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Believe it or not, most of our writers didn't enter the world sporting an address; with a few exceptions, they started out somewhere else. In an effort to up your reading pleasure while tipping our caps to some of the most illuminating work being done elsewhere on the internet, we'll be yielding the stage once a week to the best and brightest baseball writers, researchers and thinkers from outside of the BP umbrella. If you'd like to nominate a guest contributor (including yourself), please drop us a line.

Dustin Palmateer once played division III junior college baseball, finishing with a career batting average below the Mendoza Line. He now writes about the game. You can reach him via email.

In late November of 2011, Major League Baseball and the Players Association reached a new five-year Collective Bargaining Agreement (PDF), guaranteeing 21 straight years of labor peace. The new CBA features some radical changes, however, and many fans, analysts, and executives are worried about how those changes might impact an already sizable gap between small- and large-market franchises.

The biggest changes in the newly constructed CBA involve how much teams will be able to spend on prospects, specifically in the Rule 4 Draft and the international market. Previously, while the Commissioners’ office strongly suggested how much teams should spend on draft pick signing bonuses via slot recommendations, there was no hard limit in place. Further, there was no cap on international signings.

To recap, here are some of the highlights of the new CBA:

  • Teams will have a signing bonus pool with a specific amount of money allotted for spending on the first 10 rounds of the draft. The amount will be based on where they pick in each round and how many picks they have.
  • Signing bonuses after the 10th round will not count against a team’s signing bonus pool if they do not exceed $100,000.
  • Teams that exceed their spending threshold will be penalized in the form of a tax on the amount spent over their signing bonus pool and a loss of future draft picks.
  • There will be a competitive balance lottery, awarding six draft picks to small-market, small-revenue teams following the first and second rounds.
  • In the international market, teams will also be given a signing bonus pool and will be penalized for exceeding it.

In this article, we’ll focus on the Rule 4 Draft.

Ignoring recommendations
Over the years, Commissioner Bud Selig has handed out “slot recommendations”— suggested dollar amounts teams should spend on each draft pick—before each draft and strongly urged teams to follow the guidelines. For instance, in 2007, MLB recommended that the first pick in the draft sign for $3.6 million and the 30th pick for $945,000. In last year’s draft, those recommendations had only grown slightly over five years ($4 million for the first pick and just under $1.1 million for the 30th).

A number of organizations have followed Selig’s guidelines, although it isn’t mandatory and no punishments are handed down when a team blows them away (as long as they follow a set procedure before doing so). However, in recent years, the slot recommendations haven’t grown along with the industry’s willingness to spend on amateur players, making the whole “slot system” look broken and likely infuriating Selig and those looking to keep draft expenditures down.

Here’s a look at how the first-round broke down from 2007 through 2011:


Recommended slot total (all 30 picks)

Actual bonus total

Percentage of over-slot picks


$50.7 million

$62.9 million


















I defined an over-slot selection as at least $200,000 over the recommended slot for that pick. You can see that while the recommended slot total has actually decreased since 2008, first-round bonuses have generally continued to rise, outside of 2010 (when three of the first 14 picks failed to sign), peaking at a record $81.9 million in last year’s draft, which featured a very talented, deep class). The actual bonus totals are just that and do not include major-league contracts.

I should note that slot recommendations are confidential, and the estimates here are from Baseball America, as is much of the draft-related data in this article.

Organizations don’t limit their over-slot spending to first-round selections. In the first 10 rounds of the 2011 draft, according to Jim Callis (BA sub. required), teams spent $191.9 million on draft picks, while the slot total for those picks was just $133.3 million. The Pirates, Royals, and Nationals spent well over double their respective slot totals. Only eight teams spent under slot.

Some over-slot highlights beyond the first round in 2011 include the Nationals signing outfielder Brian Goodwin for $3 million (34th overall pick), the Pirates signing outfielder Josh Bell for $5 million (61st pick), the Padres signing catcher Austin Hedges for $3 million (82nd pick), and the Orioles signing catcher Nicky Delmonico for $1.5 million (185th pick).

With draft spending out of control—at least in relation to Selig’s wishes—and the new CBA on the table this offseason, it was clear that reform in this area was imminent. 

Large-market vs. small-market spending
The main concern regarding changes to the draft is that small-market, small-revenue teams like the Pittsburgh Pirates, Kansas City Royals, and San Diego Padres will be negatively impacted. In recent years, while large-market teams like the Yankees and Red Sox have continued to flex their financial muscle on big-league payrolls, small-market teams like the Pirates and Royals have gone on spending sprees of their own in the amateur draft.

