Visualizing the CBA’s Impact on Draft Spending

There have been many, many words written about the new CBA already, and the common consensus seems to be that two new provisions — the draft tax and hard cap on international signings — will impact competitive balance in baseball. By preventing teams from investing heavily in acquiring young talent, it will theoretically make it more difficult for small market teams to compete with large market teams, while also driving some young players away from baseball and into college or other sports. Dave Cameron explained this all yesterday, so check out his piece if you want further explanation.

This argument rests on one assumption, though: that small market teams spend more money on acquiring players through the draft than large market teams. Technically, since large market teams have huge revenue streams, couldn’t they also be pumping lots of money into the draft, using their late first round picks to sign top players to overslot deals? Why wouldn’t the smart front offices exploit their monetary advantage in every way possible?

So after the jump, you’ll find a two charts. The chart on the left lists the total amount of money invested by each team in the amateur draft from 2007-2011, and the chart on the right lists the amount of money each franchise spent on international signings in 2010. All the data comes from Baseball America, so a huge hat tip to them for the help.

I’ve divided teams into one of three categories: large market, mid market, or small market. The large market teams are the ones that baseball will declare ineligible for revenue sharing sometime before 2016 (excluding obvious smaller market teams like the Blue Jays, Nationals, Astros, and A’s). The distinction I drew between mid market and small market is entirely subjective — so please, feel free to suggest improvements there — but I wanted to draw a distinction between teams like the Rays and Tigers.

As you can see, the general trend is what you’d expect: large market teams spend less than small market teams in both the draft and internationally. If you look closer, though, you notice that certain large market teams are spending a good chunk of money on amateur players. Despite the fact that neither team has had a high draft pick in some time, the Yankees and Red Sox are both investing heavily in the amateur draft, and the Yankees are also large players on the international market. The Rangers and Cubs have also been putting lots of money into both areas.

So it’s too simplistic to state that the draft tax and international spending cap will have no positive effects on competitive advantage. The international spending cap will likely only affect a handful of small market teams — around four by my count — and it will affect a similar number of large and mid market teams. As for the draft, it will definitely hurt small market teams to not be able to spend liberally on prospects, but it will make it difficult for teams like the Red Sox to buy talent that slips to the end of the draft due to cost concerns.

In the end, I’m not sure if these changes will be a positive or negative development for small market teams, since much of that depends on if the talent pools for upcoming drafts are weakened (and if so, how much) due to amateurs choosing other paths instead of baseball. These rule changes are a mixed bag of good and bad, and the only way to determine their effect will be to watch how the next five years unfold.