“Trading Down” in the 2012 Draft
Unlike in the other sports, draft picks in Major League Baseball are not tradeable assets – teams are required to use the selections that are allocated to them, and they are not permitted to officially trade a player for the first 12 months after he signs a professional contract with them, though teams do occasionally use the PTBNL loophole to trade them in the 6-12 month window. So, in tonight’s draft, you won’t see any swapping of picks or deals being made. We know who is picking at what spot, and regardless of whether they’re happy with that position or not, it is set in stone and will not change.
However, the new rules governing team draft allocation pools may present the opportunity for teams to unofficially “trade down” in a way that has has been less practical in previous years.
First, a quick review of the new rules. Each pick of the first 10 rounds (338 picks in all) have been assigned a value based on the suggested signing bonus associated with a player chosen at that position. This isn’t new, as MLB has been “recommending” slot bonuses to teams for years. However, the CBA now gives the league some real authority to enforce these bonus recommendations, at least in the aggregate sense. The sum of a team’s pick values adds up to their overall draft bonus pool, and there are significant penalties in place for going above the amount that MLB suggests that a team spends to sign their selections.
Any team that exceeds the total bonus pool by any amount up to 5% will be taxed at 75 percent of the overage, so every dollar past the allocation limit is essentially $1.75 in actual cost. A team that goes beyond the 5% overage limit will also incur a loss of their first round selection in next year’s draft, and a team that spends more than 10% over their allocation is taxed at 100 percent of the overage and loses their first and second round selections in the following year’s draft. The loss of picks is a significant deterrent because the allocation pool is tied to where you select, so a team can’t simply forfeit a selection and then reallocate that money to sign over-slot guys with the selections they still have.
So, you’re probably not going to see any teams exceed the first penalty tier – they may be willing to pay an extra 75 cents on the dollar to complete negotiations and sign a guy they like, but the loss of draft picks beyond that limit makes it cost prohibitive to blow the recommendations out of the water. So, including the 5 percent overage, the bonus pools range from $12.9 million (Minnesota) to $1.7 million (Anaheim), and several teams that have been notorious for throwing big money at hard sign guys late in the first round have pretty limited budgets for this year’s draft – Detroit, for instance, has just $2.2 million to play with, while the Yankees are at $4.4 million.
So, in previous years, guys like Rick Porcello could make large bonus demands that pushed them out of the top 10, but a team with a lower selection in the first round could use their selection on the player and meet his pre-draft price in order to get him signed. Last year, for instance, the Nationals selected Brian Goodwin with the 34th pick in the draft, but signed him for $3 million – a price equivalent to what #8 pick Francisco Lindor received.
The new pool allocations make it extremely difficult for the teams with lower first round selections to make these kinds of selections, however, so guys who ask for significant bonuses but do not end up getting selected near the top of the first round could be in for a real slide. And this is where the teams at the top may find an opportunity to “trade down” this year.
The pool of talent at the top of this year’s draft is considered one of the weakest in recent history, and there’s not a lot separating the guys in the mix for the first half dozen selections or so, so there may be some temptation to take a lower value target with a top selection and redistribute that money to the team’s next selection in an attempt to grab a guy who slides for cost reasons.
The obvious example in this year’s draft is Luc Giolito, who was considered a potential #1 overall talent before elbow soreness derailed him for most of his senior season. Rather than undergo Tommy John surgery, Giolito has rested his arm and is still hoping to be a high selection, even though scouts haven’t seen him throw off a mound in months. Giolito was probably looking at a bonus in the $4-$7 million range before his injury, so even if he offers teams a discount based on the increased risk, he may still have a price floor of something like $3.5 million (keep in mind, this is speculation – I know nothing about Giolito’s actual signing price), which would make it a bit of a challenge for any team outside of the top 10 to fit him into their pool allocation.
There’s a legitimate chance that Giolito is in for a real freefall tonight. If the teams in the top 10 decide that they’d rather not take a risk on a guy with some medical red flags, teams in the 11-30 range may not see him as signable with the money they have available, and he could end up being available to teams who have already made one selection.
