Slot System Tests Teams' Creativity
See also: Signing bonus averages for the first 10 rounds
The process of distributing money in the annual June draft is bound to elicit strong reactions. The pleasure/pain ratio hinges primarily on whether the respective parties are on the giving or receiving end.
Major league teams are wary of giving mega-bonuses to young players who, while promising, might fall victim to injury, homesickness or an inability to hit the curve. And big leaguers who've spent a summer or three in Altoona are bound to feel resentment when the latest J.D. Drew-caliber hotshot holds out for a mother lode.
Across the kitchen table from the area scout, the kids and their parents are either starry-eyed and grateful or giddy with a sense of entitlement. The agents, or advisers as they're euphemistically referred to, can serve a valuable role in safeguarding the interests of families--for a cut of 3 to 5 percent. Altruism isn't necessarily their forte.
Each spring and summer, the parties engage in an elaborate dance to determine what's fair and economically feasible. Before May of 2000, the players and advisers led and baseball followed. That's when Sandy Alderson--who was then MLB's executive vice president for baseball operations--gathered the game's scouting directors and changed the choreography.
A month before the 2000 draft, clubs looked at the horizon and saw a city bus about to crush their grill. The momentum was undeniable. In 1987, Cincinnati high school outfielder Ken Griffey Jr. signed for $160,000 with the Mariners as the top overall pick. Twelve years later, Josh Hamilton received a $3.96 million windfall from the Devil Rays.
Just as troubling, to many, was the notion that the draft was becoming a sham because of the "signability" trend: poor teams bypassing superior talent for cheaper, less skilled alternatives. Teams seemed less concerned with bat speed than how quickly a prospect could grab a pen, sign and hop a plane for Rookie ball.
Alderson gathered the scouting directors for what Major League Baseball termed "negotiating training." With agents becoming more skilled than ever, MLB believed that talent evaluators were in danger of being outgunned. So the commissioner's office staked out a bigger role, recommending bonuses for players chosen in the first three rounds and making scouting directors more accountable by forcing them to go up the chain of command before exceeding those recommendations. These recommendations became known as bonus slots, and a new term entered the draft lexicon.
"One of the problems was that negotiations had gotten one-sided because clubs felt they had to sign these players," says Alderson, who left the commissioner's office in 2005 to take over as Padres CEO. "The original hope was that Major League Baseball could convince clubs that if they didn't sign a player, they didn't sign a player.
"Second, we wanted to give clubs some ideas (of) what they should think about in terms of bonuses. The result over the last few years has been a more predictable draft. It's a much more rational system now."
A Guideline, Not A Rule
That's one man's opinion, of course. Like contraction, the DH or Alex Rodriguez' ability to produce in the clutch, the financial fallout of the baseball draft is rife for dissection.
While agents mockingly refer to the slot system as "legal collusion," there are significant distinctions at play. This isn't the NBA, where rookie first-rounders sign predetermined guaranteed contracts. Baseball simply makes recommendations (which have evolved to cover players chosen in the first 10 rounds), and teams are free to exceed them at any time.
Clubs are subject to fines only if they pay "over slot" without notifying MLB. But that's a rare occurrence. And the fines--believed to be in the $75,000 range--aren't high enough to qualify as a major deterrent.
Frank Coonelly, who administers the draft support program as Major League Baseball's chief labor counsel, says the goal is to provide clubs with "education" based on historical analysis. The commissioner's office has done exhaustive analysis of previous drafts and routinely sends out memos or distributes information at annual meetings. Maybe it's a list of "bonuses harmful to the industry," or a study of the success rates of high school versus college players.
"Hopefully it's information that's helpful to the clubs and will allow them to sign players in a manner that makes sense to them and the industry," Coonelly says.
While Coonelly claims the slotting system hasn't acted as a lid on bonuses, the numbers reflect its impact at the highest level of the draft. From 1989-99, the average payout for first-round picks increased more than tenfold--from $176,000 to about $1.81 million. In the first six years under the new system, the average bonus for a first-rounder actually declined slightly.
