The Orioles Sold a Draft Pick Again
Since the trading of some types of draft choices was allowed in the most recent CBA, we’ve seen teams use their “competitive balance” selections as currency, often swapping them for role players in minor mid-summer trades. As noted in this MLBTradeRumors post from last year, players traded for draft picks include the likes of Bryan Morris, Bud Norris, and Gaby Sanchez, although they have also been included in deals for better players like Jon Lester as part of a larger package.
Last year, though, the Orioles and Dodgers created a new kind of trade for a competitive balance pick, taking out the desired player aspect of the deal, and turning it into a simple cash proposition. Last April, the Orioles decided they didn’t want to pay the remainder of Ryan Webb’s 2015 salary — roughly $2.8 million — and so they gave the 74th overall pick in the draft to the Dodgers in exchange for LA taking Webb’s contract. The Dodgers didn’t actually want Webb, as they showed by immediately DFA’ing him upon receipt, and the deal stood as the first time two teams had clearly decided that it would be mutually beneficial for one franchise to purchase a draft pick from the other.
A year later, the Orioles decided to do it again, so last night, they traded the 76th pick in the draft to the Braves, along with the roughly $3 million remaining on Brian Matusz’s contract, in exchange for two non-prospects. For the Orioles, the competitive balance selections might as well be renamed “$3 million rebate checks,” because that’s apparently how Dan Duquette sees these selections.
From the Braves’ perspective (and the from the Dodgers’ perspective a year ago), these deals are pretty easy to follow; by purchasing a mid-70s draft selection, the team acquires about $830,000 in bonus pool allocation. That’s money that can be used to draft and sign a third-round talent, or a team could decide to punt the pick and reallocate most of that money to sign an overslot player with another pick. Last year, the Dodgers drafted RHP Josh Sborz, then signed him for $722,000, giving them $109,000 in saved allocation money; that came in handy when they wanted to sign fifth-round pick Brendon Davis, who got $918,000 despite being picked at a slot where the allocation value was just $314,000.
Since the Braves already own the 3rd, 40th, and 44th pick in the upcoming draft, they’re in prime position to land a first-round talent who slides based on price, and picking up the $830K in this deal could give them an opportunity to select a much better talent with their second or third pick. As our prospect writer Eric Longenhagen put it on Twitter.
Atlanta isn’t paying the Matusz contract to acquire the 76th best player in the draft, they’re doing it to pay a top 20 talent @ 40 or 44.
— Eric Longenhagen (@longenhagen) May 24, 2016
This is exactly how a rebuilding team should be spending its money during non-winning seasons. The Braves have taken a lot of heat for not putting a quality product on the field this year, but the organization is better off long-term if they spend $3 million to buy a better quality prospect in the upcoming draft than if they had spent $3 million to have a slightly better placeholder in their rotation this year. The return on investment is simply higher by spending on the draft, and this trade helps the Braves take some of their current payroll space and turn it into value that could produce when the team is ready to win, or at least provide some currency to acquire future pieces that could help the team down the road.
We’re used to non-contending teams signing middling free agents, keeping them until the trade deadline, and then flipping for prospects in July. This is the same concept, just without the major league player being involved. This is the no-middle-man version of prospect purchasing, and the price the Braves paid is right in line with what the Dodgers paid a year ago. As a rough guide, it appears that the market value is something like 3x the slot value; in other words, each dollar in the allocation pool is worth about $3 in present salary.
The bigger question, though, is why the Orioles remain interested in selling draft picks for present cost reduction. After all, the Orioles have the 27th, 54th and 69th selections in the upcoming draft as well, so they were also in a position to move allocation money around to grab a better prospect who falls for pricing reasons. By dumping the 76th pick, they’ve reduced their flexibility and lowered the overall talent they’ll be able to add to the franchise this summer.
But while cash savings now aren’t guaranteed to be turned into roster upgrades later, the Orioles did just buy some major league flexibility. At 26-16, they’re currently in first place in the AL East, and are likely to be buyers when the trade deadline rolls around this summer. Due to the adjustments made to the rules about when draft picks can be traded — dubbed the Trea Turner rule — any picks made this summer cannot be included in deals for players this season; those picks could help replenish the farm system if the team plans on using some of their current prospects to acquire big league additions, but those picks themselves can’t be traded until after the season, and they can no longer be included as players-to-be-named-later.
