Saturday, February 13, 2016

Hard Slotting Coming to MLB Draft?

May 10th, 2010 | 20 comments »

First off, thanks to Pete Toms over at Biz of Baseball for posting a summary of Rob Manfred’s speech at Harvard regarding the upcoming collective bargaining negotiations.  I had somehow missed this and am so glad I caught it!

Before I tell you why I’m against hard slotting in the MLB draft and what my alternative suggestion might be, I’d like to make an observation.  When I’m preparing to write something like this, I do a lot of research.  I hate being corrected or proved wrong – maybe that’s the lawyer in me.  Regardless, I came across something interesting.  What’s even more interesting is that I still find it interesting, despite it being something I already knew!  Anyhow, I digress, back to what’s so darn interesting.  Do you know how many articles and blogs there are about NBA and NFL draft slotting?  Not many.  Do you know how many there are about MLB and whether or not there should be a slotting system?  More than I can count!  NBA and NFL players make big bucks, and there are certainly some dynasty-type teams in both leagues…so why do MLB fans care SO much more about issues like this?  Well, because it’s the national pasttime, and we all want a piece of it, I guess.  Anyone who follows sports even a little knows there are FAR more analysts and bloggers in baseball than the other sports, but I still continue to find it fascinating.  What can I say, I’m easily amused.

Back to the issue at hand: slotting in the MLB first-year players draft.  If you read my salary cap post, you can probably guess that I’m not a fan of hard slotting.  It agitates that old free market economy concept I love so much.  Even so, I’ve come up with an alternative I’m still mulling over.  Before I get to that though, let’s review the NBA and NFL system and discuss why MLB does not have hard slotting at this point.

To set the stage for those who are unfamiliar with the NBA and NFL systems, here is a (super) brief overview.  The NBA does not have signing bonuses.  Instead, they have salary slotting.  A player receives a set salary based solely on the slot where he is drafted.  Period.  It’s that cut and dry. 

In the NFL, signing bonuses exist but are becoming less common.  Any signing bonus paid to a player up-front is pro-rated over the life of his contract in terms of the team’s salary cap calculations  If the player is cut before the end of his contract, the entire sum of signing bonus that remains is calculated into the upcoming season’s salary cap.  So, there is an emerging trend of little to no signing bonus and more guaranteed contract years (in the past when signing bonuses were larger, contracts were not guaranteed and a player who was cut was not owed the remainder of his contract, nor was it calculated into the salary cap calculations). 

Now to why hard slotting is absent from MLB.  First, the NBA and NFL systems will not work in MLB.  The biggest reason is because of the minor league system in baseball.  A drafted player is not expected to perform at the big league level immediately, nor is he receiving much in the way of salary in those early years in the minors (with the exception of the very top picks).     

Which leads me to what I hear most people say: shouldn’t the MLBPA support the idea of hard slotting?  I hate to pick on anyone, but one of the first articles I found was by Jeff Fletcher at MLB Fanhouse.  Here’s the pertinent part of his article:

I can’t figure out why baseball still doesn’t have a NBA-style bonus structure.

I mean, I know why. It’s because the players’ union has not allowed the owners to implement one in collective bargaining. One of these days the major league players in the union are going to realize: “Hey, all that money going to amateur kids could be going to us!”

I’m not here to blame Jeff Fletcher.  He holds the same misguided belief I once had about why there is no hard slotting in MLB.  Think about it…why would the MLBPA not want hard slotting?  Like Jeff says, huge bonuses to unproven guys is money not being spent on MLB players.  (As a side note for those who don’t know, the MLBPA does NOT represent the interests of minor league players.)  So, why wouldn’t MLBPA be begging for hard slotting?

Keep it simple, stupid.  The MLBPA loves seeing kids like Strasburg get giant bonuses.  Why?  Well, it makes it a heck of a lot easier to get more money for their players!  If some unproven kid going to minor league ball is worth some enormous bonus, what is a proven and successful major leaguer worth?  An ungodly amount, that’s how much.  Player X is a right-handed reliever who was 17-4 last year with a 2.20 ERA.  He just watched Player Y get a $7 million signing bonus from his club straight out of college.  What can the club possibly say when Player X comes in for salary negotiations and wants $9 million next year?  All Player X has to do is point out the $7 million given to the kid who might never make it to the Majors.  The club now has no ground to stand on and better start drawing up the contract! 

Bottom line: the MLBPA is not going to support hard slotting, because it will have the upward effect of depressing salaries in the bigs.  Don’t even argue with me that it might not – the point is the mere possibility that it will.  The MLBPA isn’t taking that chance.

