The Draft’s Biggest Flaw

The Major League domestic amateur draft takes place this week, kicking off with the first and second rounds on Thursday night, then continuing on with rounds 3-10 on Friday and rounds 11-40 on Saturday. We haven’t done a ton of draft preview stuff because that’s simply not our strength, and there are a lot of other places — Baseball America, most notably — who specialize in high quality draft coverage, and will give you all the information you need if you want to know who is going to be drafted where.

That doesn’t mean we don’t care about the draft, though. For the basics of the new draft system, you can check out Wendy Thurm’s first and second primers on how the setup works, and then J.D. Sussman asked whether or not we even need a draft to maintain competitive balance earlier this morning. Those pieces are worth reading.

I’m going to throw my hat into the ring of draft related articles, because I want to write about the order of picks in the 2013 first round, and because that selection order highlights the biggest problem with the current draft structure: the penalization of success.

Those who argue in favor of maintaining the draft for competitive balance reasons argue that, regardless of its other agendas, the draft does serve to push the best players to losing teams, equalizing the playing field to some degree. I agree that, overall, it is generally successful at helping redistribute talent to franchises who don’t have the same financial capabilities as some of the big market teams. However, the 2013 draft order shows that the system doesn’t always work towards that goal, and sometimes, the results of tying draft selection order to previous season winning percentage are just silly.

Here is the order of selections for the first 39 picks per Baseball America, which includes the first round and the compensation selections awarded to teams. The slot value for each pick is included for reference, and then I’ve also included the Forbes pre-season revenue estimates for each franchise as well.

Pick Team Reason Assigned Value Forbes Revenues
1 Astros Team Record $7,790,400 196M
2 Cubs Team Record $6,708,400 274M
3 Rockies Team Record $5,626,400 199M
4 Twins Team Record $4,544,400 214M
5 Indians Team Record $3,787,000 186M
6 Marlins Team Record $3,516,500 195M
7 Red Sox Team Record $3,246,000 336M
8 Royals Team Record $3,137,800 169M
9 Pirates For failure to sign Mark Appel $3,029,600 178M
10 Blue Jays Team Record $2,921,400 203M
11 Mets Team Record $2,840,300 232M
12 Mariners Team Record $2,759,100 215M
13 Padres Team Record $2,678,000 189M
14 Pirates Team Record $2,569,800 178M
15 Diamondbacks Team Record $2,434,500 195M
16 Phillies Team Record $2,299,300 279M
17 White Sox Team Record $2,164,000 216M
18 Dodgers Team Record $2,109,900 245M
19 Cardinals Team Record $2,055,800 239M
20 Tigers Team Record $2,001,700 238M
21 Rays Team Record $1,974,700 167M
22 Orioles Team Record $1,947,600 206M
23 Rangers Team Record $1,920,600 239M
24 Athletics Team Record $1,893,500 173M
25 Giants Team Record $1,866,500 262M
26 Yankees Team Record $1,839,400 471M
27 Reds Team Record $1,812,400 202M
28 Cardinals For loss of free agent Kyle Lohse $1,785,300 239M
29 Rays For loss of free agent B.J. Upton $1,758,300 167M
30 Rangers For loss of free agent Josh Hamilton $1,731,200 239M
31 Braves For loss of free agent Michael Bourn $1,704,200 225M
32 Yankees For loss of free agent Nick Swisher $1,677,100 471M
33 Yankees For loss of free agent Rafael Soriano $1,650,100 471M
34 Royals Competitive-balance lottery $1,623,000 169M
35 Marlins Competitive-balance lottery, from Pirates $1,587,700 195M
36 Diamondbacks Competitive-balance lottery $1,547,700 195M
37 Orioles Competitive-balance lottery $1,508,600 206M
38 Reds Competitive-balance lottery $1,470,500 202M
39 Tigers Competitive-balance lottery, from Marlins $1,433,400 238M

The team with the #2 pick in the draft is the Chicago Cubs. Forbes estimates their revenues at $274 million per year, and while Forbes’ estimates are almost certainly wrong, we don’t really care about the specific number as much as we do the relative distribution between franchises. That $274 million estimate ranks the Cubs #4 in all of baseball. By any definition of market size, revenue generation, or access to financial resources, the Cubs are a top tier MLB franchise. They pick second overall on Thursday.