Since 2007, only two organizations have spent more than $50 million on draft bonuses, the Pirates ($52.1) and the Nationals ($51.1). Only four others have spent over $40 million: the Royals ($45.2), the Red Sox ($44.1), the Orioles ($41.2), and the Rays ($40.6). Only one, the Red Sox, could be classified as a large-market team.

Below is a chart of the top five and bottom five draft spenders per year (’07-’11), compared to their average major-league payroll over the same period. Draft data from Baseball America and payroll figures from BP’s own Cot’s Contracts:



Draft Spending

Draft Spending Index


Payroll Index



$10.4 million


$43.4 million















Red Sox




































White Sox





Google Docs spreadsheet for data on all 30 teams

Draft and payroll index put spending in context, with 100 being league average and 150 being 50 percent higher than league average. Below is a chart with all 30 teams:

As you can see, there isn’t too strong a relationship between payroll and draft spending. If anything, small-market (small-payroll, at least) organizations are slightly more likely to be big spenders in the draft than their large-market counterparts. Of course, there are multiple explanations for why this might be true.

One, small-market teams like the Pirates and Royals have been getting smarter and spending big dollars in the draft in effort to build from within. They can compete with their large-market foes in this area, where $10-15 million buys an elite draft class, as opposed to the free-agent market, where it buys two years of Aaron Harang.

That said, the Pirates and Royals have also had picks at or near the top of the draft each year, giving them first dibs at the best prospects and their accompanying hefty price tags. If we reversed the draft order, letting the best records—generally, those of large-market teams—select first, there would certainly be changes in spending patterns.

Of course, the draft is set up with the lowest records at the top for competitive balance purposes, and many small-market teams have been taking full advantage.

So, who is really punished?
Every organization looking to spend significantly over-slot money in the draft will be hurt by the new policy. First, let’s take a closer look at the penalties for exceeding a team’s respective signing bonus pool:

% Over signing bonus pool



75% tax on overage


75% tax plus loss of first-round draft pick


100% tax plus loss over first- and second-round draft picks


100% tax plus loss of first-round picks in next two drafts

There are stiff penalties in place for exceeding one’s signing bonus pool by more than five percent, including a tax on the overage and a loss of future high draft picks. A rebuilding team expected to receive a high draft pick in the following season can’t risk losing that pick, unless it’s trying to reel in an elite, once-in-a-decade talent like Bryce Harper.

It’s hard to spot the loopholes in this policy. As mentioned earlier, if teams exceed $100,000 in bonuses for a pick after the 10th round, that dollar amount will be counted toward their signing bonus pool. Further, if a team decides to forgo a selection—a high first-round pick, let’s say—that money ($5 million, for example) will be deducted from that team’s signing bonus pool.

With 2012 signing bonus pools recently published, I wanted to take a look at how teams would have been impacted if this policy had been in place for last year’s draft (theoretically, of course, since teams would not have spent as much if the policy had actually been in place last year). Below is a chart with a few selected teams’ estimated signing bonus pools for last year’s draft, the actual bonus total for their selections through the first 10 rounds (plus bonuses in excess of $100,000 past the 10th round), and the penalties they would have triggered:


Est. signing bonus pool

Actual signing bonus total

Top signing bonus



$10.5 million

$16.5 million

RHP Gerrit Cole ($8M)

$6 million tax, loss of two future first-round picks




OF Bubba Starling ($7.5M)

$7.1 million tax, loss of two future first-round picks




SS Francisco Lindor ($2.9M)

$2.1 million tax, loss of two future first-round picks

Red Sox



C Blake Swihart ($2.5M)

$1.6 million tax, loss of two future first-round picks




C Greg Bird ($1.1M)

$1.8 million tax, loss of two future first-round picks

The Pirates and Royals, who paid little heed to slot recommendations (and my estimated 2011 signing bonus pools), would have been severely punished if this policy had been in place last year, getting taxed $6-7 million and losing two future first-round draft picks. That was expected.

Perhaps more interesting, consider the Cleveland Indians, who spent over $1 million on only two picks, didn’t sign their eighth-rounder, and still incurred the maximum penalty. The Indians spent $1.4 million to reel in signability risks from rounds 11-20, including $250,000 on 14th-round right-hander Cody Anderson to lure him away from a TCU commitment. While this new draft policy will limit big signing bonuses in the early rounds, it will also prohibit teams like the Indians from stockpiling good prospects in the mid- to late rounds.

