A Closer Look At the CBA
Yesterday Major League Baseball announced the new Collective Bargaining Agreement. I talked about how the CBA essentially eliminated the Pittsburgh Pirates from contention forever. Maybe the title of the post was a little bit for effect, but the CBA definitely wasn’t good for the small market team.
I think your view on the CBA changes are largely influenced by your view on the business side of baseball prior to yesterday’s news. I’m of the opinion that the NFL’s structure is the perfect way to run a sport. They have a salary cap, a salary floor, equal revenue sharing, and scheduling that gives weaker teams an easier schedule, with harder teams getting a harder schedule. The league is designed for every team to go 8-8. From there, the smart teams win and the teams with poor decision making lose.
Even before the new CBA I felt that the odds of small market teams having a shot of winning the World Series were between slim and none. It’s a major reason why I don’t get worked up over the Pirates losing. Even if the team puts together an amazing season I think the chances of them actually winning it all are slim. Just look at the recent history of the league. MLB celebrates their uninterrupted work stoppage, which will extend to 21 years after this new deal. In all of those years only one team has won the World Series while sitting in the bottom half of the league in total payroll. That was the Florida Marlins in 2003.
People often point to the Tampa Bay Rays and Milwaukee Brewers as two current signs that small market teams can compete. But what are we really saying? The Rays have pretty much been perfect. They might be the best run team in the majors. If they were an NFL franchise, they’d be a team like the Patriots or Steelers, winning multiple Super Bowls in the same decade, and almost always going to the playoffs. Instead they are underdogs to even make the post-season, and once they arrive in the post season they’ve still got an uphill battle against the All-Star lineups and rotations of teams like the Yankees, Phillies, and Red Sox.
Also, take a look at those two teams and some of the recent history with their best players. The Rays have a great approach, but they can’t afford to keep guys like Carl Crawford or Carlos Pena. The Brewers are going to lose Prince Fielder this year. Yeah, Ryan Braun signed an extension for $105 M, but it includes a front loaded salary, and deferred salaries without interest. It’s a great contract and very team friendly. But it illustrates the difference between teams like the Brewers and teams like the Yankees. The Yankees don’t need team friendly deals to keep or sign top players. The Brewers, on the other hand, need front loading of contracts and deferred salaries with no interest in order to keep a guy like Braun.
That’s my biggest problem with the collective bargaining agreement, and with baseball. MLB acts like baseball is fine and that there is competitive balance. Teams like the Pirates, Nationals, and Royals spend big on the draft because there is no competitive balance, and because this is one of the few areas where those teams can compete with the Yankees and Red Sox for impact talent. Rather than recognizing why small market teams are so aggressive in the draft, MLB hid their head in the sand, focused on the short term dollar as usual, and took away a big opportunity for small market teams to load up on potential impact talent.
It’s understandable why they would do this. If they admit that small market teams benefit from the draft spending, they’d have to admit that there isn’t competitive balance in baseball. If they admit that, they’d have to work on a salary cap, floor, and revenue sharing to make each thing possible. If they went that route, it would probably lead to a strike, ending their string of uninterrupted labor peace. And that’s one thing MLB has that the NHL and NFL don’t have. The NHL had a lockout. The NFL had a lockout. Baseball had a smooth ride to the new CBA. If we ignore the fact that teams in Pittsburgh can compete in the NHL and NFL because of what their lockouts accomplished or preserved, then we can focus on how baseball’s uninterrupted labor peace makes them better than the other two sports.
Speaking of focus, let’s take a closer look at the changes in the CBA:
Scheduling, Realignment, Post Season
The Changes: A second wild card team will be added no later than the 2013 post-season. The two wild card clubs will play a one game series, with the winner advancing to the division series in sort of a “play-in” mode. The 2012 Wild Cards will be decided no later than March 1, 2012. Starting in 2013 the Houston Astros will move to the AL West, creating two 15-team leagues. Also starting in 2013, interleague games will be played throughout the entire season. Active roster limits will be expanded to 26 for certain regular or split double headers.
Analysis: I like the extra wild card team. Baseball obviously isn’t focused on fixing their broken system, so adding more playoff teams gives small market teams more of a chance to compete under the current system. The unanswered question with year-round interleague play will be what happens with the DH rule? Personally I’d expand the DH to both leagues. Baseball purists hate the idea. I hate two things even more: watching pitchers bat and seeing guys like Ryan Doumit limited to AL teams because they can DH.
