New Labor Deal Features Major Draft Changes

After years of talking about it, baseball is trying some new ideas

The major headline from the five-year renewal of baseball's labor agreement is that the sport is now assured of 21 straight years without a strike or lockout, the longest period of labor peace since the beginning of collective bargaining.

And from the broadest perspective, the sport will continue to operate for the next five years pretty much as it has for the previous 16.

But for those who work in scouting and player development, sea changes are coming to the draft and the international market. While baseball won't have a hard slotting system present in other sports—in which every selection in a draft gets a designated, non-negotiable bonus payment—teams will have specified budgets for drafts and international signings.

The recommended budgets were expected. The severity of the punishment for exceeding those budgets perhaps was not.

Under the new system, each club will get an aggregate bonus pool for the first 10 rounds of the draft, based on all of its picks—each of which will be assigned a value. While clubs will not be required to stick to the value of each pick, they will be expected to come in under the overall budget number.

"I think it will make a difference; you're no longer going to be able to sign players after top rounds," one National League crosschecker said via text message. "Teams with the philosophy to spend and accept risks no longer benefit, and it hurts small-market clubs who choose to develop organization through draft.

"I'm not excited about this . . . More kids will end up in college, similar to pre-2005. The bar has been set high on payout of high school players. If a player slips to the third round, the chances of signing him away from an SEC or ACC school will be very slim now. Hey, at least it will be fun again to scout Team USA and the Cape (Cod League)."

College baseball looks like it could be a major winner as a result of this agreement. UCLA coach John Savage watched as three of his top recruits—righthander Joe Ross, third baseman Tyler Goeddel and catcher Austin Hedges—signed for a combined $7.25 million within the final hour of the 2011 signing deadline. The new rules could direct more marquee players to college.

"I think the last couple of years, there's been a lot of high school players that get substantial money who normally would have gone to school where they were picked," Savage said. "So I think you'll see a little less of that, because the consequences will be heavy, in terms of loss of draft picks and financial penalty.
"I think you'd be foolish to think that it's college baseball-driven; we all know it's not. But from a party that's heavily involved in this decision, it looks like it was a good day for college baseball."

Teams that exceed the signing budget by 0-5 percent will pay a 75 percent tax on the overage. Teams that go over by 5-10 percent will pay the same tax and lose a first-round pick in the next draft. Teams that go over by 10-15 percent will pay a 100 percent tax and lose a first- and second-round pick. And finally, teams that go over by more than 15 percent will pay the 100 percent tax and lose their first-round picks in the next two drafts.

"I'm reserving judgment on the draft, but I think guys out of high school will still get good money," one veteran agent said. "I want to see how it works but it was getting ridiculous . . . Your opportunity costs were starting to really climb, you're spending $10 million on a draft class and if you're lucky you're getting five players to the majors, two of those for a cup of coffee. So you're talking $2 million per big leaguer, and that's a lot to pay for talent."

International signings will have a similar pool, with similar penalties. Going over by 0-5 percent kicks in the 75 percent tax; 5-10 percent includes the same tax and a loss of the right to sign more than one player for a bonus of more than $500,000. Go over by 10-15 percent and a team incurs the 100 percent tax and can't sign any player for more than $500,000. Going over by more than 15 percent draws the 100 percent tax and prohibition to sign any player for more than $250,000.

"In the amateur talent acquisition area, we not only made economic reforms that we think will help our weakest clubs have access to talent at a truly affordable price, but we went beyond those economic issues, in some cases at the urging of the MLBPA, to do things like awarding extra picks to teams that have performed poorly in order to improve the overall competitive balance of the game," MLB executive vice president of labor relations and human resources Rob Manfred said at the press conference announcing the deal.

Fix The Draft

For years, people in baseball—including Baseball America—had called for various ideas to tweak the draft. Such talks usually increased as the renewal of a labor deal approached, but other issues inevitably took center stage and the draft was left for later. This time around, commissioner Bud Selig made draft changes an emphasis in Major League Baseball's negotiating position, and the sport's peace in larger issues left time to tackle the issue.

In addition to the signing bonus pool, the new CBA also changes free agent compensation and seeks to award more picks to low-revenue teams.

Starting in 2012, the familiar Type A and Type B free agents, based on the Elias ranking system, will be eliminated. Now the only free agents subject to compensation will be those who are offered contracts equal to the average salary of the 125 highest-paid players in the game as they enter the free-agent process. Players also have to be with a team for an entire season to be subject to compensation, so pending free agents who are traded at midseason will not generate extra picks for the teams that acquire them.

A team that signs one of those free agents will give up its first-round pick. Unlike before, when the top 15 overall picks were protected, now only the top 10 are protected. In those cases, the team will lose its second-highest selection (not necessarily its second-round pick, as before).

There's also a lottery for six extra picks following both the first and second rounds. Teams that are in the bottom 10 in revenue and/or market size go into a pool for six picks after the first round, with odds of winning based on the prior season's winning percentage. Teams that don't get one of those picks—and any other team that receives money from revenue sharing—then goes into another lottery for six picks after the second round. The odds of winning are based on prior season winning percentage.

A couple of other notable draft changes:

• The draft will continue to be conducted in June, but the signing deadline will be moved to a date between July 12-18, depending on the date of the All-Star Game. Since 2007, the deadline has been in mid-August.

"I think that's a win-win for everyone," Savage said. "The guys that want to go out will go out. They'll be able to get out in their short seasons and play right away. I think Major League Baseball will like that. It's also a win on the college side; it gives you a little time to recover (from unexpected draft losses). It at least gives you 60 days, in some cases 90 days, to re-evaluate where you're at, roster-wise, and if you do have money available you can go out and get somebody at that time."
• No more major league deals, as drafted players may only sign minor league contracts.

• Free-agent compensation picks awarded by lottery "may be assigned" by a club, which would seem to indicate they can be traded. If correct, that would be a draft first.
• The top 200 prospects will be subject to a predraft drug test and will participate in a predraft medical program as well.

International Changes Coming

The changes to the amateur scene also affect things internationally, with a cap for the 2012-2013 signing period. Jeff Passan of Yahoo! Sports reported that the cap will be $2.9 million for all teams in the first year, and it will be adjusted for subsequent years based on winning percentage.

The penalties are as noted above, and the agreement says the penalties will increase in 2014-15 "if a draft or drafts is not agreed to by July 2014." Several sources said an international draft is a clear goal in the next few years.

Starting with the 2013-14 signing period (July 2, 2013-June 15, 2014), teams will be allowed to trade a portion of their international cap space, subject to certain (though unspecified) restrictions.