On November 23, 2011, the Major League Baseball Players Association and the league’s owners signed a new labor agreement that will maintain baseball’s labor peace through the 2016 season. That will extend the record of labor peace in baseball to 21 consecutive seasons, since the 1994-95 midseason strike. Among the many aspects of the game amended by the labor agreement is the draft, which for the first time this year saw teams limited to bonus caps corresponding to the total value associated with each pick that team receives.
Teams’ bonus caps cover any spending in the first 10 rounds, as well as the remaining portion above $100,000 for any bonus greater than that amount. This left teams’ front offices with a fascinating strategic decision to make, as the new system allows the team to shuffle money around between one player’s bonus and another. For example, if a team gives its first round pick $300,000 more than the slot for that pick, they need to make that money up by spending under slot throughout the rest of the first 10 rounds. Before this season, MLB recommended bonuses for each slot, but the league had no power to enforce those bonus amounts and most teams essentially spent what they wanted. The rare exceptions, who stayed mostly in line with MLB’s prescribed bonuses under the old system, were the White Sox and Braves, headed by longtime Selig allies Jerry Reinsdorf and John Schuerholz. Now, teams spending any amount over their allocated bonus pool must pay an extra 75% of any bonus within that range as a penalty. Ten teams ultimately decided the talent available in the draft pool was worth paying that penalty, and spent over their bonus pool totals. However, if a team spends more than 5% over their pool, they lose their first-round pick in the next year. No team was willing to incur this penalty this season, and I’d be extremely surprised to see it happen in the future in all but the very rare case of a Strasburg- or Harper-esque generational talent.
Clearly, the draft is complicated business, and with 30 different teams, there are essentially 30 different strategies to attack the draft as the rules currently exist. However, I expect teams to consider not only their strategy for this year’s draft, as well as the strategies employed by other teams, as they decide how they believe they can receive the biggest dividends from the draft in the future. I’ve grouped teams’ basic strategies into three different camps. I’ll go through and explain those basic strategy frameworks, and highlight a few teams who took each strategy and how it worked for them.
Playing It Straight: These teams basically stuck to their allotted bonus pool, avoiding going significantly over slot in most cases, and thus avoiding the necessity of going under slot to compensate. This was by far the most common strategy employed by teams, but just because it’s common and not particularly creative doesn’t mean it can’t work. The Giants are a very basic example of this strategy. Other teams basically adhered to this strategy but added their own little twist. The Braves, for example, were close to their slots throughout the first 10 rounds, but saved over $75,000 on five of them, allowing them to finish those rounds $408,800 over slot and spend a total of $585,000 ($385,000 against their cap) on their 12th and 16th round picks and still stay below their bonus pool number overall. The Dodgers went $400,000 over slot for their first pick, Kyle Seager, then created room for him like the Braves did for their later picks, by consistently going around $50k over slot for a number of their picks. Finally, the Yankees went $400,000 under slot on their first round pick, Oklahoma high school righty Ty Hensley, but then spent it a round later on Austin Aune, a Texas high school outfielder. Brian Cashman and his team then signed their picks in round 7-10 for $10,000 each, allowing the Yankees to finish a league-high $406,300 below their pool total. Unsurprisingly, three of those four picks were college seniors, a pattern that emerged because of the seniors’ lack of leverage and subsequent willingness to sign for cheap. The team had the fifth smallest bonus pool in the draft to start out with, but only outspent the Tigers (who didn’t pick until the second round) and Angels (who were on the sidelines until the third).
Example: San Francisco Giants: The Giants paid bonuses of within $30,000 of the allotted pool for each pick until they went $75,000 over slot for Shilo McCall in the 9th. They then kept the bonus of each player they signed after the 10th round at $100,000 or below, so no pick outside the top 10 impacted their bonus pool.