The Red Sox, one of the large-market draft spenders we mentioned earlier, are going to have to change their spending habits as well. They haven’t given out any huge bonuses since 2007, but they have frequently gone over-slot in the middle rounds. Considering the Red Sox will usually have a relatively small signing bonus pool (it is $6.9 million in 2012) due to selecting late in the first-round, they likely won’t be as able to spend big dollars in the middle rounds going forward.

The Yankees, despite not having a first-round draft pick, not signing their second-rounder, and spending over $1 million on just one pick, still easily exceeded their modest estimated draft cap.

As mentioned, it’s clear that the draft changes will affect any organization looking to spend big dollars, be it the small-market, rebuilding Pirates or the large-market, perennially contending Red Sox. The consensus, however, is a concern for the health of the small-market organizations, primarily because their most sustainable route to long-term success will likely come from building a productive farm system. 

While teams like the Red Sox and Yankees rely heavily on procuring talent on the farm, most of their resources are spent on big free-agent acquisitions and contract extensions. Further, they already have established a winning track record and the revenue stream that comes with it—packed stadiums, big TV contracts, merchandising, and brand recognition.

The struggling small-market team’s only way to approach that point is through developing homegrown talent, as it can’t compete on the free-agent market for players like Albert Pujols, Prince Fielder, or Jose Reyes. Regulating spending in the draft may impact everyone, but one could certainly argue that it will hurt the teams that need to rely on draft and development successes the most.

Consider the aggregate of a team’s draft spending and major-league payroll as a simplified representation of how much they spend yearly on player talent. The chart below shows which organizations rely most (and least) heavily on draft spending compared to payroll (avg. year from 2007-11):


% Spent on draft

$ Spent on draft

$ Spent total (draft + payroll)

1. Pirates


$10.4 million

$54.8 million

2. Nationals




3. Rays




28. Mets




29. Yankees




30. White Sox




An uncertain future
Despite speculation, the long-term effects of these CBA changes won’t be fully understood until we are able to see them in action, starting with this year’s version of the amateur draft in June. While many teams will undoubtedly have to alter their spending habits, it’s unclear to what degree they will have to adjust.

An unintended consequence of these new policies, also widely discussed elsewhere, is the number of players MLB could potentially lose to college, or worse, other sports altogether, like football and basketball. Previously, prospects with leverage (oftentimes high-school draftees with college scholarships or two-sport athletes) could hold out for over-slot bonuses. While these players will still be allowed to hold out at their heart’s content, organizations may not be able to sign them to over-slot deals as they have done so frequently in the past.

Future two-sport athletes like Joe Mauer may ultimately be more likely to forgo signing with a major-league team if that team can’t reach the player’s bonus demands. Mauer, you may recall, passed up a scholarship at Florida State to play quarterback when the Minnesota Twins drafted him with the first pick in the 2001 and promptly handed him a $5.15 million signing bonus.

Hopefully, for both the general health of MLB and the competitive balance between small- and large-market organizations, these changes won’t be as damning as many are anticipating. All of the baseball world will be watching—many with a critical eye—come June 4th.

Thank you for reading

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Is there anyone that can cogently explain this solution in search of a problem? I'm sure the folks that voted on the agreement thought they were solving... something, but I sure don't understand what. I'm genuinely curious.
I figure it as a means of saving the owners some money without hurting their negotiating partners -players who've already been drafted and gotten their bonuses. The union is selling out people are aren't even in it.
Exactly. It is a price fixing cap on total draft expenditures. The extra money will go into either player salaries or owner pockets. My guess is some teams will put all their allotment in the early rounds and skip some picks in rounds 6-10 or just make pre-draft handshake deals on guys who would likely go later -- "I'll take you in the 5th if you'll commit to taking 15th round money". Also, prospects who make big pre-draft demands for expected bonus may find themselves dropping more than before.
I kinda doubt there will be much "dropping". Unless you're Bryce Harper, the penalties are just too severe.