So, while it’s easy to just look at this and criticize the Orioles for selling off an asset, it seems reasonable to assume that the $3 million in cash savings realized by dumping Matusz’s money might actually be a way for the team to effectively trade a draft pick for some in-season help. By trading the pick now for the cash savings, they can then take on more money in a trade this summer, reducing the asking price in talent from the seller by providing financial relief that other teams may not be as willing to offer.
Given the state of the Orioles rotation, it seems pretty likely that the team is going to be in on a starting pitcher this summer. Perhaps the team is looking ahead to a deal for a guy like James Shields, and feels they’ll be better served by offering to take on more of his salary than by trying to compete with other buyers in just prospect offers. The Orioles don’t have a lot of prospects to trade, so by accumulating some financial flexibility, they might put themselves in a position to offer a seller something that they can’t get as easily elsewhere.
Of course, if Peter Angelos just pockets the $3 million, and the team doesn’t reallocate this money back into the franchise, then it’s perfectly reasonable for Orioles fans to be annoyed by this trend of the team selling draft picks. Making a habit out of reducing your prospect stock isn’t a great idea if you’re not using those prospects to acquire other things of value, and if shedding Matusz’s contract just allows Angelos to go buy some fancy art, well, that would suck for the franchise. But at this point, with the Orioles as likely buyers this summer and some obvious holes on the roster, I think it’s probably best to assume that this is a move made in preparation for taking on big league salary in July.
And if that’s the case, then all the Orioles are really doing is trading a prospect for some help at the big-league roster, which is exactly what we expect teams in first place to do. This is a new and somewhat more complicated way of doing it, but the end result may very well just be the same as swapping a prospect for a veteran upgrade at the deadline.
Dave is the Managing Editor of FanGraphs.
I wonder if the Cubs are considering any similar deals (with their first pick being #104).
Brendon Davis and Josh Sborz?
Braves also traded what appear to be two pen arms that both look somewhat interesting…
Yeah, they aren’t great, but if you are looking at this as a way of valuating draft picks, any small amount of surplus value messes with the calculation. A decent relief pitcher on the ML minimum is worth something.
I agree that a decent relief pitcher on the ML minimum is worth something, but Brian Matusz is being paid $3.9M this year, and has a FIP of 12.73, and an ERA of 12.00.
He is neither pitching like a decent relief pitcher, nor is he being paid the ML minimum.
That said, I agree, the surplus value that Matusz has (or deficit value) does complicate calculations around how much a pick is worth, as does the potential surplus value of the prospects who went the other way, along with any other costs associated with trading Matusz and the prospects that could factor in.
I could be wrong, but I believe TKDC was referring to the two prospects received, not Matusz. ML reliever seems to be the best case for both and that, if realized, has value.
Yes, I meant the guys going to Balmer.
This may be a particularly interesting year to be in that position, also, as a couple of the Usual Suspects with the most money to throw around — Yankees, Dodgers — may not be buyers at the deadline. And the Cubs don’t look like they need to go shopping at all. So the teams on the selling side may not have as many options if they’re looking for cash-heavy trades.
Has anyone done any research on the correlation between salaries paid to draft picks and performance? One would expect that a player paid overslot to perform better than a typical pick, and someone paid below-slot to perform worse…
Interesting question. Draft pick analysis is often a messy affair because the entire business is so littered with outliers: most picks amount to nothing at all, while a few amount to being total steals. I’ll bet that something like 5% of all the draft picks accrue 95% of the total WAR over their careers (or over the first 6 years of service time) of everyone in the draft. This disproportional achievement of outcomes will skew the results unless you looked at a really long history of picks, in which case other things may come into play (e.g. different CBAs playing a part).
Dave has done a good job for explaining why the Orioles—despite having little talent in the farm system—would make this move.
I’m fairly certain that Angelos and Duquette are making this move to free up cash so that they can make a bid for a pitcher like Shields (it woudn’t be going to art anyway, Angelos likes to invest in thoroughbred horses).
But what if it doesn’t work? What if a prospect package is more attractive to the Padres than taking on the contract of Shields?
We’ll see. At least they got rid of their financial obligation to Matusz. For the last few years he had been an effective LOOGY. He isn’t even that anymore, so he was going to be DFA soon.
