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August 12, 2008

Prospectus Today

Busted

by Joe Sheehan

With four days left until the August 15 deadline for teams to sign their draft picks, more than a third of the June draft’s first-round picks remain unsigned, including four of the first five players taken. As Kevin Goldstein noted last week, the implementation of that deadline pushed many players to wait until the deadline to reach an agreement, and those that waited did so successfully. So for many players—such as Buster Posey and Eric Hosmer—this may go down to Friday at midnight.

The draft is a broken system, one in which Major League Baseball openly and unashamedly restricts the career options of hundreds of young men in order to save itself millions of dollars each year, and everyone nods and smiles. We accept the concept of a draft in sports because it has largely been sold as a mechanism for increasing competitive balance—the worst teams get the highest picks. In fact, drafting high and drafting well are completely different things, as any fan of the Pirates—or, at the other end of the spectrum, the Braves—could tell you. That the draft may help competitive balance in a league is a tertiary factor in its existence. What a draft actually does is keep teams from competing for the services of the best talent on the market, and keeps that talent from having any options when it comes to choosing their employer for their prime earning years. It’s a beautiful system…as long as you’re not a supremely talented baseball player trying to have a career.

So when Pirates president Frank Coonelly says that his team will not "grossly overpay" for Pedro Alvarez, the second pick in the draft, it’s interesting to think about what that means. We’ve been conditioned to think of signing bonuses—the money we’re talking about here in most cases—on a scale unto themselves, disconnected from the rest of the baseball economy or, in fact, everything that those bonuses are paying for. In fact, owning the exclusive right to pay Pedro Alvarez millions of dollars is a huge positive for a baseball team, and a huge negative for Alvarez or any other player selected in the top couple of draft rounds.

What is it to "grossly overpay" the second-best amateur player in the nation? Kevin speculated last week that the end result here would be a $6-8 million major league contract, which would mean an immediate place on the club's 40-man roster. Is that overpaying? What if it were $9 million, or $10 million? What is the value of a 22-year-old third baseman who is expected to be one of the better power hitters in the game—if perhaps at a different position—in short order? What is the value of owning that player’s rights for the next seven, eight, or even 10 years, as he ascends through the minors? What is the value of being able to pay that player near the league minimum for three full seasons, and perhaps the better part of a fourth? What is the value of being able to keep that player off of the free market for talent by paying below-market salaries for three years beyond that? What is the value of never having to compete for the services of a player of that caliber?

Frank Coonelly wants you to believe that the value of that is something along the lines of $5 million or $6 million. Actually, that’s an overstatement; he wants you to forget all of the previous paragraph and just focus on the idea that Pedro Alvarez, unproven talent, wants millions of dollars before he ever plays a professional game. He doesn’t actually want you to think about the years of profit his team may make off of Alvarez’s talents, seasons in which the player may be worth five, six, or more wins to his team, wins that generate tens of millions in revenue, while Alvarez will be paid as little as $400,000, or maybe as much as $8 million or $9 million in an arbitration season.