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Let’s start with the notion that it’d probably be for the best if free agent compensation, and for that matter, the draft itself, were eliminated entirely. Let’s then accept the notion that the latter might not ever happen, and the former is at minimum a major bargaining chip in any CBA talks.

What seems likely to happen, if anything, is some modification to the existing system of compensation for signing and/or losing free agents, because the current system isn’t tenable. On the one hand, it’s working in ownership’s favor on the whole: Suppressing salaries is the name of the game when it comes to free agent compensation, and we’ve seen Howie Kendrick and Dexter Fowler settle for below-market deals to return to the team that wouldn’t lose a draft pick by signing them. While someone gets left out in the cold every year, we’ve seen Diamondbacks’ GM Dave Stewart admit that the Diamondbacks were reluctant to give up their second pick (37th overall at the time), even if they were getting a major-league upgrade in the process. This process seemed to repeat itself in Baltimore with Fowler.

Contrary to conventional wisdom, it appears that clubs are less likely to punt on a given draft by signing multiple QO’d players and absorbing the losses of several rounds of picks than to space out those losses over several years, deciding when and where to lose a first-round pick. It appears, based on their actions and words, that clubs are intensely valuing not just the picks that they speak of but, more accurately, the slot money associated with those picks.

Prior to the implementation of draft pool limits for the first 10 rounds, teams wouldn’t mind losing their first-round pick (or beyond) because they knew they could leverage the money they would have spent on that pick for a player who was dropping for signability purposes. It was something of a safety net, allowing them to recoup some value from the lost pick, while still taking a hit on when they could make that selection. It was a system that worked well enough, until small-market teams argued it gave the larger clubs an advantage—they had more money to spend in general, and could flex that advantage in both the free agent market and in the draft. Thus draft pools were formed, giving teams at the top of the draft a significant advantage based on the draft and international bonus pool allotments, regardless of their market size. Not only do teams at the top of the draft get access to more premium talent, but they get outsized slot allotments that they can use to spread to their later picks, signing more players for over-slot money, as we’ve seen the Astros do more than once.

So, if we accept that free agency will be tied to the draft*, the question becomes how to alter the compensation so that it doesn’t adversely affect the Fowlers, Kendricks, Gallardos, and Desmonds, but still allows small-market teams to recoup some value from losing free agents to large-market organizations, since this is the line that owners use to justify such a connection in the first place.

*This is not something we should accept and not fight against, so much as something we’re accepting as a premise for what follows.

Option 1: Rather than eliminate both the pick and the slot value it carries with it when signing a QO’d free agent, eliminate only the pick.

Rationale: This harkens back to the pre-pool era where there wasn’t a limit, but still plays within the current bounds of the draft system. While teams will lose an opportunity to draft the most premium players in the draft, they’ll still have the full allotment that the original slot values awarded them to spend when they do get to pick. This limits the incentive to pass on current free agents because the loss from signing a QO’d player is a relative pin-prick.

Option 2: Don’t eliminate draft picks at all, but instead add picks to the supplemental round for the team that loses a player.

Rationale: In this scenario, we drop the loss of first-round draft picks, which again allows teams signing QO’d players to be a little more aggressive in the free agent market without harming their long-term futures. It also pumps up the draft pools for the teams that are losing said players by giving them picks between the first and second rounds, providing them a small but real benefit heading into the draft.

Option 3: Determine a set amount of money to be added to draft pools for each QO’d free agent lost by a particular team. This would not be deducted from the signing team’s budget, but only added to the team that has lost a QO’d free agent.

Rationale: Unlike prior options, nothing in the draft order changes in any capacity. Similar to previous options, the clubs that are losing a QO’s free agent would receive a benefit to their draft pool, allowing them to pursue premium talent.

None of these options represent a panacea. The connection between free agency and the draft need not exist in this manner, but it does, and if it’s going to remain in some capacity, limiting its deleterious effect on existing free agents while adding money to the draft process that could enrich draftees seems like a reasonable goal if it’s going to change.