For a team with a high draft selection who doesn’t love the guys at their spot and who thinks that this scenario is plausible, this is where “trading down” becomes a possibility. Let’s just use the Pirates, for example – they have the #8 pick and the #45 pick, so their total pool allocation is $6.6 million, but they could go up to $6.9 million if they were willing to pay the overage tax. If they are interested in Giolito but don’t want to risk not being able to sign a first round talent by taking him at #8, they could work out a deal with a player who is likely a lower first round talent and offer him the slot bonus of a pick where they might expect to go. For instance, a player who believes he is going to get drafted in the 25-35 range will have an expected bonus of $1.4 to $1.7 million, so the Pirates could offer that prospect $1.5 million and the right to call himself a top 10 selection if he’ll agree to sign for well below the #8 slot recommendation.
Since slot for the #8 pick is $2.9 million, the Pirates would have just saved $1.4 million that could then be reallocated to the #45 pick, which comes with its own $1.1 million slot recommendation. Add in the approximately $300,000 worth of overage availability to the Pirates, and they could potentially offer Giolito $2.8 million to sign at #45 without incurring any loss of future picks.
Now, that’s still $700,000 below my totally made up price floor to get him to sign, so the Pirates would also likely have to go cheaper on some later picks as well. The slot bonuses for 103/136/166 total up to just over $1 million, so the team could save enough by taking easy sign guys in the 3rd-5th round in order to come up with enough money to get Giolito to sign at #45.
This strategy would essentially be the equivalent of trading picks 8/103/136/166 for something like 5/30 (so maybe we should call this trading up instead?), giving a team a chance to select two first round talents. It’s worth noting that the Pirates actually did something very similar to this in 2009 when they drafted Tony Sanchez at #4 overall, signing him for less than other players might have agreed to at that spot, and then gave $1M+ bonuses to 6th rounder Zack Von Rosenberg and 8th rounder Colton Cain, then tossed another $425K at 12th rounder Jeff Inman.
So, this wouldn’t be a completely new draft strategy, but the pool allocations now make it more likely that top talents slip past the end of the first round, and perhaps make this kind of trade-off more intriguing for a team that might not like their options in the top 10. Given that it’s a weak draft class, I’ll be interested to see if any team tries something like this tonight.
Dave is the Managing Editor of FanGraphs.
While I’ve read this before some time ago, perhaps you could remind us of the “holdover” cases that exist in the new CBA, meaning, what happens if a player selected doesn’t sign? See: Tyler “Greedy” Beede. Couldn’t a team purposefully take players they can’t sign just to get next years pick in cases like that, of have they kiboshed that too?
If you don’t sign a player that you’ve selected, you also lose the allocation that was associated with that pick. So, if the Pirates just passed on pick #8, their total bonus pool would be reduced by $2.9 million, so no, there’s no chance to take guys you don’t want to sign and spread the money to other players in that same draft.
You could, however, draft some non-prospect son of the GM or something, pay him some small amount of money, and then use the remainder of the allocation later picks. But, then, you’re wasting a high draft pick to take a non-prospect, so it’s probably not worth it.
How do the signing bonuses for the 11th round and on work? Could you take a guy in the 11th round and sign him to something like $2 million or is that barred somehow?
Could a team like the Blue Jays (17, 22, 50, 58, 60, 81) select Giolito 17th overall and then take majorly discounted players with say the 22nd, 50th and 58/60th picks?
A team can’t sign any player outside the top 10 rounds for more than $100K.
Is it possible then that if a big name/high draft demand player like Josh Bell last year slides out of the 1st and compensation round tonight that he basically goes undrafted (because no team will have any hope in signing him under the slot limits)?
What happens if a pick doesn’t sign and the loss of pool money causes a team to go over? A team could be in a real tough spot where they have to sign a guy and take the penalty or let him go and still take the penalty since he wouldn’t sign for enough under slot to make the math work. There is potentially some leverage for the players here.
that’s a fantasic question. any insight on that dave?
This strategy takes on a ton of risk, no? If you do this and Giolito is picked before you come back around at 45 (very possible), you’ve just more or less punted the entire draft. Just doesn’t seem to even be remotely worth it to me.
Not to mention, if I was GM for a division rival and I saw this happening, I might preemptively eff the plan up. It’s just waaaay too risky to use your top pick on anything other than the best available, signable talent in the hopes that the other thirty teams will pass over the guy you really want.