The Changes: Article XX(B) free agents signing minor league contracts who are not added to the Opening Day roster or unconditionally released 5 days prior to Opening Day shall rceive an additional $100,000 retention bonus and the right to opt out on June 1st.
Analysis: This will help the players to reach the majors or receive the maximum benefits. If a team wants to hold on to them as a depth option throughout the year, they have to pay an additional $100 K. For example, if the Pirates wanted to keep Jake Fox around as an infield option out of AAA, he’d make an extra $100 K. He could also opt out on June 1st if the Pirates didn’t have a spot for him, giving him a chance to sign elsewhere with teams who would be willing to give him a shot in the majors. That could amount to a lot of money for a team taking a lot of fliers on minor league deals. Last year the Pirates signed over ten minor league free agents. Keeping all of them would have cost the team $1 M.
Draft Pick Compensation
The Changes: There will be no more Type A or Type B free agents starting in 2012. Only players who were with a club for the entire season will receive compensation, which eliminates compensation for mid-season trades. A free agent can receive compensation if his former club offers him a guaranteed one year deal with a salary equal to the average salary of the 125 highest paid players from the prior season. The offer must be made at the end of the five day period following the World Series where teams retain exclusive negotiating rights. The player has seven days to accept the offer. A club that signs a player subject to compensation will forfeit its first round pick, unless it selects in the top 10, in which case it will forfeit its second-highest selection in the draft. The player’s former club receives a selection at the end of the first round, with the pick order based on the reverse order of the previous year’s winning percentage.
Analysis: This removes a ton of compensation picks, making second round picks much more valuable. This limits compensation to the top free agents. This doesn’t really impact the Pirates, since they’re not players for the top guys, and they also don’t usually have Type A or Type B free agents. It does help them by allowing them to sign lesser ranked Type A players like Michael Cuddyer or Josh Willingham without the risk of losing a draft pick (although the rules won’t go in to effect this year, so Cuddyer and Willingham could still fetch picks). It’s good to see the dates moved up. This year teams have until November 23rd to offer arbitration, and players have two weeks to make a decision. Moving the dates up allows us to get a resolution no later than 12 days after the World Series, which will really speed up free agency.
I’ve never liked the idea of a club being penalized for signing a ranked player. The player made the decision to declare for free agency. At that point any interested team is free to sign him, including his former team. I don’t think a team should be penalized for making the best offer. I believe the former team should be compensated for losing a player, but it seems strange to penalize the signing team.
Salary Arbitration Eligibility
The Changes: Super Two is still around, and will be increased from the top 17% of service time to the top 22% of service time. Also, all players tied at the 22% cutoff mark will be eligible.
Analysis: This will probably push promotions back to late-June to avoid Super Two status. It could also put some players at risk who previously weren’t at risk. I don’t think someone like Jose Tabata (1.117) is at risk, but someone like Daniel McCutchen (1.128) might take the jump to Super Two status after the 2012 season. It also increases the odds that Brad Lincoln (0.141) will be Super Two eligible after the 2013 season, assuming he’s up the entire 2012 and 2013 seasons.
The Changes: Minimum salaries will go up from $414,000 in 2011 to $480,000 in 2012; $490,000 in 2013; and $500,000 in 2014. Cost of living adjustments will be made in 2015 and 2016. The minor league salaries will increase from $67,300 in 2011 to $78,250 in 2012; $79,900 in 2013l and $81,500 in 2014. Cost of living adjustments will be made in 2015 and 2016.
Analysis: I’ve already added the changes to the 2012 40-man roster/payroll projection. The end result is that the projected salary goes up about $600 K. This isn’t a huge deal for any individual team, but it adds a lot of money for the union in general.
The Changes: The new signing deadline will be moved up to a date between July 12th and July 18th, depending on the date of the All-Star game. Drafted players may only sign minor league contracts. Each team will be assigned a Signing Bonus Pool, made up of the values of each pick the club holds in the top ten rounds. Players after round ten don’t count if they receive a bonus up to $100 K. Any bonus greater than $100 K will see the excess count against the pool. Clubs that exceed their Signing Bonus Pools will be subjected to penalties:
0-5% Excess – 75% tax on the overage
5-10% Excess – 75% tax on the overage, loss of a 1st round pick
10-15% Excess – 100% tax on the overage, loss of a 1st and 2nd round pick
15% or more Excess – 100% tax on the overage, loss of 1st round picks in next two drafts
Proceeds generated by the tax will be distributed to teams who don’t exceed their Pools. Draft picks will be awarded to other Clubs through a lottery where the odds of winning will be based on the previous season’s winning percentage. Only clubs who don’t exceed their pools are eligible for the lottery.
