep skyrocketing--it's crazy. How many guys have gone back to school? Maybe it's good that we are getting help from MLB, because sometimes it seems the industry can't save itself from that kind of (poop)."

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

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