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Phillies113
2/26
Something has to change. The fact that Fowler was unsigned for as long as he was, and that Ian Desmond is still unsigned, all because of the fear of losing draft picks, is crazy. It also seems, to me, insulting to the player. The team is basically saying they'd rather take a risk and invest in the time and development of an unknown prospect rather than bring in a player with a proven track record. For what, to save a few bucks? Please.

I think Option 2 would be the more likely choice here, given the current environment where every team values draft picks so highly. The signing team gets a free agent, doesn't lose a pick, AND the players' previous team* gets a pick. Everyone wins!

*unless that player was traded mid season during his contract year
vic19x
2/27
I am not suggesting I agree with the current system, but the one thing that it does do is force teams to fully consider the cost of signing FAs. It's not just about the money. Guys like Desmond are perhaps over-valuing themselves just because they are veterans. I can't blame a team, especially in this age of advanced metrics, to realize they're actually better off with a young, controllable (aka "inexpensive") alternative.

That said, what's comical is the the QO itself. Does anyone really believe that Grienke would be as valuable on a one-year contract as Ian Desmond? (not picking on him, just making a point). In many cases, like Grienke, the spirit of the QO is violated because $15 mil is about half his per season value. Duh, Grienke is going to decline. Desmond and Fowler (in hindsight) would have been better off accepting their QOs because the teams' costs of money plus the lost draft pick was too high for what they'd get in return. Fowler was actually lucky to get the O's offer but Desmond still languishes.

In a nutshell, Craig (I had typed Kevin :-)) should have also offered Option 4: sliding scale for compensation when teams offering QOs........they're not all equal.

Behemoth
2/26
I still think the owners see the QO system working more or less as planned. It's designed to depreciate the value of free agents, which is exactly what is happening.
TheArtfulDodger
2/26
I certainly agree that the owners see this as working, to an extent. It's absolutely suppressing salaries, as intended. That said, it's not working for the health of MLB. We shouldn't be in a situation where the White Sox, Rangers, Angels, and Cardinals, among other teams hardly even make an attempt for someone like Fowler. He fits most of those teams like a glove, and many of them are only looking at late first round picks.
swarmee
2/29
This is correct. The system is working exactly as designed. If agents and fringe players are too stupid and refuse their $15.3 MILLION qualifying offer, they get what they deserve. I don't see any reason for needing to correct this in a future CBA.
I think this year, there is a glut of middle infield prospects that are ready to take over. So players like Desmond who barely represent an upgrade on most teams, are worth less because there are so many MI prospects that can take his place. CI is the place right now if you want to make money in free agency. There just aren't that many MLB ready 1B/3B players to step in.
kenraty
2/26
Should the team losing the free agent( and gaining a pick ) also receive a bump in their signing budget ( or whatever it's called ), or is this already the case?
kenraty
2/26
Oops. Wrote this before I read Option 3.
TheArtfulDodger
2/26
well, adding picks to the team would necessarily increase their pools, since picks come with slots attached.
GBSimons
2/26
Another change I'd like to see - if the QO does stay, which I'd rather it not - is for the QO contract value to be the average of the top 75 or 100 players, not the top 125. This should increase the contract value significantly, decreasing the likelihood of players like Fowler and Desmond receiving a QO. Essentially, only the very best players - those who are all but guaranteed big, long-term deals (Greinke, Heyward, etc.) would receive QOs.
tearecrules
2/26
Isn't this the first season with the QO where players accepted it instead of getting contracts from other teams or resigning for a multi-year deal? That might lead to teams reevaluating who they offer a QO to. I know the rumor in the Astros case is they didn't anticipate Colby Rasmus taking the QO (since no one did before) and him doing so changed their plan for the offseason.

Teams might give you what you want (only the best players being offered the QO) without MLB needing to change the CBA because they players changed the league's assumptions about what players are willing to take a one-year payout.
TheArtfulDodger
2/26
But players are turning down the QO because they want longer-term security than a one-year deal at the average of the top 125 players. It's always going to penalize a class of players when it doesn't need to do so.