Analysis: The key here will be the slot amounts. If they’re reasonable, teams can still spend on some players, and the early signs suggest they will be reasonable. The penalty for going over-slot makes going over-slot not worth it. I don’t think any team is signing a Josh Bell in round two if the end result is a 100% tax and the loss of two first round picks. I think this system will remove the following:
1. Josh Bell/Stetson Allie type signings in the second round
2. Guys like Clay Holmes getting first round money in the ninth round
3. Anyone after the tenth round getting a bonus around half a million dollars
The Pirates have benefitted from all three in the past. It looks like they can still go over-slot, but not to the extreme we saw in 2011. That’s frustrating when you consider how little the Pirates are spending in the draft compared to big league spending. It’s also frustrating when you consider that the Yankees spend so much more on the free agent market, and the issue isn’t even addressed.
The best news in all of this is that the draft signing deadline will move up, allowing players who wait until the deadline to enter pro ball in their draft year. We could have seen Gerrit Cole pitch 20-30 innings this year had the deadline been in mid-July, which might have given him a strong shot at AA to start the 2012 season.
Competitive Balance Lottery
The Changes: The ten clubs with the lowest revenues and the ten clubs in the smallest markets will be entered in to a lottery for six draft selections following the first round. The odds of winning a pick are determined by the prior season’s winning percentage. Teams who don’t receive a pick will be entered in to a lottery with every other club for one of six picks after the second round. Teams can trade these picks. The top 200 draft prospects will be subject to a pre-draft drug test and will participate in a pre-draft medical program.
Analysis: It’s good to see added picks given to the small market teams, although you wonder why MLB went with the manufactured drama approach of a lottery, rather than just handing out picks to the teams that need them. It will also be interesting to see how often the picks get traded. I would think it would be difficult to trade the picks since the draft happens in June, and most trades happen after the new signing deadline. Unless the picks are awarded over the off-season I don’t see how much trading activity would take place.
It’s good to see the medical program in place as it avoids teams drafting a player, only to later find out the player is damaged goods and a waste of a pick. Overall the potential for more picks is a good thing for the Pirates. They’re also a team that values draft picks, which would put them in the market for some acquired picks if they found a team with a low value toward draft picks.
The Changes: Each club will receive $2.9 M to spend in the 2012-2013 signing period (starting July 2nd, 2012). After the 2012-2013 signing period, clubs will receive a Signing Bonus Pool ranging from around $1.8 M to $5 M, based on the reverse order of the previous season’s standings. Also starting in 2013-2014 clubs may for trade up to 50% of their Pool. A team with a $3 M pool could trade for an additional $1.5 M to spend. There are also penalties for exceeding the Signing Bonus Pools.
0-5% – 75% tax
5-10% – 75% tax and the loss of the right to provide more than one player in the next signing period with a bonus in excess of $500,000
10-15% – 100% tax and the loss of the right to provide any player in the next signing period with a bonus in excess of $500,000
15% or more – 100% tax and the loss of the right to provide any player in the next signing period with a bonus in excess of $250,000
There could also be an international draft in the future. If a draft is not agreed upon by July 2014, the penalties above could increase starting with the 2014-2015 signing period. Amateur players must register with the Scouting Bureau to be eligible to sign and the top 100 prospects will be subject to a drug test.
Analysis: For as much as I dislike the draft changes, I think the international changes are good for the Pirates. Lower bonuses for the more successful teams allows the weaker teams to sign all of the big bonus guys. It would be almost impossible for the Yankees to spend $3 M on a guy like Gary Sanchez under this system. I also like that you can trade for money to spend. I think that will be more valuable to teams like the Pirates than grade C prospects. The penalties also aren’t that harsh. The Pirates had a big year in 2010, signing Luis Heredia for $2.6 M, and only ended up with $5 M spent. I think they could spend to the max and get a lot of good talent.
Having players register with the scouting bureau will be good for identity issues, and should prevent pre-draft deals. On the flip side, it will make it harder for teams to hide players from other teams. Overall I think this simulates a draft without having a draft. I wouldn’t be surprised if we eventually see a draft in place.
-Instant replay will be expanded to add fair/foul and “trapped” ball plays. I still don’t understand how baseball can recognize the value of replay, but limit its use in the game. They could at least have it on calls at first base and plays at the plate.
-Modifications to the fourth option and outright assignment rules were added, but nothing has been announced. There wouldn’t be much need for the fourth option rule with no major league contracts in the draft.
