FanGraphs has obtained bonus figures for over 90% of all the international signings in baseball history. We have all of the most significant bonuses, every big leaguer, notable current prospects, and everything in the mid-six figure range and above, along with many years for which we have every single signing.
This provides us with a pretty complete picture of the distribution and trends of these bonuses, also allowing us to estimate how many players we’re missing. Those players are overwhelmingly names you wouldn’t recognize, guys who played for a couple of years before being released, signing as filler for a five-figure bonus.
We’ve taken out all of the major league deals (think older, high profile Japanese and Cuban players), and we have incomplete data for all of the Mexican players, as MLB notes all of them as receiving a $0 bonus (it’s an easy workaround for a convoluted system that’s mostly cleaned up now). We’ve filled in correct bonuses for players where we have it, mostly among the high profile Mexican signings, like Luis Urias and Julio Urias (no relation).
We could do a lot of things with this data — and we will, including listing it on the player pages and THE BOARD — but the thing that interests me today is combining this bonus data with our asset value research, and the dollars-per-WAR framework to get a better idea of what a dollar invested in an international amateur player returns. We’ll start with some of the meta data:
|Signing Period||Players Signed||Bonuses Spent|
2017 was the first season of hard-capped bonus pools, which explains why bonuses declined and also why they spiked the year prior. These figures don’t include the pool overage payments made to MLB from 2013 to 2016. We estimate those figures to add up to about $250 million over those four years, with about $100 million paid to MLB in 2016 alone. (The CBA says that this money was to be spent on international operations and initiatives.)
Since the international market changes and matures so rapidly, it makes sense to start with the early 2000s signing classes as a baseline for a similar era to today. Most of the players who signed 15 years ago are now in their early 30s and have either played out their entire careers or are into their seventh year of major league service time. We can grab the dollar-per-WAR figures from the years that spanned their controlled years and turn that historical WAR into a dollar amount of value created. I used seven seasons since we don’t have comprehensive service time data, which, from some spot-checking, appears to do the trick. We have the FV of the most recent signings that are current prospect on THE BOARD, which maps to an asset value.
The most interesting players to analyze signed in the last 5-10 years, are in the big leagues, and are in the middle of their control years, so I had to do some work to peg their value. I quantified what they’ve already produced the same way I did with the older players, then estimated or figured out by hand their current service time situation. I then used our various projections to fill in what those players are expected to produce in the rest of their controlled years.
In short, it’s not perfect, but as with filling in the holes in the bonus data, it’s fairly accurate and any mistakes appear to cancel each other out in the aggregate. There’s some noise in the data year-to-year, but it appears that right around 2004, the market improved its output and has held mostly steady to today. Here’s the production (a combination of produced WAR, projected WAR, and minor league asset values) over this period:
|Signing Period||Bonuses Spent||Value Created|
I included up to the 2017 class, but it would appear that we need three full seasons in the system — with players having signed on July 2, 2015, and played in 2016, 2017, 2018 — before the class as a whole has developed enough to reveal how much value it could create. As such, a dozen years (2004-2015) appears to be our usable sample.
We could use the above figures to create a simple return on investment calculation, but a true ROI would compute what a team is making on the average dollar spent, so we also have to consider the expense to operate the department that signs the players. Building or renting an academy, feeding and housing the players, running a DSL team, paying coaches, trainers, scouts, and administration and travel expenses are all facets of an international operation that are essential to signing and developing these players, so they have to be considered alongside the bonus expenditures. After consulting with some international directors, I’ve estimated those costs for all 30 teams combined and added that to the bonuses, before arriving at an ROI figure that represents something close to what MLB clubs can expect a bonus pool dollar to return. I used a rolling figure to smooth out any noise in the yearly results.
This gives us an idea of what a club’s accounting department would say their ROI was running an international operation in these years. There are a couple of other ways to look at this data. Going forward, we know that overages won’t exist. We also know the maximum that can be spent with hard caps in place. If we were to take the historic spending of 2016 and keep those signing rules, while also imagining that the talent of 2018 demanded the same outlay in bonuses and overages as the group in 2016, we could compare the two realities owners were considering in the most recent completed CBA negotiations:
|Projected Actual ’18||$150,000,000||$0||$90,487,500||$1,125,000,000||368%|
|’16 Rules/Talent in ’18||$210,000,000||$105,000,000||$90,487,500||$1,125,000,000||177%|
You can see that there’s still a solid positive return even with historic spending levels, but owners negotiated to add a hard bonus cap to the international market, essentially doubling their ROI. The 2016 class was unique in that clubs were motivated to spend wildly in anticipation of the caps and because of that, a great class of Cuban players that couldn’t be duplicated today (four of our top 132 prospects are Cuban players from this class) drove much of that spending. That roughly $315 million expenditure may be the closest figure we’ll get to what clubs think the true value of a historically-talented class is in an open market with multiple motivated bidders. The market is now capped at half that figure.
We can also answer the question of what an international pool dollar is worth going forward. If we assume that the overhead of running a department is fixed, how should clubs think about the value of each additional dollar added to their bonus pool? We could take the table just above this one and use the projected actual 2018 row to figure out the ROI from $150 million in bonuses and the estimated $1.125 billion in value that will be created by the signees. The result is a staggering 650%. It appears that it takes about three years for the an investment in the international market to mostly mature in terms of trade value, though there’s a way to read this data where there’s further value gained in a 5-7 year horizon for full maturity.
This sort of analysis can get too close to quantifying the worth of humans in purely dollar terms, although going through the exercise in this way also helps to define what a fair market price is for someone’s service. 650% is a pretty abstract number to consider, so let’s compare it to an standard investment for wealthy individuals such as baseball club owners: investing in the stock market. An owner can invest roughly $5 million into international market each year and expect a median return of 650% after three years, while a strong 10% yearly compounded return in the stock market over that period would return a 35% return. That sort of return makes clear both the appeal for ownership of signing international players, and capping their bonuses. It also points to how wide a gap exists between the value these players generate for their clubs and their compensation relative to that value.
In the next part of this series, I’ll take a look at some of the best and worst signing classes, if we were to grade out every club’s international signing class over the last 30 years using the framework rolled out today.
Kiley McDaniel has worked as an executive and scout, most recently for the Atlanta Braves, also for the New York Yankees, Baltimore Orioles and Pittsburgh Pirates. He's written for ESPN, Fox Sports and Baseball Prospectus. Follow him on twitter.