So yes, offering it to fewer players would be better. But I think each of the above options achieves the spirit of the compensation (in terms of rewarding teams that are losing players, not the suppressing salary part) equally or better.
tearecrules
2/26
Gotcha. FWIW I think I like your option 3 the best.

I'm not sure that avoiding "punishing" a class of player is something that needs to be done, or even can be. Some class of player is going to be "punished" regardless. Maybe "very good players but not the best" is a class that shouldn't be (and I'd agree).

IRT a point you made in a response to an earlier comment is it a case of teams vastly over-estimating the value of late first round picks and their associated slot money vs what a player like Fowler could deliver? Don't get me wrong, I'm glad to see the Rangers and Angels pass on an opportunity to improve their team this year for a lotto ticket that might pay off in 5.
TheArtfulDodger
2/26
Yeah, ultimately someone always gets left out in the cold, but I think in this scenario it seems a class of players is designed to? Maybe that's being too dramatic about it, but it boggles my mind that Kendrick and Fowler signed the deals they did.

I think it is a case of teams overvaluing the late first round picks, but also that it's not merely the picks themselves, but the slots associated with them. If you have a late first round pick and you give it up, you have *very* little money to work with the entire draft, assuming you don't have supplemental or compensation round A picks. This means you can't go over slot on someone later in the draft and so on.

So for teams to give up their first two rounds (AZ, BAL as mentioned), I think they get in the mindset that they're not just giving up picks, but giving up the whole draft, and they want to do *something* in the draft, so they'll make their one big move, and still get to play the game, so to speak. I think that logic extends to late first round pick teams as well.

A thing I wanted to work in but didn't mention is that the QO fails to me on another ground, and I think this goes to your point about more teams being unwilling to offer it going forward. FA Compensation was designed for two things: suppressing player salary and helping teams that generated homegrown stars get something when said stars left for the big markets. If there's more risk that these players are accepting the QO, then the big market teams are the only ones who are going to offer them the QO, because smaller markets could have their entire offseasons derailed by someone accepting it. Basically, it's a bigger risk for smaller markets to offer, so they won't, and those teams will be left in the cold, while bigger markets can absorb that risk/payroll.

I'm fine with that on the one hand, because I don't care for compensation to exist in any capacity, but I think it goes against the spirit of the compensation in the first place.
tearecrules
2/26
I hadn't thought of the implication for it on big vs small market teams and that's a really good point.

The more I think about it the more I like it and agree that a possible remedy would be teams keep some portion of the lost draft pick's bonus pool. At least if there has to be free agent compensation.
JeffBlogwell
2/26
Let's dispell with this fiction that the draft doesn't know what it's doing. It knows exactly what it's doing.
TheArtfulDodger
2/26
I don't think that fiction was present anywhere in this article
ResumeMan
3/01
Political reference recognition fail...
TheArtfulDodger
3/01
Oh god dammit. I've been owned.
mblthd
2/26
Is the draft barely a sentient being?
jsdspud
2/26
I like option 3 the best. I think that it gives the right balance of reward to the team that loses the player while not penalizing the signing team.

Under Option 1, the signing team can make a side deal with a potential draft pick that causes him to fall to their next pick. I still believe that Josh Bell had a deal with the Tigers who didn't pick until round 3.

Under Option 2, there will be too many picks added between rounds 1 and 2. In 2011, the Pirates picked 1st (Cole) then didn't get to pick until 61 (Josh Bell) because so many picks were added. I believe that the Red Sox had 4 or 5 picks in between. The worst teams should have the opportunity to pick the best players.

Craig, I take exception to your comment that the small market teams complained about draft spending. A member of the Red Sox FO made the comment that if they knew that Josh Bell would sign, they would have drafted him.
TheArtfulDodger
2/26
I honestly don't understand what you're taking exception to. Josh Bell was a unique situation where he asked not to be drafted by every team due to a commitment to school. Not because he was saying "I want 5 million dollars."
TheArtfulDodger
2/26
I'd also note that 2011 was wonky in general to look at trends because all the teams knew life as they knew it would be changing, so massive draft spending occurred in advance. And certainly some smaller markets *cough*KC*cough* were at the top of draft spending prior to that. Some of that was picking at the top of the market but some was recognizing a source of cheap future talent if they hit right.