Personally, I don’t support hard slotting.  I have the same reasoning as my argument against a salary cap – why does this have to be about restricting a person’s ability to make money?  When I was looking for my first attorney gig, there was a range of “signing bonus” money firms gave out for moving and bar expenses.  Do I think the American Bar Association should come in and set the signing bonus?  Of course not.  I should be able to factor that into my decision.  So should ballplayers.  If they say they want to play for Team X or that they will only sign for $5 million or they’ll go play college ball, fine.  That’s their right as an available employee. 

Does signability affect the draft?  Absolutely.  Have I pointed out before when a player like Jeff Francoeur says he wants to play for the Braves or he’ll go play college ball?  Yep!  Does it keep the draft from being perfectly fair?  Sure it does.  But if the Nationals can come up with $15 million ($7.5 million signing bonus and the rest in pro-rated salary over 4 years) to sign the top pick, then clearly signing bonuses aren’t keeping clubs from getting their dream pick.  So the Yankees pay first round money to guys they get in the fifth round, so what?  If the guy was really first round material, he would have gone first round and gotten the money from someone else.  Let the Yankees throw their money around to unproven players.

I can hear you screaming about fairness and the evil empire (aka, the Yankees), so I’ll offer an alternative that I could stomach.  The MLBPA won’t support my alternative idea, but I’m throwing it out to appease the rest of you.  The MLBPA might not be good at compromising, but I am!

I say MLB and the MLBPA sit down and set a threshold amount that can be spent by each club on signing bonuses for each year of the upcoming CBA.  So, let’s just say for sake of having an example, each club can spend $15 million on signing bonuses for the 2010 draft.  They can divide it up any way they choose between the rounds, but cannot exceed the maximum total amount.  This still limits the amount a player is going to receive, but there’s some flexibility.  If he’s really worth it, a team will spend a huge chunk of their allotted amount on him.  In a hard slotting system, he’s got no chance.

The system is still flawed, because inevitably the teams will simply sign the player to a  contract like Strasburg’s where he receives large sums over the next few years as salary.  Then you have to go to a system like the NBA where there are no signing bonuses and only slotted salaries.  Now I have a problem again.  My free-market sensibilities cannot handle slotted salaries.  Same reason I’m against a salary cap.  Hey, at least I’m consistent!

So, even I have a hard time defending my alternative.  It’s the best I’ve come up with if we simply must have some change.  However, I’m ultimately not in favor.  I don’t really believe that clubs are that greatly affected by the lack of  hard slotting in the draft.  Don’t believe me?  Consider what I found in an article by the Pittsburgh Tribune-Review.  The Pirates only signed 23 of their 50 picks in the 2009 draft, which John Grupp notes is the lowest number of signings amongst MLB clubs.  However, the Pirates GM, Neal Huntington, revealed their strategy: they used large signing bonuses to get top high school pitching talent that slipped in the draft.  He seems to think they were successful in their strategy.  The Pirates spent $8.08 million on their top ten picks, which ranked sixth among all thirty clubs.  What does that tell me?  The Pirates might not be the richest club (not even close, actually), but they had a strategy and used what they did have to get what they wanted.  I didn’t hear any remorse about the 37 guys they didn’t sign.  I’m guessing they weren’t worth the money they wanted.

If you ask me (which you’ve basically done by choosing to read this), the real problem is in terms of international signings.  Not all clubs can afford to play that game, which I think is a far bigger problem than signing bonuses.  More to come in the future on what I think should be done there.

I’ll close with another random tidbit I find interesting.  The large majority of my followers on Twitter and on this website are Yankees fans.  We’re here talking competitive balance, revenue sharing, the competitive balance tax, salary caps and draft slotting, and my biggest contingent of followers are Yankees fans.  Some of them even support all or some of these concepts!  I find it endlessly intriguing.  Yankees fans: watch for my post later this week about my weekend in Boston at the Red Sox-Yankees series!

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20 Responses to “Hard Slotting Coming to MLB Draft?”

  1. Tweets that mention » Blog Archive » Alternative to Slotting in MLB --

    […] This post was mentioned on Twitter by Kristi Dosh, Kristi Dosh. Kristi Dosh said: New post on whether #MLB should have slotting in the draft: Short answer? No. […]

  2. Larry@IIATMS

    Kristi, on this topic I think we’re in fundamental agreement. Baseball’s existing economic structure is stacked against the entry-level baseball player. Baseball needs “competitive balance”, and baseball achieves a sort of competitive balance by paying young players much less than they are worth. In this way, the poorer clubs in baseball can compete against the Yanks, Sox and Phils IF they can build a Rays-like squad consisting of players too young to be eligible for free agency.

