How Much Money Will MLB Teams Save In A Shortened 2020 Draft?
Major League Baseball is set to formally announce in the coming days that the 2020 draft will be only five rounds, the fewest since the draft began in 1965.
MLB and the MLB Player’s Association agreed in March to cut the draft from its usual 40 rounds to as few as five rounds as a result of the shutdown caused by the coronavirus pandemic. With the 2020 season still uncertain to be played—though owners have begun presenting a proposal to players for a shortened, 82-game season beginning in July—clubs are seeking ways to save money in order to offset the revenue losses from a shortened or unplayed season. Reducing the number of players drafted, and by extension the amount of money teams pay out in draft signing bonuses, is one of the most direct ways to do so.
MLB proposed a 10-round draft where bonus slot amounts in rounds 6-10 would be halved from last year, but the MLBPA rejected that proposal. As such, the draft will consist of five rounds with slot values equal to 2019. A total of 160 players will be drafted compared to the more than 1,200 normally selected.
In baseball terms, the amount of money clubs save by reducing the number of draft rounds is minimal.
Teams combined to spend $23.319 million on signing bonuses for players drafted in rounds 6-10 in 2019. That’s an average of $777,300 saved per team by eliminating those draft rounds this year.
Teams combined to spend $79,215,284 on signing bonuses for players drafted between rounds 6-40 in 2019. That’s an average of just over $2.64 million saved per team by not having a full 40-round draft.
On the surface, $770,300 is a small price to pay for the chance to draft a Jacob deGrom, Paul Goldschmidt, Justin Turner, Marcus Semien, Whit Merrifield or Edwin Encarnacion, all of who were drafted between rounds 6-10.
In non-player terms, however, those savings can be meaningful.
For example, $770,300 could be the difference between 12 team employees making $60,000 a year remaining employed or being laid off. $2.64 million would be the difference between 44 such employees keeping or losing their jobs.
Teams are saving money through the draft in other ways. Players drafted in the first five rounds will receive only $100,000 of their signing bonuses this year. They will receive 50 percent of their bonuses in 2021 and the remaining amount in 2022. Typically, draft bonuses are paid out by the end of the following year after a player signs.
Players drafted in the first five rounds last year received a combined $237,345,700 in signing bonuses. If all 160 players drafted this year sign for the full slot amount, teams will save more than $221 million in spending in 2020 by deferring all but $100,000 of those bonus payments, although clubs will still have to pay out the full amount in later years.
Teams will likely save more than that $221 million in spending this year because many players, particularly those drafted in the fifth and final round, are expected to sign less than the full slot amount.
Clubs are making these moves because they face steep revenue losses this season, even if games return but fans are not allowed into stadiums.
About 40 percent of team revenues come from ticket sales and attendance-related expenses such as parking and concessions, according to league sources and published reports. The exact figure varies by team.
The Mariners, Padres and Rangers announced employees making more than a certain amount would take pay cuts this year in order to help avoid furloughs and layoffs. The Rays began furloughing staffers at the start of May and the Marlins will reportedly furlough between 90 and 100 employees beginning June 1, according to Ken Rosenthal of The Athletic.
MLB saw gross revenues of $10.7 billion in 2019 according to Forbes, its 17th consecutive year of record growth.