But certainly there *were* smaller markets that were upset with how the big markets played the draft, because even if they themselves pushed their spending up, it was just another area they couldn't compete overall.
grover
2/26
I don't understand the worry for the Desmonds, Kendricks, etc. They were all offered guaranteed contracts worth approximately $15.8 million... and they said "No". They and their agents believed the marketplace would offer something better, most likely in dollars and years.

They were wrong.

The current system isn't the problem. The rules in free agency are known to all. The problem is these few players screwed up and over-estimated their worth. If Baltimore doesn't want to give up a pick while giving Fowler an opt-out that's their choice and I don't understand why the rules should be changed to eliminate them having to make a choice.
TheArtfulDodger
2/26
Certainly it is Baltimore's choice to do that. But by most metrics that aim to understand what it is players are worth, these players are worth somewhere in the vein of $16M+ per year, using an $8M per win type of valuation.

I'm not proponent using $/Win and calling it a day, but the teams discussed above are all at the point on the win curve where each additional win would be worth more than it would to the market at large. Given these parameters, the expectation would be that players of this ilk would, not necessarily get that type of money per annum, because multi-year deals involve a lot of risk being taken on by teams, but certainly something in the vein of a multiyear deal for slightly less that $/Win valuation. Given that multiple teams should have been interested in these players around those valuations, it's reasonable to assume competition would drive their prices upwards.

Again, none of this is certain to take place, but reasonably expected, given the age and track records of the players mentioned. If their markets are being inappropriately impacted by the value being placed on the draft picks (which quotes support), then it's reasonable to seek a remedy to that imbalanced impact. You can say they would have made close to their valuation by accepting the QO, but the QO is a one-year offer which is a reduction in value in and of itself.
grover
2/26
Their markets aren't being "inappropriately impacted". The players have a sense of what they're worth and the teams mentioned disagree. Teams have been placing a higher and higher value on acquiring young, cost-controlled talent and the factoring in of draft pick loss has been in play for years. When a team like the Mets gamble on signing Michael Cuddyer to a two year deal and give up a draft pick they get lambasted. I don't recall much discussion about how compensation rules needed to be amended to help out the Mets.

Why can't these players, who turned down guaranteed money to pursue "better" offers that may have never existed, get lambasted for their decisions? Why does there need to be a rule change that eliminates the need for a team to balance its short-term and long-term goals?
TheArtfulDodger
2/26
Lots of players get lambasted for their decisions. Remember Nelson Cruz originally wanting $75M before he settled for $8M? Remember Ervin Santana wanting $100M? Lots of players miscalculate the market because they want too much.

There were no outlandish deals on record for Kendrick or Fowler. They merely never saw a market materialize, which clubs have admitted is at least partially due to the impact of losing draft picks.

The connection between FA and draft is tenuous at best, so weakening the link so that players are offered contracts based on their value seems like a positive step in that direction. I'm unclear as to why it makes you so upset to move towards that.
grover
2/26
The players were offered contracts based on their perceived value from their original clubs. As it turns out, that was the high point of their markets. They chose not to accept the money offered.

Compensation didn't do much to hinder Greinke, Heyward or other high-end free agents from getting top dollar contracts. So the argument that there needs to be an overhaul of the rules to cater to a sub-set of players who over-rated their value strikes me as a waste of time.

I want teams to face the choice of losing cheap assets (draft picks) if they're going to spend tens if not hundreds of millions on free agent signings. I find it fascinating that the Yankees have been such a non-factor in the free agent market this offseason. I believe this is simply a cycle; I think that teams will gradually shift back to being more spendthrift with their young talent and draft picks. And I don't support any of the options you suggest because you don't support them either.

I feel this way because I don't see how a small market team is supposed to compete with the Yankees or Dodgers in being able to afford even mid-tier FAs like Fowler or Kendrick if there isn't something, anything giving big market teams pause. Right now that's the loss of a draft pick.

