Baseball Prospectus Needs Your Help! Check out our call for contributors!

Between the Stephen Strasburg factor, prime-time coverage on the MLB Network, and just a general growth in interest, the 2009 draft was quite easily the most publicized baseball draft ever. As such, the August 15th signing deadline received the most publicity ever, and more people were exposed to a system quite unlike what those familiar with football and basketball’s talent procurement systems expect.

Following deadline day, there were a flurry of articles concerning baseball’s draft process, with the two most words attached to it being “broke” and “fix.” I’ve given a lot of thought to this, and here’s where I’ve ended up: the draft isn’t broken. If you disagree with that sentiment, then you have to admit that if one wants to fix it, they shouldn’t hire the same contractor who did the job last time.

Let’s start with the second half of that statement first. When talking to an agent about the draft for a series of pre-deadline pieces on the draft, one quote stuck with me. “It’s an imperfect system, but trying to make it perfect is just going to screw it up more,” said one agent, and he has the track record to prove it.

Prior to the 2007 draft, Major League Baseball, tired of the season-long holdouts perpetrated by players like Max Scherzer, instituted a new signing deadline of August 15th. It proved to be a myopic gesture, solving one problem while creating several more. In baseball’s first year with the new deadline, several players held out until the deadline day itself. The following year, even more players followed suit, realizing that those that waited ended up getting the most money. This year, the number of holdouts grew significantly once again: in 2006, there were 26 slot-busting bonuses in rounds two through ten, and in 2007, there were 32. With the lessons the players and agents learned from that year, that number increased to 90 this year.

It’s important to talk about rounds two through ten. While people are focused on the kind of money players like Strasburg, Dustin Ackley, and Donavan Tate are going to get, that’s not where “the problem” is. The problem is with the later picks. From 2006-2009, the amount of money spent on bonuses for players from round one through five has risen just 19.6 percent, obviously stronger than our economy, but when measured solely against the modern draft, a fairly moderate rate of inflation. But in rounds six through ten there has been a 65 percent increase.

What happened? Well, first off a few teams started taking those “signability” guys, and then other teams got smart and realized that the teams doing that were the teams adding the most talent to their system. So that started more teams doing it, and more teams than ever joined that club this year. The two most aggressive teams with this late round big-spending strategy over the past two years have been the Royals and the Pirates. Do you really still want to pull a big-market, small-market argument with me?

So the lesson here is that baseball tried to “fix” things, but the holdout problem they tried to correct in actuality became much worse.

But are things actually broken, or are they simply different? People scream about the necessity for a system that provides a more equitable distribution of talent, but that perpetuates the myth that the primary purpose of a draft is to provide that equity. While that was consideration when big-league officials first designed the draft in 1964, of greater concern were the amateur bonuses that were spiraling out of control, highlighted by the Angels‘ payment of $200,000 for University of Wisconsin outfielder Rick Reichardt. And for the most part, the system worked, as no draft pick would exceed that mark until 1980.

Still, even with the current system of seven-figure bonuses extending well into the later rounds, the system still works by limiting a players ability to negotiate with one team. The so-called loophole picks of 1996 (including Bobby Seay and Travis Lee, among others) proved that as true free agents these players were worth eight to ten times what they were signing for, and that was before the laughable slot system was implemented by MLB. For all the wailing and gnashing of teeth, the fact remains that draft picks are still the biggest bargain in the business, which is why more and more teams are following suit and spending money not only on their first-round pick, but well beyond.

This brings us to the argument that the draft is broken. The fact that teams are the ones claiming such problems borders on comical. The teams are the ones writing the checks, and then go out and complain about their size? It’s the equivalent of giving a toy to a five-year-old kid, watching him throw it against a wall, run over it with a tricycle, let the dog chew on it for awhile and then complain that it doesn’t work anymore.

Teams that don’t like the way the draft works need to flip their way of thinking, much like the Pirates and Royals have begun to do, as well as many other teams, and make the draft work for them. The current draft system allows for the most flexibility and rewards those teams that do the best job in indentifying talent and properly valuing it. I don’t understand how anyone would want it any other way.

Thank you for reading

This is a free article. If you enjoyed it, consider subscribing to Baseball Prospectus. Subscriptions support ongoing public baseball research and analysis in an increasingly proprietary environment.

Subscribe now
You need to be logged in to comment. Login or Subscribe
Is there a solution to the 'holdout until the deadline' situation, or do you see that as something not in need of change?

Seems like the most likely change will be a hard slotting system like the NBA uses, is that likely? I'd think the players would offer that as a nice chip when they negotiate the next CBA.

What of trading picks? Is that likely to happen, or viewed as not particularly useful?
Kevin, thanks for laying out the problem with the usual insight and eloquence. You now have me wondering: what 'fixes' are those inside the industry whispering about, and is there anything on the horizon before the next CBA?

I don't see any corelation between the earlier deadline and an increase in signing amounts and you assume this without identifying any corelation either.

Yes, signing amounts have gone up over the past few years, but that is too be expected (and presumably organic). The rest of your article essentially lays out the case why this should be so for other teams not doing it, so I don't see why you would attribute this to the deadline. It's merely the teams catching up with the most savvy way of handling the current rules.
I'd like to see them reinstate the old signing deadline. It accomplishes two things that I like. First, it incentivizes most players to sign in a fairly timely fashion since days lost of player development hurt their underlying value. Under the current system, the hold out period is not long enough for the middle round picks to seriously damage their value by seeking more clams. Under the old deadline, picks gained no negotiating power unless they gave up an entire year of player development. An agent telling a player to hold out for 2 months is far more palatable than an agent suggesting a year long hold out. Most of these guys are probably very eager to start their career. The second thing I like is the practice of draft-and-follow which the new deadline has made defunct.