    If you trace baseball’s economics down into the minor leagues, you’ll find the same sort of rules in play. From the moment a player is signed until the player is eligible for arbitration (if that ever happens), the player is subject to a complex set of rules and regulations (including your hated salary caps and floors) that prevent the player from negotiating a salary representing his true market worth. The sole and single exception to this system is the player’s ability to negotiate a signing bonus when he’s drafted.

    I may not have your faith in the goodness of free markets. I may be willing to tinker with reforms to improve baseball’s competitive balance. But even I have my limits. The economic burden of paying for competitive balance is placed disproportionally on baseball’s youngest players. Enough is enough. Let some other group pay for baseball’s next effort to assist the Marlins and the Pirates.

  3. Kristi Dosh

    I actually have no problem with how minor leaguers are paid. Yes, they are paid terribly and have not-so-great work conditions in term of travel and lodging. That’s all supply and demand though. There are FAR FAR more people willing to play minor league ball than are needed.

    It’s the same with sports law. I looked at a hundred sports-related legal jobs coming out of law school and they all paid about 1/4 of what I made at my law firm the first year. Why? Because so many attorneys are dying to get into sports. You don’t make any money in sports law within an organization like a ballclub until you make it to the General Counsel or General Manager position. Why? Because far more people want the job than there are positions for. Why pay me $100k when Joe Blow will take $30k and has the same skill set?

    I don’t see minor league conditions or pay changing anytime soon. There’s a reason they don’t have their own union.

  4. Larry@IIATMS

    Kristi, well I guess some day we’ll agree on something!

    I get what you’re saying about the minor leagues, and supply and demand. I think you have more direct experience with the minor leagues than I do. But let’s do some math. We have 30 teams in baseball, and if we just look at the 25-man roster, that’s 750 baseball players. I’ve read that the average major league career duration is 5.6 years. So every year, major league baseball needs to replace around 135 players. You have a few Dice-Ks that may come from outside of the minors, but not too many: let’s say that the minors has to supply the majors with 125 players a year. Let’s figure that the average minor league player needs 4 years in the minors before he can play in the major league. So at any moment the minor league holds 500 players that are going to play in the major league at some point.

    But hold on. Not every prospect can become a major league player. Just skim through the list of draft picks from 5 years ago, 10 years ago. Again, I don’t have the statistics, but I figure that maybe one out of 3 players in the minors that are serious prospects actually make it to the major leagues. My math is getting a little sketchy here, as I’m making some SWAG assumptions. But in order for the minor leagues to develop the talent required to feed the major leagues, we’d need 1500 players in the minors.

    How many people are playing minor league baseball? A lot more than 1500! I’ve read that there are roughly 250 teams in the minor leagues. If you figure 25 players a team (and I know that some teams are allowed to have more than 25 players), you’d have over 6,000 minor league baseball players. The math tells us that not all of these players can be serious prospects. But our serious prospects need to play on teams with 9 men on a side, in leagues where there are teams to play against. So I’ll continue to follow the logic: in the minors at any time, there are 1,500 players with serious pro aspirations, and 4,500 other players that (notwithstanding their hopes and dreams) are there to help train the serious prospects.

    I don’t mean to be cruel about it, but those 4,500 guys are the baseball equivalent of sparring partners, or tackling dummies. (No doubt, a few of them will persevere, prove us all wrong and make the MLB all-star team.) They are necessary to the survival of organized baseball, but as individuals they have little economic value. There are another 4,500 guys, 45,000 guys, on sandlots all over America, that would be happy to live the minor league dream for a few years, for next to no pay, regardless of working conditions. If I could have been one of those 4,500 guys, I would have done it, in a heartbeat, for no pay. So you’re right, the market value for those 4,500 guys is close to zero. You just have to pay them enough so that they can find a place to live and can afford to feed themselves. (I don’t mean to get all Karl Marx on you here.)

    The economics for those 1,500 other minor leaguers is very different. These 1,500 minor leaguers are pro prospects. They are a very unusual and talented group of young men, as very very few people can do what a potential major leaguer can do. They cannot be replaced. There are not thousands of other guys out there to replace these 1,500. Without these 1,500, baseball dies. These 1,500 have real economic value.

    You like analogies to the business of law? The 1,500 are like summer associates at big law firms. They are promising potential future legal superstars. Of course, few of them will go on to become rainmakers with 8 figure books of business, but the promise that a FEW will do so makes the entire group valuable. You know how much summer associates are paid by big firms, and how much first year associates are paid by big firms. There’s a huge (and to me at least, distasteful) gap between how these summer associates are treated and how the next “tier” of law school grads are treated. But this is how markets work. If minor league baseball was a free market, you’d see MUCH more of this sort of thing at work there.