Major League Baseball is sensitive enough about discord within the ranks that teams have been instructed not to comment publicly on the system. But several club officials shared their thoughts with Baseball America on the condition of anonymity.
The general consensus: While the goal of the new program is admirable, it has significant kinks that need to be addressed.
A National League executive said the slotting system discourages creativity and makes it difficult for teams to try new ideas. Say, for example, a club has the top pick in a weak draft. Rather than pay $5 million on the No. 1 choice, it might want to economize and divvy the money among four or five high-ceiling high school players in later rounds. But that approach would be difficult if not impossible to execute under the new system.
An American League personnel man objects to the idea that the teams most willing to buck the commissioner's office and pay over slot are more likely to land the best talent.
"In the big picture, everybody in baseball is on the same page," the AL official says. "But this has created a division between the teams who will toe the line--the ones that (commissioner Bud) Selig and the commissioner's office have influence over--and the clubs who don't give a crap. They'll take the best players and give them the money. There's an advantage there, isn't there?
And just about everyone has a favorite example of a player who got away. Maybe it's Drew Stubbs, whose negotiations with the Astros unraveled when the club backed out on a promised $900,000 bonus--after MLB applied the pressure to stay closer to the recommended bonus. Stubbs went to the University of Texas and stands to make significantly more as a first-rounder this year.
Or maybe it's pitcher Tim Lincecum, who couldn't agree to terms with the Indians in his first go-round under the slot system and will now hit the jackpot out of the Washington after leading the nation with 199 strikeouts.
Do these types of cases make sense for baseball?
"From my perspective, if a kid goes to school and proves himself and comes back and is drafted in a higher round, more power to him," Coonelly says. "For every example of a kid who goes back into the draft and gets more, I can give you examples of guys who go back into the draft and get less."
As baseball's designated slotting gatekeeper, Coonelly is the man who answers the phone when a club wants to step outside the box. A team might want to pay more than the designated slot to dissuade a player from going to Stanford or Georgia Tech. Or perhaps the player is a two-sport athlete with choices outside baseball, and he needs a financial incentive to continue his career on the diamond.
After Coonelly hears the scouting director's pitch, he typically calls the team owner and explains why it's not a good idea. In some cases, Selig will get involved. Some personnel people resent the not-so-subtle intimidation at play. One AL front-office man used the term "scare tactics." And there's a natural tendency for people who carry radar guns and stopwatches for a living to distrust lawyers in suits.
"I think it can get a little heavy-handed at times," says a National League official. "When you're an operational guy who's run a club and you have somebody who's never done it calling and telling you how things should be done, that tends to rub some people the wrong way."
From the moment Alderson laid out details of the new system six years ago, teams were quick to test it. The White Sox set the tone in 2000 when they paid Stanford outfielder Joe Borchard $5.3 million--the going rate to persuade a budding Dale Murphy to forsake a potential career as an NFL quarterback.
There have been dozens of other examples since. The Braves paid over slot to land two-sport star Jeff Francoeur, and the Expos gave Grady Sizemore $2 million in the third round so he wouldn't play football at Washington. While those expenditures worked out, a $2 million investment doesn't always seem so prudent in hindsight. The Mariners will forever regret paying that amount to supplemental first-round choice Michael Garciaparra in 2001.
Different Approaches
And just as the slotting system pits stopwatch clickers against number crunchers, it also reflects the different approaches among the agents who negotiate those deals.
On the one hand is Scott Boras, who has a terminal aversion to predraft deals and sharing information with clubs. Some baseball officials say the slot system is tailor-made for Boras because it's easier for his "special" players to drop to affluent clubs. But Boras is critical of the system because he's convinced it's had an adverse effect on the game's talent base.