I think pick trading could be an interesting avenue to explore, although it might be quite complicated. I think it's something that would need to be experimented with and adjusted several times.
Pick trading would immediately solve the problem of teams picking early skipping obvious top talent to avoid having to pay for it.
A couple things:

1. Just because teams are doing their best to play the game by its present rules, doesn't mean they shouldn't be able to argue that the rules should be changed. I guess you're saying if the teams really had a problem with the size of the checks they'd write smaller ones--but if they did they suffer a competitive disadvantage to other teams that did. That's not to say a rules change is justified, but just that it's not hypicritical to argue for one just because you're doing your best to under the present rules.

2. Second, you seem to ignore the fact that the draft clearly has a leveling function--it is arranged to give the worst teams the first picks, after all. Whether or not it's a "myth" that it is supposed to have this function, it does, and you don't really address the argument that it should do even more leveling in favor of the poor and pathetic.

Any system that allows some to spend more and some to spend less will systematically favor the bigger spenders. That doesn't mean the system is bad--actually I think they have the mix about right--but don't pretend to be scandalized by the fact that the smaller spenders are going to try to eliminate as many opportunities for differing spending as possible. That's not 5-year-old behavior, that's rational ballclub behavior.
Can someone explain why Aaron Crow can still negotiate a deal with the Royals while the deadline has passed? BA said something about him heading to independent ball extends his ability to sign.
He's treated as a college senior, and thus has until a week before the 2010 draft to sign.
"...and then other teams got smart and realized that the teams doing that were the teams adding the most talent to their system. "

So what *should* be the purpose, adding the most talent or adding the BEST talent?

Using this year's Nats as an example, adding Strasburg was a no-brainer, but the 10th pick was another example of signability over talent hurting a team that can use all the BEST talent they can get.
But every team is constrained by payroll. While different teams allocate different amounts of resources to the draft, the Nats, having allocated $15m to one player, had to allocate less to the remaining players the draft. This means drafting "less" talent with later picks, but only because they drafted "more" talent with the #1 pick.
Correct me if I'm wrong but isn't the real problem with the current system that the commissioners office has a rule delaying the announcement of over-slot bonuses? Why not just get rid of that rule. The commissioners office has no real power to enforce it and teams are just ignoring it anyway. Why not just have a recommended slot (that doesn't decrease, which is something else causing problems) that is simply that. All the guys claiming they want "record setting" contracts aren't going to settle for slot regardless. Just get rid of the delay in announcement so teams can get the deal done and get the player playing.
Personally, as a Rangers fan, I'm disgusted with the draft. Why? because unlike for the 29 other teams in the league, the commissioners office apparantly did have leverage over the Rangers front office and kiboshed its negotiations with their number 1 pick. The kid (who's name I now forget) was asking for $6 million during the draft. The Rangers drafted him knowing that, and were probably prepared to pay it or at least close to it. They even went so far as to offer him $4 million. The problem is that the league, since they loaned the Rangers money for operating expenses (since Tom Hicks is going broke, apparantly) came back to the Rangers and told them, "You aren't offering him more than $2.3 million or I'm going to call in your note and you can forget about paying the REST of your players this seasnon." That's broken.

The problem isn't the draft, or the signing deadline. It's the whole "slotting" concept. Players will make what they deserve. If one guys says, "I'm a top 5 talent" and he's drafted in the 8th round, then its up to the team to decide, not just the player and certainly not the League.
This is beyond factually incorrect. Purke turned down the $4M offer.
"Beyond factually incorrect"? That's pretty strong language, considering that Ira agreed that the Rangers did offer $4M -- at one point. The question is whether that's the deal that was on the table at deadline time, or had the team, under pressure from the league, cut it back to $2.3M by then? I've seen that allegation made by people other than Ira. I'm not sure that I'd trust anyone who wasn't in the room at the time to give an honest answer on this one -- although Kevin, among your "sources," you may actually HAVE someone who was in the room then.

In any event, I'm not sure what this non-signing has to do with the contention that the system is or is not broken. If the alleged shenanigans did occur, it's not the fault of the draft system, although Rangers fans have a right to be upset with Hicks and/or MLB over the strong-arm tactics. If they did not, then the only thing apparent from this is that Purke's values are rather different from most people's -- which is not to say that they are wrong. Neither is suggestive, at least to me, of a systematic problem with the draft, nor is either evidence that the draft is working as well as it should. That Matt Purke didn't sign with Texas is just a fact, period.
I'm guessing "Tom Hicks going broke" had a lot more to do with it than MLB strong arming.
I'm not sure it's accurate to say the loophole picks "proved that as true free agents these players were worth eight to ten times what they were signing for." There's a decent argument to be made that the values of those players were inflated because of scarcity.

With teams competing at that point to sign only a few players, signing them became something of a zero-sum proposition. If no players were subject to the draft, yes it would almost certainly inflate bonuses from where they are, especially at the upper end of the range of talent. But as good as Stephen Strasburg is, I'm not sure he would get an 80-100 million dollar contract. Though he might well get the 50 million Boras was looking for.

However, as you point out, the issue is in later rounds. And lower down on the totem pole, where the talent distribution is flatter, I suspect players would become much more fungible. Teams might be less likely to bust their budget for the equivalent of a number 200 pick if they can easily turn their attention to a number 201 pick.

I believe it was Charley Finley who originally proposed that free agency involve no multi-year contracts, such that every year the market would be flooded and prices would be reduced. I suspect the same principal would be at play here.