    But apart from signing bonuses, the 1,500 are paid just like the 4,500 are paid. They’re all treated the same. They all live under salary caps, and with the same per diems on the road. You’d never see that in a free market.

  5. Kristi Dosh

    You’re right – there are far more guys who are just taking up space than guys who are actually there to develop into Major League ballplayers. However, I would suspect the majority of those who the big club expects to make it are compensated above the minimum. Look at Strasburg. He got a $7 million bonus and rougly $2 million per year for four years. Yes, he has to endure the buses and bad hotels, but only for a short period.

    Why do minor leaguers go through what they go through and for pennies? Because they’re willing to do it. Major League Baseball wasn’t anywhere close to a free market just 50 years ago. Why did things change? Because they players weren’t willing to do it anymore. I don’t see the minor leaguers banding together and refusing to play if they don’t get better pay or conditions. And like I said, I think the top prospects are paid fairly for the most part based on their signing bonus and/or contract pay.

    While I believe in a free market, I don’t see how a wholly free market approach would change things in the Minors. The top players expected to make it through would still be paid well like they are today. The rest would still be made a pittance because there are thousands of guys out there (like you) who are willing to come take their place.

  6. Larry@IIATMS

    Kristi, well … baseball players were also willing to play during the era of the reserve clause. The fact that a person is willing to work in a rigged market doesn’t justify the market being rigged.

    But let’s shift focus for a moment. Both of us dislike the proposed hard slot system. If we’re looking for a compromise solution, what about extending the period during which a team has the exclusive right to negotiate with a draftee? Right now, I think this period is about 3 months (I haven’t looked it up). Why not make it 15 months? That would give owners more leverage. What do you think?

  7. Kristi Dosh

    That’s just it though – I don’t really feel like the Minor League system is rigged. The players who are expected to make it to the Majors have signing bonus money and often contract money to get them through their time in the minors. The rest of the players are paid according to this scale:

    Alien Salary Rates: Different for aliens on visas–mandated by INS (Immigration).

    Triple-A–First year: $2,150/month, after first year no less than $2,150/month

    Class AA-First year: $1,500/month, after first year no less than $1,500/month

    Class A (full season)–First year: $1,050/month, after first year no
    less than $1,050/month

    Class A (short-season)–First year: $850/month, after first year no
    less than $850/month

    Dominican & Venezuelan Summer Leagues–no lower than $300/month

    Meal Money: $20 per day at all levels, while on the road

    Most teams also partner with local “host families” to find players homes. From what I’ve heard these arrangements range from being free to a couple of hundred dollars a month.

    Is it a lot of money? Nope. Is it a fair amount? Maybe so. Let’s look at the situation I was faced with when graduating law school. I could take my dream job working for a baseball team at $38,000 or I could take a $130,000 big firm job. (Note: I’m not at that firm and that’s not my salary anymore, so that’s why I don’t mind sharing to make my point.) Is the market for baseball attorneys rigged because they pay pennies compared to law firms? Nope. It’s just a sought-after job, so they don’t have to pay much and people are still willing to do the work. Was I willing to make far less and live in a city I didn’t like in order to work in my dream job? Nope. I decided it wasn’t my dream job after all, plus I couldn’t afford to make my student loan payments from law school. So, here I am, writing about baseball instead of working in it.

    As for giving a longer time for draft negotiation, I don’t think your method will work. The reason the time frame is so short is because it has to end before guys who are juniors in college return to school to play their senior season. The only way it could work is if negotiations were suspended for the school year and then the team that drafted the player could resume exclusive negotiations with the player at the end of the school’s baseball season. I honestly don’t see how it would change things. A player who is going to drag it out to the wire is going to do so no matter when the deadline is, unless there are stiffer penalties for not signing. And I’m not sure I can support stiffer penalties for not signing, because then we’re getting into a more restrictive market.

  8. Larry@IIATMS

    Kristi, I’ve seen the same salary figures you’ve cited. I think there are also rules about how much you can pay a minor leaguer who’s had major league experience, and how much you can pay someone once you remove him from the 40-man roster. So, the very top minor leaguers are doing OK (a lot closer to your $38,000 dream job salary, but OK), but that’s because of the specified minimums for guys who have gotten a whiff of the majors. It’s still my impression that even the top minor leaguers make the minimum or close to the minimum, and that the economic differentiation between the top prospects and hangers-on is based almost entirely on signing bonuses. But I’ll admit, the info I’ve been able to put my hands on is sketchy.

