What Do You Get for Your International Bonuses?

With the likely winner of the Shohei Ohtani sweepstakes becoming a bit more clear, 23 teams now find themselves in an interesting situation. Before Ohtani had narrowed his list, many of those clubs had hoarded their international bonus money for the big moment. Following the announcement of Ohtani’s seven finalists, however, they were left with the capacity to offer free-agent bonuses, but few actual players in whom to invest that money.

Fortunately for them, a fresh set of prospects emerged thanks to the Braves’ indiscretions on the international market. Some teams — including the Angels, Phillies, and Royals — pounced quickly, using funds from the 2018-2019 pool to sign some of the top ex-Braves. Other teams will assuredly put their remaining bonuses to use in this way, taking a chance that these players will thrive in a new system.

There is, of course, one other way in which teams can put their bonus dollars to work, and it’s one that seems to have increased in popularity during this year — namely, by trading the bonus money. The rules for this have changed a few times. Under the terms of the most recent CBA, however, a team can trade away its entire international bonus pool or acquire additional funds up to 75% of their initial pool through trades.

Some teams have taken advantage of this rule to trade substantial portions of their bonus pools, to varying levels of public approval. The last few days, specifically, have seen the remaining teams in the Ohtani sweepstakes make trades to augment their pools.

Is this a smart strategy? Before we disparage or praise teams for using their bonus pools in this fashion, it’s worthwhile to look at what teams are getting with this particular kind of asset.

While teams occasionally would take advantage of trading their international bonus pools in 2015 and 2016, the market really began to take off in 2017, which year saw 26 deals involving the exchange of international bonus money . The largest amount of money to change hands in a single trade was the $2.75 million sent by the Reds to the Red Sox for Nick Longhi. The smallest reported amount (that I could find by way of MLB Trade Rumors, at least) was the $198K sent from the Orioles to the Mariners for Paul Fry.

Of the 26 trades, 20 of them were the “only-bonuses-for-player(s)” variety. Four trades saw international bonus money used in addition to other players to grease the wheels of a trade. The remaining two were used to help teams unload unfriendly contracts. Unsurprisingly, 11 of the trades occurred in the month of July, in between the start of the international signing period on July 2nd and the trade deadline on the 31st. The full list of these trades is given below, with the teams, players, and money involved.

For simplicity’s sake, let’s focus on the 11 trades both (a) of the “bonus-for-player(s)” variety and (b) for which we know the amount of bonus sent in the trade. What did teams receive in the trades? From these 11 deals, the teams that traded away bonus slots got one major-league player (Chris Hatcher, controllable for two years and projected for 0.0 WAR in 2018) and zero top-100 prospects (by FanGraphs, Baseball America, MLB.com, or Minor League Ball). Four traded players entered the year ranked among their team’s top prospects (per FanGraphs). These players were projected by KATOH for a combined total of 1.7 WAR over their first six years in the majors. The remaining six players didn’t even crack their respective clubs’ top-prospects lists and likely have negligible KATOH projections. All told, the teams traded $9.66 million for approximately a projected 2.0 WAR over the entire time of team control.

Now, there are many reasons teams would trade these bonuses, whether because of penalties from previous signing periods or aversion to spending. The few number of trades for which we have concrete details and the fact that certain clubs are involved in multiple deals, renders it difficult to conclude with certainty that team’s are undervaluing the worth of bonus money in trades.

It’s even harder to speculate about how much these trading teams should receive for, say, $1,000,000 in bonus money. Teams probably wouldn’t trade a top-100 prospect to have the chance to sign another (potentially someday higher-ranked) top-100 guy, especially with the nature of projecting 16-year-old amateurs. Complicating matters further is the fact international free agents are probably one of the final areas of baseball in which teams can have drastically different evaluations of a player. That said, it’s not entirely unreasonable for one to think that $2.5 million in bonus money could merit the 10th-best prospect or a passable reliever from another organization.

The market for international signing bonuses is still a young one. As such, the rules for it are still being defined. Whether through organizational philosophy or limits on spending due to penalties, some teams view trading their bonus pool as a more viable alternative to spending that money. At this time, it seems like the teams shedding bonus money are getting shortchanged on the deal, getting marginal returns for assets that allow other teams to enrich their farm systems. Hopefully, the market will eventually reach something of an equilibrium where teams get a player whose value is closer to what they could have gotten had they spent their money.