Now, look at the #7 pick. The Boston Red Sox have a $336 million revenue estimate, second in baseball to only the Yankees. Again, by any kind of financial calculation you want to make, the Red Sox are a well off organization. They pick seventh, one spot ahead of the Kansas City Royals, who have estimated revenues almost exactly half of what Boston has access to.

We can keep going. The 11th pick belongs to the Mets, who have $232 million in estimated revenues. At #16, we have the Phillies, with $279 million in estimated revenues. The Dodgers ($245 million and owners with apparently no concern for the luxury tax) are picking 18th. The Tampa Bay Rays, the franchise with the lowest revenue estimate at $167 million, pick 21st. The A’s, who have the second lowest revenue estimate at $173 million, pick 24th.

That is, the Rays and Athletics do not pick in the 2013 draft until after Chicago, Boston, New York, Philadelphia, and Los Angeles have made their selections. Major League Baseball has steadily been pushing both the cities of Tampa and Oakland to provide new publicly funded ballparks for these, noting that their ability to compete will be compromise without access to increased revenues. And yet, in the draft, Tampa and Oakland are picking behind five of the wealthiest franchises in the entire sport.

When the prevailing argument for the draft is that it is intended to help distribute talent to low revenue teams, it is tough to argue that the current model is well designed when the two lowest revenue teams are both picking at the back end of the first round, behind five of the financial behemoths that they apparently can’t compete with. And, because of the new bonus pool structure, the A’s and Rays actually have less money to spend in the 2013 draft than the Yankees, who have the seventh largest bonus pool of any team because of the two compensatory picks they got for losing Nick Swisher and Rafael Soriano.

By bonus pool size, the Cubs are 2nd, the Yankees are 8th, the Mets are 10th, and the Red Sox are 12th. The Rays get basically the same overall amount to spend on their draft picks as the Rangers; the A’s get the same amount as the Phillies. If this is promoting competitive balance, then I’m the Prime Minster of England.

There’s no way around this simple fact: Tampa Bay and Oakland are being penalized for successfully building winning teams despite their disadvantages. The draft is taking away potential future value from those teams and redistributing it to the Cubs and Red Sox. That just doesn’t make any real sense.

Even if we accept that the league will never abolish the draft, so the basic structure of awarding players to teams in a sequential order is here to stay, we should at least consider changing the way in which those picks are distributed. MLB has already begun to hand out draft selections based on revenues with the competitive balance selections, and besides the selection that the Marlins traded away and now belongs to Detroit, you can see how those picks actually make some sense; extra selections were given to Kansas City, Pittsburgh, Arizona, Baltimore, Cincinnati, and Miami. None of those teams were estimated to bring in more than $206 million in revenues.

If we can hand out extra picks based on team revenues in the name of competitive balance, why not hand out all picks based on a calculation that gets us to a similar point? MLB clearly has access to more and better information than Forbes, so they wouldn’t need to settle for just picking something as simple as a revenue estimate, but could develop a system that ensures that the lowest revenue clubs always pick near the top of the draft while the higher revenue clubs always pick near the bottom.

Maybe you base it on a rolling average over multiple years so that there is no incentive to reduce revenues to raise your spot in the draft order. Maybe you setup a system of tiers, where draft order can fluctuate based on winning percentage but teams have a net that they cannot escape. Or maybe you just eliminate compensation picks being tied to free agent signings and start giving the lowest revenue teams some picks of real value near the top of the first round.

There are a lot of different ways to modify the current system. What I do know is this: the Yankees don’t need to be compensated for losing free agents, and the Cubs don’t need to be compensated for being terrible. There’s no reason to punish Tampa Bay or Oakland for putting a winning team on the field, and the league shouldn’t be too interested in sending premium prospects to Boston and Chicago as rewards for wasting giant piles of cash. The sport has done a lot of work to promote parity and create a more level playing field than there has in the past, but on Thursday night, the first round of the draft is going to be a great example of why this particular system needs some upgrades.

We hoped you liked reading The Draft’s Biggest Flaw by Dave Cameron!

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Dave is the Managing Editor of FanGraphs.

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Brilliant.