The International Spending Limits Are Not Limits At All
Major League Baseball’s signing period for international prospects kicked off on Wednesday and will continue until June 15, 2015. Teams may sign players residing outside the United States, Canada and Puerto Rico who have or will turn 16 by September 1 of this year. Just a few years ago, teams were allowed to spend as much as they wanted to develop and sign international prospects. That all changed with the current collective bargaining agreement, which went into effect in 2012.
The CBA imposes bonus pool limits on international signings. The team with the worst winning percentage in the prior year receives the largest bonus pool for the next year. The team with the best winning percentage receives the smallest. The remaining 28 teams fall in between, again according to their winning percentage from the prior season. International players who are 23 years of age or older, and have played professional baseball for five or more years, are exempt from the bonus pool limits. Click here for the list of bonus pools by team, with the Houston Astros on top with $5,015,400 and the St. Louis Cardinals at the bottom with $1,866,300.
In additional to the bonus pools, MLB also assigns slot values for international prospects, even though there is no international draft. But the slot values are tradeable, and are therefore valuable for teams looking to spend more on international prospects than their assigned bonus pool would allow. A team can trade for up to 50% of its bonus pool, but it must trade for a specific slot value. For example, a team with a $4 million bonus pool can trade for up to $2 million in pool space, but it must receive in return specific slot values that add up to $2 million, or less. Click here for the list of 120 slot values assigned to each team. The Astros have the top slot value of $3,300,900 and the Cardinals have the lowest at $137,600.
Where there are bonus pools and slot values there are also penalties, which purport to incentivize teams to spend within their allotment. This year, teams face the following penalties:
- Any spending over the bonus pool allotment is taxed at 100%.
- A team that exceeds its bonus pool by more than 5% but less than 10% is prohibited from signing any international player the following year for more than $500,000.
- A team that exceeds its bonus pool by more than 10% but less than 15% percent is prohibited from signing any international player the following year for more than $300,000.
- A team that exceeds its bonus pool by more than 15% is prohibited from signing any international player for the following two years for more than $300,000.
Last year, the Chicago Cubs and the Texas Rangers spent more than $8 million on international amateur players, and thus exceeded their bonus pools by more than 15%. During the current signing period, those teams will be prohibited from signing any player for more than $250,000 (the penalty imposed in 2013). But both teams still have their bonus pools and slot values for this year and can trade any slot value that exceeds $250,000. The Cubs have slot values at $2,288,700, $458,000, $309,300, and $206,700. The Rangers have slot values at $543,000, $366,600, $247,600, and $158,300. That $2,288,700 Cubs slot value is going to be very difficult to trade, as only the Astros and the Marlins could add that much value to their bonus pools. The Rangers are in a much better position to trade their slot values.
Several teams are reportedly planning to spend well beyond their bonus pools during the current signing period. The New York Yankees, in particular, haven’t been shy about their plan to spend between $10 million and $12 million on international amateur talent between now and next June 15. With the 100% tax on any spending beyond their bonus pool of $2,193,100, the Yankees look prepared to spend up to $25 million this signing period. Baseball America reported in May (subscription req’d) that the Boston Red Sox, Tampa Bay Rays and Milwaukee Brewers also are expected to spend big money in the international market this year.
That report bore fruit on Wednesday. Ben Badler of Baseball America tweeted that the Red Sox had inked deals with two top prospects.
Red Sox will pay penalties, but they get the No. 1 pitcher available (Anderson Espinoza) and the top Dominican pitcher (Christopher Acosta).
— Ben Badler (@BenBadler) July 2, 2014
Two hours later, the Red Sox had exceeded their bonus pool.
Red Sox are already well over their bonus pool, add a Dominican shortstop for $300,000 (via @DPLBaseball): http://t.co/sKbZR70vcx — Ben Badler (@BenBadler) July 2, 2014
For big-market, well-financed teams like the Yankees and Red Sox, spending $20 million or so in the international amateur market looks like a smart investment, even if it restrains them from spending big in the next two years. A $20 million investment in future talent that would be under team control for a long time is a drop in the bucket for franchises valued at more than $2 billion. It’s certainly less than those teams pay annually for top free agents.