-Waivers will be processed on the weekends during the regular season.
There’s things you can’t really say when talking about teams like the Pirates, even though those things are true. You can’t say that Andrew McCutchen will eventually hit free agency and will sign with another team. You can’t say that the Pirates have no shot at Jose Reyes, even if they give him their entire off-season budget. You can’t say that Pedro Alvarez, Gerrit Cole, Josh Bell, and any other Scott Boras client will only be here through their six years of team control. You can’t say that the best approach for the Pirates might be to eventually trade Andrew McCutchen, only under the circumstance that they have three quality outfielders who can cover the starting positions.
You can’t say any of this stuff because a lot of people are in denial about the reality of Major League Baseball. It is a league built for big spenders, and the Pirates will never be a big spender. Even if they get their payroll up to the desired $70-80 M range that seems to be the ceiling for teams like the Pirates, they’ll still be well below the league average payroll.
If the Pirates had any chance at competing, their best chance was to build through the draft and international markets. I don’t think their chances in the international market was hurt, but their approach to the draft will have to change. They won’t be able to add a Ryan Hafner for $450 K in the 17th round, or a Clay Holmes for $1.2 M in the ninth round, or most importantly, a Josh Bell for $5 M in the second round. They’ll still get impact talent in the first round, and they’ll still be able to go over-slot on a few deals, but they’ll be limited in how often they can go over-slot.
Teams like the Pirates need all of the advantages they can get with the way MLB is stacked against them. Not being able to sign someone like Josh Bell is pretty minor to a team like the Yankees. For the Pirates it’s a huge blow to the system. MLB is designed for the Yankees to go out and spend $150+ M on a star position player. The only chance the Pirates have is adding a player through the draft, and their chances were just limited.
There’s the argument that the draft changes helped the Pirates in the long run. That comes from the fear that the Yankees could have eventually gone all out with their draft spending, thus removing any advantage the Pirates have. That theory fails to recognize that the draft isn’t an open market. If the Pirates draft a player, they’re the only team who can negotiate with that player. What this would remove is the odds that a Josh Bell fell to the Pirates in the second round. Then again, plenty of Josh Bell type players fell from the top 15 to the late first round every year. Bell was rare even under the old draft standards.
As for later round picks, nothing would have changed. There’s not a huge difference between a lot of the prep pitchers. Ultimately you’re paying to get the player in your system so that if they break out in the next few years, you control them, rather than watching them re-enter the draft. We’ve seen the Red Sox go over-slot on players in recent years, yet the Pirates still ended up with Nick Kingham in the fourth round of the 2010 draft and Clay Holmes in the 9th round of the 2011 draft. The Red Sox picked 11 times before Holmes was drafted, and he’s a guy who throws 93 MPH out of high school.
What it boils down to is scouting. Just because Baseball America has a player in their top 200 doesn’t mean it’s a guarantee that the Yankees will take him and throw the kitchen sink his way. Just because the Pirates like a player doesn’t mean he’s universally regarded as a guy who deserves his asking price. No matter what the Yankees do, the Pirates can still get guys on their draft board, and still have exclusive rights to negotiate with those players. The question then boils down to whether the Pirates were making the right choices.
Scouting will play a huge role in the new CBA. With over-slot bonuses being limited we’re likely to see more college juniors and seniors drafted, with prep players opting for college. Most players will be limited to slot money, and most players out of college are essentially finished products. It’s possible to identify impact players outside of the top picks, but you need good scouting. Guys like Mike Trout (27th overall, 2009) and Brandon Belt (5th round, 2009) come to mind as players who signed for slot prices. Despite all of the over-slot spending by the Pirates, they managed to land Justin Wilson, Jordy Mercer, Chase d’Arnaud, and Matt Hague for slot prices (though none are anywhere near the Belt/Trout category).
It’s the same thing for the international market, although that’s an area where the Pirates have benefitted from good scouting. They were able to sign Starling Marte for $85 K. They signed Alen Hanson for $90 K. Even some of the bigger bonuses aren’t that big, such as the $250 K that Jose Osuna received. They still have Rene Gayo directing the Latin American operations, so this shouldn’t be an area of concern.
As much as scouting plays an important role, the ability to spend freely played a bigger role. There will be situations now where the scouts might identify a good player, but the player might not be obtainable due to his bonus demands. That might be the most frustrating thing of all. The Yankees are still able to spend whatever they want on talent at the major league level. The Pirates are now restricted from spending on talent they identify through the draft. That’s just one more thing that prevents the Pirates from competing in big market friendly Major League Baseball.