If you really want to sever any link between FA and the draft that impacts signings than institute a salary cap. Have the cap cover MLB payroll and signing bonuses for both the draft and international markets. Adopt a system like the NFL uses for compensation picks when teams lose players via FA. Advocate a real change rather than argue that guys who had $15.8 million deals in hand are somehow getting the short end of the stick.

TheArtfulDodger
2/26
Small-market teams are the ones who are negatively impacted by this system, because A) they're the teams that would sign guys like Fowler or Kendrick, but now they have to give up a pick (ostensibly their lifeblood) to do so and B) because they're the ones most severely impacted when deciding whether to extend someone a QO, because they could see 20%+ of their budget tied up in one player, which can be harmful almost no matter who the player is. If that holds, the big market teams are the ones able to risk offering the QO to non-elite but still high quality players, and thus benefit more from the draft-pick compensation. Acting like this is doing a favor to smaller markets is to ignore the effects we've seen it have.

I think you've opted to completely misinterpret what I've written above and in the comments in response to you, nor do I think you make any logical points. It's fine to want what you want, but I don't see anything compelling that would make anyone else want this too.

I'm glad you believe a lot of those things, but I don't find them grounded in fact or reason. You can choose to believe things are as black and white as you say they are, or you can accept that the draft picks are being valued at a significantly greater cost than you are otherwise willing to admit, because teams are behaving in exactly that way. In fact, General Managers are *admitting* that they're more valuable that you seem to think they are.
grover
2/27
I'm saying draft pick loss is the primary thing slowing down big market teams from going on FA shopping sprees; how you translate that into me somehow undervaluing them is preposterous. What I've argued is that the potential loss of a draft pick is part of how teams are factoring the cost of signing any QO'd free agent and that those players and their agents need to consider that fact when they try to determine what kind of market awaits them. If they don't than THAT is a decision not based on fact or reason.

Fangraphs did a crowdsourcing project on the Top 82 free agents for this offseason; Fowler was projected to get a 4 year/$56 million deal while Kendrick was projected for 4 years/$52 million. I don't know what these two players were actually asking for but lets use these numbers as a neutral example for discussing free agency and small market teams.

I'm an A's fan. I've seen Oakland give up 1st round picks to sign Esteban Loaiza and Mike Magnante... but the next time they sign a free agent to a multi-year deal worth $13 or $14 million AAV will be the first time they sign any player to a contract that expensive. I agree, losing the draft pick would be a factor in the decision making process for a team like Oakland but there is a far larger elephant in the room when discussing the viability of a small market team being able to afford a mid-tier FA signing.

Your B point is fair but that is part of the risk evaluation process a small market team has to make. I think some teams were caught off guard when their QO's were accepted this winter... and that was their fault. Call it the Yin to the Yang of players like Fowler and Kendrick not finding the robust markets they were expecting. (I like watching teams and players scramble when their plans go awry.) Big market teams are always going to have an easier time absorbing bad money contracts, be it signing a FA bust or having a QO unexpectedly accepted. This is a disparity that will only go away if a salary cap goes into affect.

I haven't misinterpreted what you've written. You see imperfections in the system and want to change them. I think the imperfections are fine. I think if there's going to be a push to change the system it should be on a grander scale.
TheArtfulDodger
2/27
Okay... as far as I can tell you're merely proving my point. If Kendrick and Fowler are worth $13/4M per year for 4 years, them settling for the deals they settled for (or even the reported Orioles deal for Baltimore) is a significant underpayment from the market. You're blaming this on the player, and to some extent that could be possible, but the point is that even the smaller market teams aren't offering something that can compete with $20M/2 year deal for Kendrick or $17M/2 year deal for Fowler. This is the point at which smaller markets should be jumping on those guys and they didn't. Instead they re-signed with their big market club.

