Did a Steinbrenner Write the New CBA?

While baseball fans have been able to celebrate the fact that their sport is enjoying a long run of labor peace, and the negotiation of the new Collective Bargaining Agreement hasn’t threatened any on-the-field action or turned acrimonious in any way, the release of details of the new CBA show that this labor peace does not come without significant cost to fans of teams in markets other than New York.

The details of the new regulations on the draft and international free agents were first reported by Jeff Passan on Twitter. As laid out by Passan, the league is now going to enforce the following changes:

International Free Agents

$2.9 million cap on total spending for all 30 teams for 2012.

Beginning in 2013, pool of money available to sign talent will be determined based on Major League team’s winning percentage. Passan notes that spread will be something like $5 million for worst team, $1.8 million for best team.

Also beginning in 2013, teams will be able to “trade” money from their allocations, with no team allowed to acquire more than 50% of their original total. So, while it will be possible to slightly expand your international signing budget, it will require surrendering talent in order to get money from another team’s allocation.

Domestic Draft

Tax on over-slot signings – 75% tax on up signings up to 5% over recommendation, 75% tax and loss of first round pick for signings from 5.1% to 10% over recommendation, 100% tax and loss of first and second round picks for signing 10.1 to 15% over recommendation, and finally, a 100% tax and loss of two first round picks for signing of greater than 15% over recommendation. These penalties are so severe that they essentially eliminate any benefit a team would get from signing a player for more than the slot recommendation, so they equate to de facto hard slotting. Teams no longer have the ability to spend heavily to convince players who were strongly committed to colleges (or other sports) to forego those options and begin a career as a professional.

The institution of a competitive balance lottery that will assign six picks between 1st and 2nd round to teams with 10 lowest revenues and in smallest markets – the odds of receiving a pick will be based on a team’s winning percentage. A similar lottery takes place after the 2nd round, but all teams are eligible except those who received a pick in the first lottery.

The Effects

While the lottery for extra picks is designed to give teams with smaller payrolls an extra draft pick each year, the value of that pick pales in comparison to those teams prior ability to compete for young players by allocating their resources more heavily to those areas. Here’s the list of team spending on the draft in 2011 – you’ll notice the Pirates ($17 million), Nationals ($15 million), Royals ($14 million) at the top, followed closely by the Diamondbacks ($12 million), and then the Rays, Mariners, Padres, and Blue Jays who all spent $11 million. Thanks to hard slotting, this strategy is no longer viable, and these low-revenue teams who had been focusing heavily on acquiring talent through the draft will now have to find another way to add talent to their organizations.

Likewise, the competitive advantage of scouting internationally has essentially been demolished. If you look at the list of top international bonuses paid out over the years, you’ll notice a lot of smaller revenue clubs investing heavily in these markets. While the Yankees have enjoyed significant benefits from higher Major League payrolls over the years, they haven’t been as big of spenders internationally, and small-to-mid-market teams have been able to increase their talent bases by pursuing the top 16-year-olds available in foreign countries.

With a flat cap for the upcoming year, any advantage these teams have has been completely removed, and teams will now all be submitting remarkably similar offers to the best international talents, causing these players to choose which organization to join based on factors beyond signing bonus. No longer will teams be able to create systematic advantages in international scouting, as they simply won’t have the resources available to bring in more than one or two additional significant talents per year.

Overall, these new rules will work to dramatically decrease the overall spending levels of teams on new talent, but will do so at the cost of allowing small to mid market teams to pursue strategies that focus on developing talent internally. The lotteries simply won’t make up for the inability to increase spending on talent acquisition, flattening the differences between organizations and making winning at the Major League level more about acquiring veterans and less about acquiring amateurs.

These rules are fantastic for big market teams who can maximize the advantage of their revenue streams by spending on Major League talent. These rules are absolutely terrible for teams who cannot afford to build teams by paying the market rate for those same players.

Congratulations, Major League Baseball, you just screwed every team that doesn’t have the capability of running out a $100+ million payroll, and you just made winning a lot more about Major League payroll size than anything else. In the name of cost reduction, you just made it even less likely that teams like Tampa Bay or Oakland will be able to build long term winners. This agreement will set competitive balance back significantly, and now the best hope is that the damage is so obvious that these changes get repealed as quickly as possible.

Dave is the Managing Editor of FanGraphs.

Newest Most Voted
Inline Feedbacks
View all comments
12 years ago

What’s the point of rooting for the Nats, Rays, Pirates etc. now that they have no shot of coming up with ways to compete with the Yankees and Red Sox?

12 years ago
Reply to  David

Nats can actually support a big payroll, I wouldnt include them in this list.

12 years ago
Reply to  David

Now that they have no shot? Am I missing how they have had a chance in recent years, or are the Pirates still riding an 18 year playoff drought?

12 years ago
Reply to  Brendan

The Pirates had a chance this year, thank you very much 😡

But looking at the bigger picture, Pirates GM Neil Huntington inherited a barren farm system in 2007, and proceeded to rebuild by trading any player of value for prospects, and spending more $ than any other team in baseball on the draft (including many over-slot bonuses to later round picks) from 2008-2011. Huntington’s evaluation of ML talent seems to be spotty at best, but at least there is a coherent plan to acquire as much talent as possible.

But thanks to the new CBA, future teams will have to spend like the Pirates under Huntington’s predecessor, Dave Littlefield, who only drafted players that would sign for slot (or close to it) and instead plowed money into useless free agents like Jeromy Burnitz while trading for Matt Morris and his bloated contract.

12 years ago
Reply to  David

This is entirely wrong. If it is in the best interest of the Yankees/Red Sox to spend a lot of money on amateur players, they will outspend the Pirates and the Royals. This limits their ability to do that. This is GOOD for small market teams and BAD for big market teams.

12 years ago
Reply to  joe

Also, when you compare total expenditure, it would be interesting to look at spend after the first round. Those numbers are inflated by the high priced picks at the very top of the draft. The Red Sox and Yankees aren’t competing for those players at all. If you look at money spent after the first round, I’m certain you’ll see that the Red Sox have been flexing their financial muscle in the draft for many years now. This limits their ability to do that and makes it a more even playing field for small market teams.