If a prospect package is more interesting to San Diego, the O’s were already out of the running. They had nothing to offer but cash. They now have more cash to offer.
They aren’t the angels. That said it’s injury striken pitchers and chance sisco. I would take a shot with hunter Harvey though.
So you’re saying that $830K in bonus allocation is worth $3M cash? This is a screw-up comparable to the problem with the international free agents. These “pools” just don’t work at all, and should be dropped immediately.
we can argue how MUCH of a bonus draftees should get relative to their expected value, but it can’t be 100%. that would make draft picks worthless, and you’d have a lot more draft picks making millions of dollars for having mediocre minor league careers.
Also part of the reason the $830k in draft pool is worth $3MM to acquire is because it’s capped.
I actually think it works. It helps a rebuilding team acquire more high end talent while allowing a competitive team more in season budget room. I don’t like dfa’ing matusz though. While paying him you might as well see if you can fix him as a few teams need loogys come the deadline.
The way to think about this is that it isn’t money at all that is distributed, traded and used to sign players during the draft. It’s monopoly money. Each team gets a certain amount of it, as a function of when their picks are. They can spend their monopoly money however they see fit, and they can even trade their monopoly money with other teams before the draft starts. After the draft is done, they can cash out their monopoly money – dollar for dollar – although the things they were buying with their monopoly money (i.e. the rights to the players they just drafted) are worth way more than what they cost in real money, so it’s better to spend the entirety of the pool than to cash any money out. Dave is suggesting that the exchange rate of monopoly money to real money is roughly 3:1.
This is the same team that cut Miguel Gonzales in order to get out of paying him $5 million this year. It would be nice to have him on this team now, especially if one more pitcher goes down. That being said, they’ve now have 8 million freed up. I’m an O’s fan, but more and more I think Duquette is less a genius and more just a mediocre/bad GM pulling one Homer after another and stumbling blindly into success. They Orioles are still almost entirely composed of players initially picked up by MacPhail, yet he never came close to winning and Duquette hasn’t fielded a single loser. With the O’s player development prowess (or lack thereof), giving up draft picks for cash is probably a good idea. They can use this cash to buy players that other systems have developed. It’s probably too late for Matusz to become the next Arrietta, but if he had been traded a couple of years ago, there might have been hope for him. He looked much when he debuted than he looks today.
Miguel Gonzalez was simply not worth the money. He looked poor last two seasons and even worse during spring training. Cutting Gonzalez allowed the O’s to carry Wilson, Wright, and Worley, who have all performed better than Gonzalez at a much lower cost
Orioles also sent around 700k in international bonus slot money to the Reds for a 25 A ball pitcher yesterday.
That was for this signing period though, the o’s were already done and had about 850k left.
Ahhh, wasn’t quite sure how all that worked.
Hey, have you found Dickey’s Lost UCL yet? I love that screen name.
The Orioles have found an interesting, albeit probably less-than-ideal, method of shedding bad contracts.
What I find odd is that the Orioles seem to have over-paid for Chris Davis by bidding against themselves. If they were really so tight on cash that they would forfeit exclusive rights to bargain with potentially good players (and therefore secure years of their services for well below-market prices), then why would they be so free with cash when paying Chris Davis (possibly) above-market money?
The Chris Davis signing was Angelos saying “I want me some dingerz!”
The Brian Matusz sale is Duquette working to field a competitive team around that mandate.
At $18MM/year, he’s currently paid what he’s worth
23mil/year, I don’t think anyone questioned the first few years of the deal. The worry is the last 3 or 4 being adam Dunn esque
There’s differed money in the deal. Something like $40m is being paid over ten years after the contract’s up. So in present money terms it’s only 18m/year. Although in the future they will be paying for Davis to be retired.
The badness of Davis’ contract is completely overblown by analysts who either did not know the details of the contract or simply did not care. Jeff Sullivan had a very good breakdown of the deal, you should read it.
Lets not forget the immediate roster benefit for the Orioles. Matusz (and Kim and rule 5 pick Worley) cannot be optioned. The Orioles LOVE running a shuttle between Baltimore, Norfolk, and Bowie. With Matusz on the 25 man this is challenging. Now they have a slew of minor leagues players with options who can be called up and down as needed. Buck Showalter is now playing with, essentially, 2 extra roster spots.
So if the 77th pick is worth around $3M, then what does that make the value of one of the compensatory picks? $7M?