Boras contends that scouts have so little security and input in the process, they're forced to recommend players for signability at the expense of talent and character. He thinks the rigidity of the current system, coupled with the shortage of college baseball scholarships, has steered more elite athletes toward football and basketball. And he argues that the prohibition on trading draft picks is an antiquated concept that's outlived its usefulness.
But Boras' principal dissatisfaction with the slotting system is reserved for young agents who "buddy up" to scouts before the draft. He calls them "salesmen" and says they allow players to settle for less even as the game's revenue continues to increase.
"Young agents go to the family and say, 'I can get you drafted high. I can get you last year's number,' " Boras says. "They're actually taking away the right of negotiation of most of the high school athletes and many college athletes. And their entire appraisal of the athlete's value is coming from the club."
At the other end of the philosophical spectrum are San Francisco-based agents Matt Sosnick and Paul Cobbe, who have built a thriving company with an anti-Boras model--working the grapevine and cultivating harmonious relationships with clubs. Pitchers Brandon Weeden and Jeff Marquez are among the Sosnick-Cobbe clients who received higher bonuses by moving up the draft because clubs knew they would sign quickly.
"That's how we plan for the draft," Sosnick says. "We try to manipulate it based on doing stuff the right way. Some big agents say, '(Bleep) it. We're not changing anything for anybody.' Their guys slip in the draft. They hold them out. It becomes more of an anxiety play for the people involved than it would be otherwise. It's all about the agent's ego."
In 2002, the Blue Jays were prepared to give pitcher Jeff Francis a $1.725 million bonus as the 14th pick in the draft. But when it became clear the Rockies couldn't get a deal done with outfielder Denard Span in the No. 9 spot, Francis moved up five places and pocketed $1.85 million.
"In my opinion, Jeff Francis was going to get $1.7 million or $1.8 million no matter what," says Jim Lindell, Francis' agent. "So you can do it two ways. You can tell everybody he's an elite player and he goes in the second round and holds out all summer and gets it, or you can be proactive and move him up in draft the way I did. At the end of the day, you don't care if he goes ninth overall or in the second round as long as he maximizes his market value. That's in the client's interests."
Getting Around The System
Just as it's natural for draft picks to seek more money, it's natural for clubs to seek ways to circumvent the system and pay it. Since 2000, a total of 18 picks have signed creatively structured major league contracts out of the draft. That compares to 11 major league deals from 1986-1999, starting with Bo Jackson and the Royals.
Scouting directors also claim that with elite players, clubs are encouraged to wait until late in the signing season. Last year first-rounders Justin Upton, Alex Gordon, Jeff Clement and Mike Pelfrey all signed late to minimize the fallout for subsequent picks.
For selections in lower rounds, there's less give-and-take than ever in the draft. Years ago, a team might take a flyer on a high-ceiling high schooler in the fourth or fifth round. The two sides would do the obligatory mating dance and bridge the gap, and within a month or two the player would be in the fold. No more.
"If the price tag was $500,000 and the team offered $275,000, you could meet somewhere in the middle and teams would pay for the kid," Lindell says. "Now that's not happening. You have 150 players competing for 100 draft slots, and teams kind of pit players against each other. Some players will just say, 'Screw the slotting system--I'm going to college.' "
The union is essentially a bystander in the process because collusion rules apply only to players covered by the basic agreement. By the same token, because draft picks are tied to free-agent compensation, any changes in the system must be collectively bargained.
There are rumblings that Major League Baseball wants to seek changes in the draft in the next labor talks. If the union agrees to a formal, defined scale for draft bonuses, some of the money saved could go to big league players. But the union would then be accused of selling out future members and sacrificing its principles for short-term gain. And the union would also cede the moral high ground if owners push for a salary cap one day.
Those are questions for down the road. At the moment, the ramifications of Sandy Alderson's negotiating training seminar are still being felt. How hard do teams push the system or rush to comply? It's rarely an easy call.
"We have the choice to go over slot, but that's like telling a high school kid, 'You have the choice to break curfew,' " an NL talent evaluator says. "Sure you do. But you also know there's going to be some kind of consequence."