And, assuming Dustin has his facts straight, you can't skip some picks and use the $$$ elsewhere in the draft: "Further, if a team decides to forgo a selection—a high first-round pick, let’s say—that money ($5 million, for example) will be deducted from that team’s signing bonus pool." Your pool gets charged the full slot amount whether you sign him or not. With that rule in place, you don't just have a cap on your total pool, you have a cap on every spot in the first 10 rounds of the draft.
Not that I'm really questioning Dustin's assertion which kmanter quotes, but can we get a confirmation of this? It seems somewhat at odds with this little bit of the CBA: "Draft picks that are forfeited by Clubs will be awarded to other Clubs through a lottery in which a Club’s odds of winning will be based on its prior season’s winning percentage and its prior season’s revenue. Only Clubs that do not exceed their Signing Bonus Pools are eligible for the lottery."
I read the combination of the two clauses resulting frequently in a team not being able to sign a player, losing a chunk of their pool regardless, and then losing the pick itself to another team which then has its pool increased to accommodate the added pick. It would seem to simply shunt picks to teams which have larger budgets and the correlative (I assume) lower picks at friendlier slots, and so a further-augmented ability to keep shy of the Overage Tax. And what then if the teams who win these lottery picks can't afford the slot?
As an added bonus it also creates a temporal hurdle by seemingly requiring teams to decide whether they'll forfeit their pick before draft day, based on the value of the slot alone and without seeing who the pick will get them. Either that, or the supplemental Overage Lottery wouldn't occur until a later date... But of course I may be misunderstanding all of this.
Anyway, it's a whirlwind of a concept. Like everyone has already said, what's the damn point? Thanks to Dustin for taking on the subject.
Also, cfinberg, I first read about that part on BA's draft blog, where Jim Callis said:

"The most significant new detail: If a team fails to sign a player in the first 10 rounds, its draft cap is reduced by the assigned value of his pick. It can't reallocate that value to sign other players. However, it can reallocate the difference between a player's bonus and the value of his choice."
Meaning if a team signs a player to less than his recommended slot, that shortfall is reapplied to the pool? That makes sense, but the teams are already over a barrel anyway. Draftees can basically say "Screw you, Team A. Pay me the full slot or I won't sign and you'll lose your pick and your allowance." I don't see much room for leftovers, somehow.

BTW, where are these guys like Callis getting their more specific insights? Is there an unabridged copy of the CBA floating around, or is it a private document that Mystery Owners will distribute at times of their own choosing, like so many Dino Laurenzi Jr. samples?
Right, if the slot value for a certain pick is $3 million and a team signs the player selected there for $2 million, they can use that extra $1 million to go over-slot on other picks.

I'm not sure where some of the info comes from, but I would guess that Callis (and others) have solid sources giving them extra details. I believe the entire CBA is expected to be released sometime in the near future. On his Biz of Baseball site, Maury Brown said it could be released by Opening Day.
I would agree, I think the easiest explanation for these changes is that the MLBPA isn't going to fight too vehemently against limiting signing bonuses for non-MLBPA members and the owners get to save money in an area where spending was rising rapidly (at least among some teams).
Looking at the information provided via the "2012 aggregate bonus pools" link at, "saving the owners some money" may not even be the case. They can spend $189.9M on their first 10 rounds this year, while they spent $191.8M last year. Assuming they spend somewhere near their limits, that's only a 1% savings.

The only "problem" this "solution" is likely to solve is to keep a handful of players in college who might otherwise jump to the pros.
Yes, though pardon me if this comes off too flippantly.

MLB was interested in limiting the amount of money it has to pay to the players. This has been Selig and Reinsdorf's hobby horse for 40+ years, and they'll do it any way they can (legally or not). This was an easy one to win, because . . . the MLBPA doesn't represent any player until after they sign a contract, and so didn't care what kind of draft pool/penalties were put in place. If anything, the MLBPA could easily say to the players, "This leaves more money for minor league and major league salaries."

Its really short-sighted on both sides' parts, but there you are.
The only good thing to come out of this is that the best players should be picked in order. No more Rick Porcello's falling to the 27th pick because of bonus demands.