To me, the major wrinkle in the new draft rules is that players are seriously demotivated to hold out for better offers next year. There just can’t be major deals struck like the Nats have done for the last three drafts. No amount of trying to game the system will change that, short of a team drafting one major guy at the top and then choosing nothing but filler for their remaining picks.
Sure, if I were the RS with the #37pick, I’d call up his agent and see if he’d sign for ‘x’. After that, it would just be a matter of trading down in subsequent picks, kind of the opposite of what you suggested.
Theoretically, at some point, you be held hostage to the agent though. If Giolito gets more than slot, because you are planning to sign your #3 pick using #8 money on a #9 level pick, then if you don’t sign that other player, you lose the slot money, making it impossible to use the slot money for trading up.
It’ll be interesting. You just know that Theo is army of physicists figuring this one out.
That’s a REALLY interesting point… Couldn’t the agent of that 8th rounder being selected #8 overall use it as leverage to generate a significant overpay? It would be clear to the agent that that player has to be signed in order for the “trade-down scenario” to take place. Sounds really messy to me…
baty, I would assume that they’d have a pre-draft deal in place. I highly doubt a team would suddenly pick an 8th round talent with the #8 pick if they didn’t discuss it beforehand. I guess the agent could always make a pre-draft deal and then use the leverage after the draft is over, but I can’t see a reputable agent doing that. Their reputation would take too big of a hit on something like that.
Sure… And even though, there’s dozens of guys you can go to who would be willing to take that opportunity, I still imagine the pre-draft deal would have to be an overpay… Not that it would break the bank…
If you were a projected 8th rounder getting a call to be the #8 pick in the draft, it would have to be tough to manage the negotiation without pre-draft exposure to the media, and a resulting stir. If a pre-draft deal is struck with any player who’s being used to conserve a significant amount of cap space for a team to be later used, I imagine we would know about it already… I just don’t see this strategy working as a pre-draft maneuver. It’s too risky and the draft is too spontaneous.
You might be able to burn the pick with a player who has very close ties to the organization to better contain negotiations, but who knows what’s going to happen after you make that first pick anyway.
Yeah, I still think this new system has the potential to wreak havoc. I can’t imagine the amount of “on the fly” strategizing these teams will be having to make within only a few minutes of selection time per pick because it’s so rigidly structured.
Within this interesting “pick trading scenario” you present, isn’t it possible that a team could be left with its first 2 selections of the draft unsigned if the speculation and further negotiations backfire? Or you could be left with Giolito taking a pass anyway, and a flimsy most likely over payed player as your #8 pick. I would be apprehensive to draft any high schooler who starts to take the slide in future drafts.
In a draft like this (by all accounts pretty thin at the top, and shallow in general), strategy could be anything, so this is interesting. I’m looking forward to seeing how teams use these loopholes, to throw MLB for a loop.
let me get this straight… there is a significant penalty for going over 5% of the total amount of the bonus pool, but the entire bonus pool for a team’s first 10 rounds could still be theoretically spent on one selection without penalty?
You have to sign guys with the picks you make or you lose that part of the pie, so kind of but not really. A team could load up most of their pool on one guy if they then took low cost college seniors with rest of their selections, but it’s not worth it.
You could theoretically add one pick’s slot to anothers if you selected a “son of the President” type and signed him for like $1,000 but I’d have to think Bud Light would come down on that.
Yes… So in the past there were “cost per slot recommendations”. If a strategy like this unfolds, I’m sure the commissioner’s office would find some way of putting together a “talent per slot recommendation” (haha). Or create a “you can’t spend lower than 60% of the recommended signing bonus per slot” rule. I imagine it would be pretty embarrassing to see a system where each year, a handful of scrubs make first round status because a handful of organizations project the deeper and more worthy value of a draft more towards the “mid-early rounds”.
Why wouldn’t a team who wanted guys with signability issues just take/sign a complete scrub with their first pick for almost nothing then redistribute that money among the picks they’re actually interested in?
Why not draft the good player with the first pick, and then pick a couple of shlubs later? Much less risky.
Exactly. If you have $5MM worth of picks in the first 3 rounds, why not take the good player first and the cheap players in rounds 2 and 3? I don’t see how it makes any sense to pick a scrub first, then save the #3 pick for the good player.