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PrintSee also: Signing bonus averages for the first 10 rounds
The process of distributing money in the annual June draft is bound to elicit strong reactions. The pleasure/pain ratio hinges primarily on whether the respective parties are on the giving or receiving end.
Major league teams are wary of giving mega-bonuses to young players who, while promising, might fall victim to injury, homesickness or an inability to hit the curve. And big leaguers who've spent a summer or three in Altoona are bound to feel resentment when the latest J.D. Drew-caliber hotshot holds out for a mother lode.
Across the kitchen table from the area scout, the kids and their parents are either starry-eyed and grateful or giddy with a sense of entitlement. The agents, or advisers as they're euphemistically referred to, can serve a valuable role in safeguarding the interests of families--for a cut of 3 to 5 percent. Altruism isn't necessarily their forte.
Each spring and summer, the parties engage in an elaborate dance to determine what's fair and economically feasible. Before May of 2000, the players and advisers led and baseball followed. That's when Sandy Alderson--who was then MLB's executive vice president for baseball operations--gathered the game's scouting directors and changed the choreography.
A month before the 2000 draft, clubs looked at the horizon and saw a city bus about to crush their grill. The momentum was undeniable. In 1987, Cincinnati high school outfielder Ken Griffey Jr. signed for $160,000 with the Mariners as the top overall pick. Twelve years later, Josh Hamilton received a $3.96 million windfall from the Devil Rays.
Just as troubling, to many, was the notion that the draft was becoming a sham because of the "signability" trend: poor teams bypassing superior talent for cheaper, less skilled alternatives. Teams seemed less concerned with bat speed than how quickly a prospect could grab a pen, sign and hop a plane for Rookie ball.
Alderson gathered the scouting directors for what Major League Baseball termed "negotiating training." With agents becoming more skilled than ever, MLB believed that talent evaluators were in danger of being outgunned. So the commissioner's office staked out a bigger role, recommending bonuses for players chosen in the first three rounds and making scouting directors more accountable by forcing them to go up the chain of command before exceeding those recommendations. These recommendations became known as bonus slots, and a new term entered the draft lexicon.
"One of the problems was that negotiations had gotten one-sided because clubs felt they had to sign these players," says Alderson, who left the commissioner's office in 2005 to take over as Padres CEO. "The original hope was that Major League Baseball could convince clubs that if they didn't sign a player, they didn't sign a player.
"Second, we wanted to give clubs some ideas (of) what they should think about in terms of bonuses. The result over the last few years has been a more predictable draft. It's a much more rational system now."
A Guideline, Not A Rule
That's one man's opinion, of course. Like contraction, the DH or Alex Rodriguez' ability to produce in the clutch, the financial fallout of the baseball draft is rife for dissection.
While agents mockingly refer to the slot system as "legal collusion," there are significant distinctions at play. This isn't the NBA, where rookie first-rounders sign predetermined guaranteed contracts. Baseball simply makes recommendations (which have evolved to cover players chosen in the first 10 rounds), and teams are free to exceed them at any time.
Clubs are subject to fines only if they pay "over slot" without notifying MLB. But that's a rare occurrence. And the fines--believed to be in the $75,000 range--aren't high enough to qualify as a major deterrent.
Frank Coonelly, who administers the draft support program as Major League Baseball's chief labor counsel, says the goal is to provide clubs with "education" based on historical analysis. The commissioner's office has done exhaustive analysis of previous drafts and routinely sends out memos or distributes information at annual meetings. Maybe it's a list of "bonuses harmful to the industry," or a study of the success rates of high school versus college players.
"Hopefully it's information that's helpful to the clubs and will allow them to sign players in a manner that makes sense to them and the industry," Coonelly says.
While Coonelly claims the slotting system hasn't acted as a lid on bonuses, the numbers reflect its impact at the highest level of the draft. From 1989-99, the average payout for first-round picks increased more than tenfold--from $176,000 to about $1.81 million. In the first six years under the new system, the average bonus for a first-rounder actually declined slightly.