Other teams: Angels, A’s, Braves, Brewers, Diamondbacks, Dodgers, Marlins, Mets, Orioles, Phillies, Rays, Rockies, Tigers, Twins, White Sox, Yankees
The Bank and Tank: In this strategy, teams spend heavily in the first few rounds, going way over slot for one or more of their early picks. Many of these teams cut it very close to the 5% barrier, as the Jays demonstrate. The Pirates attempted to make room for Mark Appel in their relatively small bonus pool through this method, taking three college seniors in their four picks between the 7th and 10th rounds. When Appel didn’t sign, the Pirates went to their backup plan, spending $825,000 ($525,000 against their pool) to go over slot in the 16th, 17th, and 18th rounds with the money saved at the end of the first 10. Their situation still didn’t work out perfectly, however, as the rules dictate that if a player does not sign, the slot money for his bonus pool disappears and cannot be distributed among other draft picks in the first 10 rounds. For this reason, the Pirates spent just over $3.2M after starting with a bonus pool more than twice that. Teams employing this strategy were hoping to acquire blue-chip talent early at the cost of some of the likelihood of getting a big league player later in the first 10 rounds. The way I see it, that’s not a bad tradeoff, as an extremely large portion of these players will flame out anyway in the long term and only the best of the best will be able to develop to the point where they can reach the majors. I believe teams’ goal in the draft should be to maximize their chances of developing true impact players who project as first-division starters, and this strategy may be the most effective route to that objective.
Example: Toronto Blue Jays: The Jays stayed fairly close to slot with their two first-rounders, saving $250,000 on DJ Davis on their regular pick this year (17) and then using the 22nd overall from their failure to sign Tyler Beede on Duke righty Marcus Stroman. Then, Alex Anthopolous and crew went nuts. They signed Ohio high school lefty Matt Smoral for $2M, making him one of only 6 players in the draft to get bonuses more than seven figures above their slot. They went over slot three more times in their next four picks, tacking an additional $573,300 in bonus-pool debt on to Smoral. After taking two-sport star Anthony Alford (who will play football at Southern Miss as a condition of his contract) in the third, Anthopolous flipped the switch. The team spent $5,000 each on picks 4-9, and $1,000 on 10th round pick Alex Azor. Six of those seven picks were college seniors. When the dust settled, the Jays had enough money left to go over slot for 15th rounder Ryan Borucki, giving the projectable high school lefty $426,000. The Jays went the most over slot of any team in the draft, spending $9,272,000, a measly $340 short of the 5% barrier.
Other teams: Cardinals, Cubs, Nationals, Pirates, Rangers, Red Sox
Spreading the Wealth: These teams went under slot early, taking advantage of the relatively larger slot bonuses to give themselves significant room to work with later and then going over slot either later in the first 10 rounds or picking up $100,000+ players later in the draft. Most of the teams attempting this strategy were among the larger overall bonus pools, allowing them to most effectively leverage the savings they can create on the huge bonus attached to their first overall pick. However, the strategy wasn’t exclusively for teams with extremely early picks, as the Indians and Reds were able to make it work by saving $500,000 on Tyler Naquin and $375,000 on Nick Travieso, respectively, in the teens. While the Astros employed this strategy aggressively and ended up outspending their bonus pool slightly, other teams were able to stay within their pools using this strategy as well.
Example: Houston Astros: The Astros used the first pick overall on Carlos Correa, which may have been a stroke of genius. While Correa crept steadily into the discussion in the week before draft day, many prognosticators projected that the Astros would tab either Appel or Byron Buxton, who eventually went second overall to the Twins. However, in a draft with no clear standout first overall talent, Houston picked Correa, and signed him for $4.8M on a first-overall slot of $7.2M. With the $2.4M they saved on that pick, the Astros were able to offer more than a million over slot to both Lance McCullers and Rio Ruiz, potential first-round talents who fell to the supplemental and fourth rounds respectively largely because of bonus demands. Because of the money they saved on Correa, Jeff Luhnow’s team was one of only three teams, along with the Cardinals and Blue Jays, to sign three players to bonuses of $1.5M or more.
Other Teams: Indians, Mariners, Padres, Reds, Royals
Overall, as teams continue to understand the dynamics of the draft by looking back on the aftermath of the way it was handled this season, more complex strategies will begin to emerge as teams push to optimize their draft strategy. As we’ve already seen, a key strategy employed by many teams is the drafting of college seniors at the back end of the first ten rounds. These players are valuable to their new teams only partially because of their baseball skills. The more immediate advantage is that, in signing these players to bonuses well under $10,000, teams are able to save hundreds of thousands toward their bonus pool that they can use to aggressively chase the blue chip talent available early in the draft.
Questions or comments are welcome in 140 characters or less @saberbythebay.