Even for the smaller-market teams like the Rays and the Brewers, the plan can make sense. Maybe those teams’ scouts view this year’s 16-year-old international talent as exceptional, and more likely to yield eventual major league players than the younger players who will be available in 2015 and 2016. But even if the talent pool gets better — even if the Yankees, Red Sox, Rays and Brewers miss out on an incredible talent next year — they’ll have stockpiled a lot of young talent.
In fact, once a team decides to exceed its bonus pool by more than 15%, there’s no reason other than the 100% overage tax not to spend and spend. The maximum penalty — no slot values greater than $300,000 for the next two seasons — has already been triggered. Might as well get as much good young talent as you can while you can. Just like the good ol’ days before 2012.
Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.
I’m happy with this, the more money kids in South America know they can get, the more kids baseball steals from futbol.
The problem with the “limits” is that they act less like a limit and more like an advantage that can be purchased by the richer teams.
Yes, the Yankees won’t be able to sign anyone really for 2015 and 2016. But over the 3 year period of 2014-2016, they’ll still probably have acquired the best talent of all 30 teams, because they’re just buying the field this year. Not to mention that all the prospects they sign in that 3 year period will have 2 years development by the end of the period.
Then they can do it all again in 2017.
They won’t be able to do it again in 2017. The next CBA will be in effect by then and this overspending virtually guarantees an international draft will be included in that CBA.
The current CBA expires in December 2016.
The 2014 International signing period is from July 2nd, 2014 to June 15th, 2015.
The 2015 International signing period is from July 2nd, 2015 to June 15th, 2016.
The 2016 International signing period is from July 2nd, 2015 to June 15th, 2017.
In other words look for there to be an International Draft in July 2017.
That’s good news. But the point remains that they’ll have the best haul of players over the next 3 year period, despite these ‘penalties’.
*2016 period is 2016 to 2017 (not 2015 to 2017 as I wrote)
How so Brendan? Any other team can do the exact same thing next season. Who is to say that team’s haul won’t be better than this year’s Yankees haul? Especially when they don’t have to outbid the biggest spender who will be limited to 300K per signing.
Because not every team can afford to spend $25M on IFAs.
Why can’t they Brendan? Every team certainly can spend that kind of money. The Reds for example just spent that amount on a Cuban.
I don’t think an international draft will happen. It would be awful for the players, especially the lower guys that sign for $10,000. The reason Latin American countries produce baseball players is teams spend like crazy for a lottery ticket. Teams don’t want it either. And the players Union doesn’t care because international picks would not be union members.
Try to find one person in baseball who supports an international draft. I bet there are close to 0
Wrong. Poor billionaire owners don’t want to have to bid in an open market for these prospects. Why plunk down $4 million to out-bid other teams when the owners can all collude to hold down spending?
A draft isn’t the only way to make sure deeply suffering American baseball team owners don’t have to actually bid against each other, but it’s a good way. And they can sell it as a tool to improve competitive balance!
JP is right – if the owners love anything, it’s holding down salary through collusion. The draft is one of the best tools for that.
Every single owner sans Yankees would welcome it.
An international draft would be one of the worst things that could be added to the current composition of MLB.
This whole system was set up to make an international draft (Cuba, Japan) excluded. I think that’s the way it should be. If not it’s going to be 8-10 teams rotating big spending every three years, with the big money teams getting the big talent. I don’t want to see Dominican academies downsized because it provides great instruction and other Opportunities such as education. I would like to see MLB commit to the growth of academies in the Dominican, Curraco, and other baseball hotbeds as well as Europe and Austraila, China, India in exchange for the MLB drafts. If we are going to suppress the stars earning value individually coming into tha system, lets provide more opportunity and grow the game globally with perks such as education. Let’s also revisit the scale of slot values if we are going to pack more “peas into a pod.”