Major League Baseball is sensitive enough about discord within the ranks that teams have been instructed not to comment publicly on the system. But several club officials shared their thoughts with Baseball America on the condition of anonymity.
The general consensus: While the goal of the new program is admirable, it has significant kinks that need to be addressed.
A National League executive said the slotting system discourages creativity and makes it difficult for teams to try new ideas. Say, for example, a club has the top pick in a weak draft. Rather than pay $5 million on the No. 1 choice, it might want to economize and divvy the money among four or five high-ceiling high school players in later rounds. But that approach would be difficult if not impossible to execute under the new system.
An American League personnel man objects to the idea that the teams most willing to buck the commissioner's office and pay over slot are more likely to land the best talent.
"In the big picture, everybody in baseball is on the same page," the AL official says. "But this has created a division between the teams who will toe the line--the ones that (commissioner Bud) Selig and the commissioner's office have influence over--and the clubs who don't give a crap. They'll take the best players and give them the money. There's an advantage there, isn't there?
And just about everyone has a favorite example of a player who got away. Maybe it's Drew Stubbs, whose negotiations with the Astros unraveled when the club backed out on a promised $900,000 bonus--after MLB applied the pressure to stay closer to the recommended bonus. Stubbs went to the University of Texas and stands to make significantly more as a first-rounder this year.
Or maybe it's pitcher Tim Lincecum, who couldn't agree to terms with the Indians in his first go-round under the slot system and will now hit the jackpot out of the Washington after leading the nation with 199 strikeouts.
Do these types of cases make sense for baseball?
"From my perspective, if a kid goes to school and proves himself and comes back and is drafted in a higher round, more power to him," Coonelly says. "For every example of a kid who goes back into the draft and gets more, I can give you examples of guys who go back into the draft and get less."
As baseball's designated slotting gatekeeper, Coonelly is the man who answers the phone when a club wants to step outside the box. A team might want to pay more than the designated slot to dissuade a player from going to Stanford or Georgia Tech. Or perhaps the player is a two-sport athlete with choices outside baseball, and he needs a financial incentive to continue his career on the diamond.
After Coonelly hears the scouting director's pitch, he typically calls the team owner and explains why it's not a good idea. In some cases, Selig will get involved. Some personnel people resent the not-so-subtle intimidation at play. One AL front-office man used the term "scare tactics." And there's a natural tendency for people who carry radar guns and stopwatches for a living to distrust lawyers in suits.
"I think it can get a little heavy-handed at times," says a National League official. "When you're an operational guy who's run a club and you have somebody who's never done it calling and telling you how things should be done, that tends to rub some people the wrong way."
From the moment Alderson laid out details of the new system six years ago, teams were quick to test it. The White Sox set the tone in 2000 when they paid Stanford outfielder Joe Borchard $5.3 million--the going rate to persuade a budding Dale Murphy to forsake a potential career as an NFL quarterback.
There have been dozens of other examples since. The Braves paid over slot to land two-sport star Jeff Francoeur, and the Expos gave Grady Sizemore $2 million in the third round so he wouldn't play football at Washington. While those expenditures worked out, a $2 million investment doesn't always seem so prudent in hindsight. The Mariners will forever regret paying that amount to supplemental first-round choice Michael Garciaparra in 2001.
Different Approaches
And just as the slotting system pits stopwatch clickers against number crunchers, it also reflects the different approaches among the agents who negotiate those deals.
On the one hand is Scott Boras, who has a terminal aversion to predraft deals and sharing information with clubs. Some baseball officials say the slot system is tailor-made for Boras because it's easier for his "special" players to drop to affluent clubs. But Boras is critical of the system because he's convinced it's had an adverse effect on the game's talent base.
Boras contends that scouts have so little security and input in the process, they're forced to recommend players for signability at the expense of talent and character. He thinks the rigidity of the current system, coupled with the shortage of college baseball scholarships, has steered more elite athletes toward football and basketball. And he argues that the prohibition on trading draft picks is an antiquated concept that's outlived its usefulness.