    I thought of one important distinction between a legal and a baseball career. If your dream is to work at the top levels of MLB management, you’re probably better off taking your big firm job and moving your way up the ranks, then moving over laterally once you’re a rainmaking partner muckety-muck. Minor league players cannot move into the MLB laterally from, say, construction, or soccer. They have no choice but to toil in the minors.

    My sympathy for minor leaguers is based on articles like this one: Maybe these minor leaguers are being treated fairly. I’ll admit, this is not an area I know a lot about. However, if we’re looking for a way to improve baseball’s competitive balance, I’d rather not do so in a way that takes money from minor leaguers.

    As for a longer time for draft negotiation … I was not thinking that the negotiation process requires more time. I was thinking that the owners might be able to do a better job of holding the line on bonus amounts if the player did not have the option to re-enter the next year’s draft. If the teams had a longer exclusive period to negotiate with players, this would give the teams more bargaining power. (Of course the unsigned player could return to school. I’m not anti-education!) But given your objections, I’m just as happy to leave the draft the way that it is, slot-less and with limited draft team exclusivity. As I said, let the millionaires (MLB players) and billionaires (MLB owners) figure out how to solve their competitive balance problems without taking money away from the working stiffs (minor leaguers).

  9. Kristi Dosh

    Two things…

    First, let’s take a AAA player, who is presumably a “top minor leaguer.” If he’s making the minimum, he’s making $2,150/month. If he was working a 40-hour week, he’d be making $13.44/hour. Plenty of those guys, especially the ones without college educations, couldn’t find a job paying that much in the “real world.” One minor leaguer I follow on Twitter was getting on a 4:00pm bus to the stadium for a 7:00pm game. He’ll be back in his room by 11-12 tonight. Yes, they travel, and yes they sometimes work 6-7 day work weeks. However, I just don’t think they’re underpaid. Take any job that has thousands of people wanting it and you’ll find it doesn’t pay well.

    Which brings me to my second point, regarding what you said about a law firm job being better if I want to work in baseball. That’s actually not really true. Most top executives in baseball either started out as a player or as an intern or entry-level employee. John Schuerholz started out as an Administrative Assistant for the Baltimore Orioles. Theo Epstein started out as a media relations intern for the Orioles. Frank Wren started out playing for the Expos and then scouted for them. Pat O’Conner, current President of Minor League Baseball, was an intern for the Dodgers. I can go on and on… :)

    So, hard for me to feel too bad for these guys. I gave up my dream job because I couldn’t live on the money. They don’t HAVE to be out there playing ball, they choose to do so.

    Major League players were able to demand better wages because there weren’t viable replacements, and because it was an industry where the players were receiving a small fraction of the revenue. Minor league baseball doesn’t make nearly the revenue the Majors makes, and so many of the players are “space fillers” as we’ve said before. It would be interesting to know though what percent of revenue minor league players receive. I’ll see if I can get the number.

  10. Kristi Dosh

    I read the article, and I hate to be heartless, but I’m fairly unmoved. Plenty of people make sacrifices to chase their dreams. I knew tons of people in law school who lived in similar situations because they either couldn’t or didn’t want to take out more student loans. Quite a few had to get help from their parents as well. And I definitely have no sympathy for the ones with wives or children. Why would you get married or have children when you can’t afford to take care of yourself?? And some of the minor leaguers I know who complain about not having money also spend what they do have on alcohol, fancy electronics, jewelry, etc. A lot of people have to struggle to get by in their first job, especially if it’s in a coveted industry like sports or some other type of entertainment. This is really no different.

  11. Larry@IIATMS

    Kristi, you don’t have to apologize to me for being heartless! ;^)

    Four of the top execs at MLB are lawyers who started at big law firms. You could look it up. Bud Selig started in his family’s car leasing business. I’m biting my lip so hard there are tears in my eyes.

  12. Kristi Dosh

    I should have clarified (and not included O’Conner in my examples)…I wanted to be the first female GM. Almost all of those guys either started as players or interns. See Frank Wren, John Schuerholz and Theo Epstein above. Daniel O’Dowd started as a Rockies intern…Josh Byrnes started as an Indians intern…Jon Daniels started as a Rockies intern…Michael Hill started as a player…Ed Wade was a Phillies intern…Doug Melvin started as a player…I can do all 30 :) If I had to guess, I’d say 27 started as either players or interns.

  13. Larry@IIATMS

    This discussion is off-topic, but fascinating. Are there any attorneys in the GM ranks?

    It’s even further off-topic, but do you find it strange that there are so many attorneys in baseball’s top brass?

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  15. It's a Swing and a Miss » Blog Archive » The Hard Slotting Debate Renewed

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