For many reaons. First the player you really want could have been selected by the next time you pick. Also, you are basically wasting a high draft selection. Yea you could take a scrub at #8 and then allocate all your money to the next pick, but that gives you only 1 good player instead of 2. Why not just select to good players and try to sign them to the slot you are assigned? much less risky
Don’t really understand this strategy at all.
It’s a fixed amount of dollars for the #8 and #45 pick combined in the scenario given so why not pick Giolito at #8 when you are guaranteed to have him available and then draft the scrub at #45? The dollar amounts are the same while the risk is probably reduced by 90%
Not sure this blog entry was that well thought out unless I’m missing something.
The implication in the article is that the team drafting Giolito at 45 would pick a player ranked in the top 25-30 at 8 (presumably the strategy is you have a guy you think is undervalued that you can get for cheap from that group), so flipping the picks doesn’t work bc the other guy won’t be there at 45
Yeah. I thought it was pretty straightforward. It was pretty clear that the #8 guy was no “scrub.”
It also seems ot me that, by penalizing the teams that don’t sign a guy, by taking away that slot money, you are giving the power to the agent. If I were the GM, I’d like to be able to say, ‘$1M is all we can do’ and then use that $1M elsewhere if the player refuses to sign.
This does that.
It takes away a player/agent’s ability to say “Well, just don’t sign that other guy”.
Now, the team can say “We’re allowed 1M to sign you. Take it or leave it”
This whole process screams for an auction instead of a draft.
Dude…..
Awesome……
Who wouldn’t pay good money to see that? This would separate good GMs from bad GMs in a heartbeat. And it is really very much free market. It is entirely possible that the NYY love an SP, and might want to shoot the moon on just one guy. Maybe a team like the RS would like 3 very good, but not great, players. Maybe TB would like to wait until the big market teams have left the room before picking up every tier B pick.
I wonder if we will see fewer guys sign this year because the available bonus money is going to be so much lower. That would seem to be the obvious result, but given the fact that the agents know they don’t have the leverage they used to, it will be interesting to see whether the advice changes. Also, given the weakness of this draft, not signing a guy might not be the worst outcome. The Cubs, for instance, might not mind failing to sign an Albert Almora if it means getting #7 and heaven knows probably #1 next year in a better class.
But guys who fail to sign this year can’t expect better next year. No one can go very far over slot anymore, so if you’re holding out for more money than the team has allocated, you’re really gambling that you’ll go higher in the draft next year. And then you have to weigh whether you’ll expect to get paid significantly more, enough to make it worth missing a year of pro experience and pay, and risk an injury that actually drops you next year, or even worse, a bad reputation that makes other teams not want you. It’s a stupid risk for most players.
Players will just have to take what they can get.
I’m not an expert on how talent falls in the MLB Draft, but is there any chance a team like the Yankees ($4.4m available) just draft all the sign-ability guys available one year and spend say $16m (Total cost $24.7m after penalties) to get higher ceiling talent in every round? Is there any chance that strategy could be worth both the money and giving up the first 2 picks next year? Is there enough talent falling on signing concerns that it might work since only the one team in this scenario can really go after those guys?
Why would the Pirates go through all this trouble in order to offer Giolito less money than they could if they just drafted him #8?
Because the other guy is a better prospect (#25-30) than they would otherwise get for basically the same cost. The drawback is that Giolito might not be there @ 45.
I see this system creating issues where if a guy starts slipping, he falls forever. Since the slots are pretty rigid, once a guy falls past his slot, he’s pretty much toxic since a team would have to pull the shenanigans list above to sign them. A guy like Giolito would either go top 5 or not at all, since teams lower in the order don’t have the cash to sign him.
But doesn’t that only happen if a guy is looking for more than he’s worth, compared to where he thinks he should be drafted? If that’s the case, it’s the player’s fault.
You’re assuming perfect information.
All you need is one team to say “We’re not drafting him because we don’t think he’ll sign”, or other teams to read that after a team passes him up, and hes pretty much undraftable. If you’re not signable at pick X money, you’re not signable at any pick afterwards.
I have a feeling that we’re going to see a lot of players hold out this year at their agents advice, and then a whole lot of agents fired halfway through the year when their clients realize that they’re missing a year, are a year further away from free agency/ARB, and are going to get even less money next year because there will be more draftable players.