The other downside not mentioned in the article is that players might be over or under paid depending the year they are drafted. This year the 1-1 pick gets $7.2M. Maybe the player taken 1-1 would have "only" received $6M under the previous rules based on his talent. The player taken 1-1 in 2013 might be worth more than $7.2M. Strasburg and Harper broke 10 year old records because they deserved it based on talent, not because of inflation increasing their recommended slot.
You really think so? Let's work through this a sec. If a team realistically thinks it has no chance of signing the best player on the board for a slot bonus (i.e. a promising HS or two-way player who has an option to go elsewhere if the team doesn't meet his demands), they get penalized for doing so. The rational thing to do, then, is to get the most *signable* player on the board at that point. So the draft no longer reflects the best baseball talent, only those where MLB's arbitrary bonus restrictions matches the amateur player's idea of what his bonus should be.
Right?! Teams will be falling over themselves in hopes of overpaying for comparative mediocrity, because at least then they'll get something out of the deal. Otherwise they lose their monopoly money AND don't get any players - though they keep their real-life cash... which they can spend on even more inflated free agents!

Not only are the slots arbitrary, but they're graduated. This has to heavily favor the later/richer teams once past the absolute cream of each crop.

What is this, a school for ants? People are going to freak out both inside and outside the sport. I can't believe that ownership agreed to five years of this.
It is amazing to see the ridiculous draft policy of the White Sox in stark black-and-white here. I knew they weren't spending much, but my God. Gee, Jerry and Kenny, you think maybe this is one huge reason why you have the league's worst farm system?
I thought the same thing looking at these numbers somewhere else a few weeks ago. Connecting Reinsdorf with this cap system is just unavoidable.

The one thing I keep thinking about: What if a decent # of teams(say 5-10?) blow a cap number and a accrue a 1st round penalty? If those spots just disappear then the line gets moved forward and lessen the penalty. Of course I am imagining a wholesale revolt, but recent draft history says it could be a reasonable pattern.
I didn't focus much on the White Sox in the article, but as you guys mention, they are certainly one of the most conservative draft spenders. And their unwillingness to go over-slot is probably a big reason why they have a low ranked farm system. These changes won't impact the White Sox spending habits in the draft, that's for sure.
I hope you're right. That would be awesome, especially if all the other large market teams (and maybe a handful of the smaller ones) go that route -- say NYM, NYY, LAA, LAD, CHC, and maybe some of the worse-off mid-market teams.
Really nice article, Dustin. Well done!
Thank you!
How will teams be affected when they don't / can't sign their pick? Also, will you be writing how the draft choice compensation to teams losing free agents is different under this agreement?
"Further, if a team decides to forgo a selection—a high first-round pick, let’s say—that money ($5 million, for example) will be deducted from that team’s signing bonus pool."

Does this mean a team loses the slot money if they are unable to sign a player that was actually selected? If not, couldn't they draft someone they have no intention of signing and use that slot money elsewhere?

The most telling statement in this article that proves the draft should not have been an issue: "where $10-15 million buys an elite draft class, as opposed to the free-agent market, where it buys two years of Aaron Harang."
As fas as I understand it, yes, if a team fails to sign a player after they draft him, the slot value of that unsigned pick will be taken away from the team's signing bonus pool. So you can't take a player you have no intention of signing and use that money on other picks.
I personally believe there will be a huge talent loss to other sports as a direct result of this policy.
Yup. I have to wonder just how long it will last, either de jure (enough teams get annoyed with it to jettison it) or de facto (by defection from teams willing to pay the penalties).
I'm not sure how much talent will be lost to other sports, but it will definitely be there at some level. I know one prep player was quoted saying something along the lines of "I guess I'll be playing football," in response to the changes.

It'll definitely be interesting to see this all play out in June and July (the new signing deadline is in mid-July).
I'm OK with larger market cities having a little advantage. That's more fans getting to enjoy more success. If a weak market can't support a team, let's find a market that can. That said, I would be resistant to letting some well established baseball small markets die just due to a passing era of hard times. I would hate to lose Cinci, Cleveland, or Pittsburgh - or even Baltimore. Minnesota deserves to stay, too.
Won't the play be to draft college Srs. for a thousand bucks in the early rounds,then using that $$$ to sign guys that fall? As long as they sign a pick they get to keep the bonus room, right?

I was really hoping for a better defense than 'the greedy old people get to keep more of their money'. I guess none will be forthcoming.
That's possible, yes, but it's pretty risky using a high pick on a player who doesn't warrant close to slot money - who knows how many top prospects will drop and be available in later rounds.

Further, I'm guessing that kind of behavior will be frowned upon by MLB, but we will see.
Well, why couldn't you do it in reverse? Use your first pick or two on the top talent available, then draft late round talent in rounds 3-8, sign them to minimal bonuses and use the saved money in those rounds to ink the top 1 or 2 picks?