You're saying the pick is the only thing stopping big market teams from gutting the FA market. I think you're not acknowledging the affect it has on smaller budget clubs in this exact situation (Baltimore and Arizona, on record as saying so, as examples).
gtgator
3/04
No, what you're failing to comprehend here is that the value a player brings is not the only cost an acquiring team incurs - and the players and their agents are to blame if they are failing to recognize this in cases such as Fowler's.

If a pick in the latter half of the first round is worth around $10MM (discounted net WAR of about 1.3 WAR for such picks), then it doesn't cost STL (for example) $8MM to sign Fowler for 1 year - it costs them $18MM. I'm sorry, but Fowler isn't an $18MM/year player. If he and his agent think he is, well then they're nuts and deserve having to settle for "only" $13MM here.

Of course, if a team can spread that $10MM draft pick cost over multiple years, then the deal is more palatable. BAL tried to do that with their 3 year, $35MM contract (or 3 years at $45MM total cost) - $15MM year (amazingly close to the $14MM/year projection). Fowler turned them down because of no opt-out (which, again, pushes the $10MM cost all into 2016). No team would accept that. Again, the player and his agent overvalued the player which is a piss-poor reason to try to "fix" the system.

Now is it "fair" that Fowler should have to surrender some of his contract value to account for the draft pick cost? Maybe not. But he could have avoided that by accepting the $15.8MM contract - he was never forced into turning down that offer. He chose to do so because he thought he was worth more. Why should we fix a system because he and his agent misjudged his value? The moment the QO was rejected, the draft pick cost came into play.

As for "long-term security" of a multi-year contract? Please - if a player who has made millions before FA and is guaranteed another $15.8MM for 1 year is unable to have a secure long-term future, he needs a better financial manager. Plus, I seriosuly doubt Fowler is going to go from $15.8MM in 2016 to $0 in 2017.

In the end, I also think this is a mountain out of a mole hill. We're talking less than a handful of players potentially being harmed here. This is no different than the last system (where, for example, Type A RP were just as screwed). At least here, the player can avoid the consequences by simply accepting the QO.
oldbopper
2/27
If a win is valued at $8M it would appear that every 2.5 win player is worth in the neighborhood of $20 million per year and the top stars that are past arbitration are worth $50-70M per year. I simply do not agree with that figure. The numbers do not add up. Revenue is exploding but I doubt if there are any teams that can have a payroll of $500M with $200M of that tied up in 3 or 4 players. My question is how was the value of each win determined?
TheArtfulDodger
2/27
Long term deals take discounts on per annum values into account because of the risk taken on by the team.

There have been numerous looks into the matter from different angles in terms of how to calculate it.

Dave Cameron did it for 2014 here:

http://www.fangraphs.com/blogs/the-cost-of-a-win-in-the-2014-off-season/

Lewie Pollis did it at Beyond the Boxscore here:

http://www.beyondtheboxscore.com/2013/10/15/4818740/how-much-does-a-win-really-cost

and Matt Swartz did a look that covered the previous two and added some variables to his own here:

http://www.hardballtimes.com/methodology-and-calculations-of-dollars-per-war/

He came up with $7.7/WAR and that was for 2014. $8M/win might be conservative given inflation. It might be accurate. I'm not tied to any specific figure, really. If it's $7M rather than $8M so be it. But the broader point still holds.
slamotto
2/26
Perhaps the system could be tweaked such that qualifying player didn't have to accept the QO right away, but instead they could accept the QO at any time up until March 1. That would allow a player to test the market, with the QO in their back pocket. If they don't find an offer to their liking, they can then accept the QO. Teams may be less willing to extend the QO if they know they could be in limbo for most of the winter. At least it would save the player the indignation of signing for less than what they were originally offered.
vic19x
2/27
Teams would never want to wait until March 1. They pretty much want a set roster coming to spring training.

I can see a later date that what is current, but it has to be considerably earlier than March 1.
theduke11
3/01
Fowler and Desmond could have waited a couple more months and signed mid-season with no comp attached.

If they really think the market is massively overvaluing picks, they should have waited the QO time limit out and they would have been much better off.

I don't understand why more players don't do that. Its easy to stay in shape in an independent league and then come back to a team that has had an injury and really needs you.