Right, except you can only do it every other year.
You can’t do it every other year, spend over 15% this year and you can’t sign anyone for more than 300K next year and the year after.
Right, but the slots are tradeable, so you can only do it once every three years, and then the other two years still get decent value for the money you would have spent, just somewhere other than the international market. The tradeability makes the prohibition pretty much meaningless.
Incorrect, look at the Cubs they have a 2 million dollar slot that they likely aren’t going to be able to trade because a team can’t trade for more than 50% of their pool.
I would rather just get the best guy every year and then quit (unless you can get some more without the penalties.)
So would everyone else. But how does anyone know who the best 16 year old is? Even top rated college players can flame out. These guys are all crap shoots. You’re better off getting 10 every 3 years and hoping 2 or 3 become useful each period.
Super smart move by the Yankees. It’s a drop in the bucket and now they will give their farm system a huge boost. Even if it does not produce a lot of big league players, it only takes one Polanco and it’s all worth it. Plus they have some more assets in trades over the coming years. I don’t know why more teams don’t do it with the draft in 2017 basically a reality. I wonder if some other teams are going to buy big next year.
I think they also benefit by doing this early. As the likelihood of a draft increases, there may be more of a gold rush in the next few IFA signing periods with multiple teams looking for that last big score.
While a couple of teams are going over this period; most of these deals were likely in place before folks really knew what was going on (thought there were grumblings in the offseason that the Yankees were planning to do this).
I imagine it’s going to be hard for any one single team to secure 8-10 top guys going forward as more teams look to get talent before a draft is potentially implemented..
What’s the penalty for signing a player for more than 300K after going over the 15% threshold the previous year?. Can’t teams just continue to spend more than they’re “allowed”?
The league office has the power to void any contract that violates the CBA, which that certainly would.
“That $2,288,700 Cubs slot value is going to be very difficult to trade, as only the Astros and the Marlins could add that much value to their bonus pools.”
This limit could be easily avoided by effectively trading down, which would result in the other team adding less than the $2,288,700.
Also, where do the overage penalties go? Does MLB direct the money to a specific purpose?
So the international signing bonus cap is exactly what it was advertised to be and agreed to? Stop the presses.
Why not stay within spending limits for now and then blow past them on the last year of the CBA with the potential that the penalties will disappear if an international draft is implemented?
1- This year’s talent pool is unusually deep.
2- The Yankees need lots of young talent *now* not in 2016.
3- They’ll probably cook up another caper for the next two years.
Soft budget constraints always favor the richer teams. Those teams can ignore them when it suits their whims.
They don’t favor them as much as no budget constraints.
Seems like the advantage is going to go to the teams who overspent last year, and the teams that stick to their budgets now in order to spend like mad in 2016.
Of course, the teams probably know that, so there might be a lack of overspenders next year, allowing one or two teams to lock up the market.
given that the Yankees are always going to be waay down the list in the domestic draft, this was a wise move for them to hoover up the best available talent in a year where the talent was exceptional.
Twelve months ago the Rangers & Cubs obviously thought the 2013 class was exceptional, and the 2014 class not so much.
So why should anyone just assume that this year’s class is in fact exceptional? And by the by, if you go to John Sickels’ site and peruse the list of all-time biggest international bonuses (through 2009), you’ll find a real rogues’ gallery of failed ballplayers.
When it comes to 16-year-olds, it’s far far better to have the best scouts & instructors than the deepest pockets. Big cash is usually thrown at large hitters with present power, little glovemen who may or may not ever hit their weight, and pitchers who can top 92/93 MPH. And that’s fine. But quite often it’s the skinny kids without much pop (G. Polanco, O. Taveras) who wind up the better players — at a bargain price. (GP and OT signed for about $150K apiece; Hanley Ramirez signed for $20K if memory serves.)
“United States, Canada and Puerto Rico”
When did Puerto Rico stop being part of the United States?
Puerto Rico is not a state and hence not part of the United Stares. It is a colony essentially.