Explaining Why A Team Would Punt On The 2020 Draft, And Why It Doesn't Make Sense
There is a rumor bouncing between teams and agents that at least one team will consider picking a player in the first round with no intent of signing the player, knowing that they would receive a compensatory pick (one pick later) in the 2021 draft. The rumor has been floating around for a while, but CBS Sports’ RJ Anderson was the first to publicly report it. Another version of the rumor that has been shared regularly is that some unnamed team or teams will look to sign players, but at far below slot value to save money.
It’s a topic of discussion around baseball. Front office officials with multiple teams and multiple agents said they have been hearing the rumors and talking about it, but at the same time there’s a heap of skepticism as to whether it has any validity. It’s a rumor.
Multiple front office officials tried to suss out the logic of such an approach, examining it from different approaches. Overall, most of them failed to see the logic and said they did not expect it would happen.
Here’s an attempt to explain the reasons why a team would consider punting on its first-round pick, as well as the arguments against such approaches.
1. Cost savings
Every draft pick this year will receive a maximum of $100,000 of their signing bonus in 2020. The remainder of each player’s bonus will be divided into two payments that are payable in 2021 and 2022. So a player signing a $4,500,000 deal this summer will receive $100,000 in 2020, $2.2 million in 2021 and $2.2 million in 2022.
The same rule will apply for the 2021 draft. So a team that failed to sign its first-round pick this year would defer the $100,000 payment to 2021 and save the larger payments until 2022 and 2023.
For any major league team, these cost savings are quite modest in the scope of $100 million payroll budgets and team valuations of at least $1 billion. A solid argument could be made that any major league team unable to pay a first-round pick $100,000 this year and $2 million in both 2021 and 2022 is no longer a properly functioning Major League Baseball organization.
But it doesn’t mean it’s not possible. In 2001, the Reds selected Jeremy Sowers with the 20th pick of the first round knowing that he was very likely headed to Vanderbilt. BA’s report heading into the draft said that Sowers “has an almost unwavering commitment to Vanderbilt. His stepfather, a doctor, wants him to go to school, no matter what his signing bonus may be.”
The decision to select and then not sign Sowers allowed the Reds to reset their draft budget after multiple years of borrowing from next year’s draft budget to sign draftees and international free agents. Back then there was no compensation for failing to sign a first-rounder, so the Reds simply passed on adding a first-round talent in 2001.
The Reds’ 2001 draft class is one of the worst of all time. The only two players Cincinnati drafted that year who ever made the majors were two the team failed to sign—Sowers and Nick Markakis. By the time they dug out of that hole, general manager Jim Bowden had been fired.
2. Saving on service time
The draft pick signing deadline this year is Aug. 1. Some front office officials said they didn’t expect to see many first-rounders sign as quickly as usual this year because there is unlikely to be a minor league season for them to participate in. But whether they sign in June or late July, those players will still sign 2020 contracts, which means that this year counts against players’ Rule 5 exemption and thus an organization’s 40-man roster decisions years down the road. A college player drafted this year will have to be on a 40-man roster after the 2023 season to be ineligible for the Rule 5 draft.
Theoretically, by punting on a pick this year, teams could wait to draft and sign a player in 2021 who would be able to head out and play immediately, putting such a player on a slightly faster development track than a 2020 draftee.
But there are holes to this argument as well. The vast majority of front office officials we consulted expect that 2020 draftees will get on the field this year in some form, whether it’s in an expanded instructional league setting, the Arizona Fall League or some form of minicamps.
And in a normal year, college pitchers who are drafted rarely get significant time in their draft season because they are coming off of a long college season. None of the seven four-year college pitchers drafted in the first round in 2019 threw even 25 innings in their pro debuts.
So if a team picks a high school player or college bat, they could receive a modest development boost from a typical minor league season, but they will receive no real benefit if they select a college pitcher. This year, with the possibility of pitching innings in an extended fall league or instructional camp, that wouldn't be the case.
3. Feasting on a great draft
The 2021 draft is expected to be overstuffed. There will be a much better junior college class than normal because of high school players and Division I kickbacks who end up opting to head to junior college because it allows them to be draft eligible in one year (rather than the two or three years that is the case for D-I players). It’s also viewed as a very talented college crop that again is expected to have plenty of pitching.
And one could argue that it will be a more “normal” draft. If the 2021 season is played as usual, teams will have more data and more scouting looks than they had in the abbreviated 2020 spring season.
So arguably, a team punting on its 2020 first-round pick would have the ability to take better advantage of the even deeper 2021 draft.
There are problems with that argument. A draft pick now is worth more than the very same pick a year from now, something that has been consistently shown in sports which allow the trading of draft picks. An NFL team wanting a third-round pick in the current draft has to give up a second-round pick in the following year’s draft to make the deal. Consistently in the NFL draft, teams have to offer a pick from a round earlier in next year’s draft to account for the difference in value between picking now and picking a year later.
There aren’t many examples to turn to because not many first-round picks go unsigned. The Pirates failed to sign Mark Appel in 2012 and drafted Austin Meadows with the compensatory pick in 2013. The Blue Jays drafted Max Pentecost in 2014 after failing to sign Phil Bickford in 2013. The Astros drafted Alex Bregman in 2015 after not signing Brady Aiken in 2014. The Dodgers drafted Jordan Sheffield in 2016 after not signing Kyle Funkhouse in 2015. Three unsigned 2018 first-round picks turned into 2019 compensatory first-round picks, but not nearly enough time has passed to make any evaluations on those picks.
In some cases (Meadows and most notably Bregman) teams have benefitted from failing to sign a player and using the compensatory pick a year later, but in many of the cases there were medical questions that led to the players opting not to sign, which wouldn’t be the case in this hypothetical scenario.
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4. Poor Use Of Resources
The MLB draft allows teams to sign players far below their market value. There are draft busts every year, but the amount of money MLB teams spend on the draft every year is dwarfed by the value they receive in return.
Punting on a draft pick or draft is akin to turning down a $10 investment you know you can turn around and sell for $20.
The production teams get from draftees far exceeds the cost teams would pay for similar production on the free agent market. But going beyond that, we have several examples that demonstrate how much more actual value draftees have beyond the cost of their bonuses.
We have several examples that demonstrate this. In 2014, the D-backs signed Touki Toussaint for $2.7 million. A year later, they traded him to the Braves to free themselves from the $10 million they owed injured pitcher Bronson Arroyo (Arizona received utilityman Phil Gosselin in return). The D-backs received almost four times as much in value from the Toussaint pick as they had to spend to sign him.
In 1996, four first-round picks were declared free agents because of technicalities. The “loophole” free agents all signed for far more than the draftees did. Two of the loophole free agents signed $10 million deals in a year where the top pick received $2 million.
And just a couple of years ago when Kyler Murray had the option of going pro in football or sticking with baseball, he chose football and turned down a $14 million offer from the Athletics. That offer is equal to the highest total bonus pool in the 2020 draft, belonging to the Orioles.
A team that wanted to be cheap would be better off drafting and signing a player at slot value and then turning around and trading away that same player for significantly more than they paid the player.