But Boras' principal dissatisfaction with the slotting system is reserved for young agents who "buddy up" to scouts before the draft. He calls them "salesmen" and says they allow players to settle for less even as the game's revenue continues to increase.
"Young agents go to the family and say, 'I can get you drafted high. I can get you last year's number,' " Boras says. "They're actually taking away the right of negotiation of most of the high school athletes and many college athletes. And their entire appraisal of the athlete's value is coming from the club."
At the other end of the philosophical spectrum are San Francisco-based agents Matt Sosnick and Paul Cobbe, who have built a thriving company with an anti-Boras model--working the grapevine and cultivating harmonious relationships with clubs. Pitchers Brandon Weeden and Jeff Marquez are among the Sosnick-Cobbe clients who received higher bonuses by moving up the draft because clubs knew they would sign quickly.
"That's how we plan for the draft," Sosnick says. "We try to manipulate it based on doing stuff the right way. Some big agents say, '(Bleep) it. We're not changing anything for anybody.' Their guys slip in the draft. They hold them out. It becomes more of an anxiety play for the people involved than it would be otherwise. It's all about the agent's ego."
In 2002, the Blue Jays were prepared to give pitcher Jeff Francis a $1.725 million bonus as the 14th pick in the draft. But when it became clear the Rockies couldn't get a deal done with outfielder Denard Span in the No. 9 spot, Francis moved up five places and pocketed $1.85 million.
"In my opinion, Jeff Francis was going to get $1.7 million or $1.8 million no matter what," says Jim Lindell, Francis' agent. "So you can do it two ways. You can tell everybody he's an elite player and he goes in the second round and holds out all summer and gets it, or you can be proactive and move him up in draft the way I did. At the end of the day, you don't care if he goes ninth overall or in the second round as long as he maximizes his market value. That's in the client's interests."
Getting Around The System
Just as it's natural for draft picks to seek more money, it's natural for clubs to seek ways to circumvent the system and pay it. Since 2000, a total of 18 picks have signed creatively structured major league contracts out of the draft. That compares to 11 major league deals from 1986-1999, starting with Bo Jackson and the Royals.
Scouting directors also claim that with elite players, clubs are encouraged to wait until late in the signing season. Last year first-rounders Justin Upton, Alex Gordon, Jeff Clement and Mike Pelfrey all signed late to minimize the fallout for subsequent picks.
For selections in lower rounds, there's less give-and-take than ever in the draft. Years ago, a team might take a flyer on a high-ceiling high schooler in the fourth or fifth round. The two sides would do the obligatory mating dance and bridge the gap, and within a month or two the player would be in the fold. No more.
"If the price tag was $500,000 and the team offered $275,000, you could meet somewhere in the middle and teams would pay for the kid," Lindell says. "Now that's not happening. You have 150 players competing for 100 draft slots, and teams kind of pit players against each other. Some players will just say, 'Screw the slotting system--I'm going to college.' "
The union is essentially a bystander in the process because collusion rules apply only to players covered by the basic agreement. By the same token, because draft picks are tied to free-agent compensation, any changes in the system must be collectively bargained.
There are rumblings that Major League Baseball wants to seek changes in the draft in the next labor talks. If the union agrees to a formal, defined scale for draft bonuses, some of the money saved could go to big league players. But the union would then be accused of selling out future members and sacrificing its principles for short-term gain. And the union would also cede the moral high ground if owners push for a salary cap one day.
Those are questions for down the road. At the moment, the ramifications of Sandy Alderson's negotiating training seminar are still being felt. How hard do teams push the system or rush to comply? It's rarely an easy call.
"We have the choice to go over slot, but that's like telling a high school kid, 'You have the choice to break curfew,' " an NL talent evaluator says. "Sure you do. But you also know there's going to be some kind of consequence."
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