This all seems like a plan to reduce imbalance in college football by increasing the supply of HS athletes taking the scholarships.
I remember reading somewhere that this is Bud Selig’s attempt to make the MLB draft more like the NBA and NFL, with players being drafted in a rough order of skill. The old system meant the best athletes at times would not be signed until a team with deep pockets was up and willing to pay the asking price. One of the motivations for change is to make the MLB draft more suitable for television.
I wish they’d have an auction/draft combo….first ten teams get 2 weeks to sign anyone they want to sign, up to two or three players. Then, all other players go into a draft pool, with slots for the positions. That way, the most coveted players can choose to sign with a team or not, and the others go into a draft. You’d have to have a few other rules, but it allows the best players to really get paid, and the rest to join the ranks of the working class like the rest of us. Or, you can choose to go to college (if you are in HS), and roll the dice on more money later.
Because part of the point of the draft is to give the weaker teams a chance at getting talent, and allowing them to move back into contention.
Any sort of auction is going to lead to Chicago/NY/Boston/Philly completely blowing their load and teams like KC eventually being folded.
…or we could just hard slot. I guess the player’s union will never let that happen.
The players’ union has no reason to care about draft bonuses, hence the passage of the current draft slotting system.
They represent guys who have already made the majors, not prospects/college draftees. Slowing down the influx of top prospect minor leaguers helps inflate the price of mediocre MLB vets.
I wonder whether a team at the bottom of the 1st round would grab Giolito and punt the rest of their round 2-10 picks?
i HAVE A NOVEL IDEA LETS GO BACK TO BEFORE THE DRAFT—TOO SIMLW WHAT?
Because this draft class is considered so weak, why wouldn’t a team, say the Marlins at #9, draft an unsignable kid just so they can get the #10 pick next year in addition to wherever they draft normally, when hopefully the class is much deeper?
Because 1) the draft is not that weak and 2) GM’s life expectancy is too short to trash a draft for a future draft.
Because you don’t get the replacement pick anymore. Or the money. In fact I think you get penalized if you don’t spend the money.
You still get a comp pick for failure to sign a prospect in the first 3 rounds. You only get “penalized” for not signing a player by losing the allocation from your total pool. I think comp picks are unprotected still so the real issue is he leverage you lose. If the Cubs don’t sign Almora this year and select Austin Wilson with pick 1.7 next year they are almost forced to give him whatever bonus he demands or lose he pick all together.
Pretty sure that this is wrong, no matter how many times you say it.
All this discussion is around signing bonuses. Could agents and players hold out for a higher yearly salary or is that not allowed?
In the past they could, but with the last CBA major league deals are no longer allowed (I think). Someone, please correct me if I am wrong.
I suspect that a lot of people, including FO’s, are over thinking the new rules. Is there anything wrong with the “straightforward” strategy: sign the best available player, offer him slot money (+5%), and if he doesn’t sign just take your compensatory pick to next season? Trying to be clever about it means eventually robing Peter to pay Paul.
I think the only exception might be using a top pick on a 2nd or 3rd round talent, offering him only a portion of the slotted money, and if he signs use the surplus to have enough to go after high school athletes with options who need a big monetary incentive to give up football and a degree in business.
money doesn’t carry over and you don’t get a replacement pick anymore.
Clearly Luhnow and the Astros figured this one out. By signing correa for something under slot money, say 6.5 mill, you save 700 K, plus the overage, which for Houston is another 550 K, put that on top of 2nd round money of 1.8 and BOOM! You get Lance McCullers signed for 3 mill. Brilliant!!!!
I really hate the draft slots. It just screws everyone over. It was intended to keep big budget teams from having an advantage on “sign-ability issues” guys, but in reality it was the low budget teams who had been doing that more recently. Also, a lot more guys will go to college now, and some will even go to other sports if they feel they can get more money. For instance, if zach lee had been drafted under these rules, he almost certainly wouldn’t have signed.
What I really want to know is whether teams can go WAY over their pool (i.e. – have to give up next 2 years’ #1 picks) if they don’t have #1 picks next year for some reason. In that case, the Yankees could just throw huge bonuses at every kid that teams have passed on for $ issues every year. So what if they never get a #1 pick if the talent they got in the later rounds are that of 1st round quality?