First Pitch: The Downside of the New CBA Starting to Appear For the Pirates

When the new Collective Bargaining Agreement came out during the 2011-2012 off-season, I wrote about a lot of the downsides for small market teams. At the time the downside was somewhat debatable. We didn’t see how the new system would impact the Pirates at the time. There was some debate over whether the new system would hurt small market teams. Some argued that eventually teams like the Yankees and Red Sox could take their big spending to the draft and the international markets, and take away the Pirates’ only avenue for acquiring young potential impact players.

Here’s what we knew at the time: small market teams had no chance at adding star players through free agency. Their only hope was that they could draft and develop a big impact guy, or sign a future impact guy out of the international ranks. They could spend whatever amounts of money they wanted in those areas, and even the highest spending teams were only spending a fraction of some of the biggest free agent contracts.

And now?

Small market teams still have no chance at adding star players, or even most mid-level free agents through free agency. That’s because free agency wasn’t addressed. The only thing that was addressed was the draft and international spending. Here are the early results for each for the Pirates.

The Draft

The Pirates didn’t have any problems making tough signs under the old system. Their $5 M deal with Josh Bell in the second round pretty much broke the old draft system. You know, because it’s that type of unchecked spending that’s going to send baseball down a path where not all teams can compete. So what happens in the first year? Mark Appel drops to them, and they can’t sign him because they’re limited to what they can spend under the new system.

Now Appel probably doesn’t drop to them under the old system, since a higher team could offer him a lot of money. But they would get one of the top seven picks in that scenario. Maybe that ends up being Albert Almora, who went one pick before they selected.

The Pirates have the fifth biggest draft pool this year, although that’s largely because they have two first round picks. Without that compensation pick, the Pirates would have a pool ranked in the 20-25 range (based on last year’s value of $2.8 M for the 9th overall pick).

International Market

The international market might be switching to a draft by 2014. If there’s one area where I agree that big market teams could hurt small market teams by spending, it’s the international market. That’s straight free agency, meaning the top players usually go to the highest bidder. It would be easy for the Yankees, Red Sox, or Dodgers to invest an amount they wouldn’t miss and have a monopoly on the top talent each year. In a draft, any team could spend big, but you could only negotiate with your own draft picks. So it’s not like the Pirates wouldn’t be able to sign their own draft picks if big market teams were allowed to spend big.

The problem with the current international market is that the spending is restricted across the board, and it is restricted by standings. The 2013 international bonus pools came out today, and the Pirates have the 13th biggest pool. They are given just over $2.4 M, which is down from their normal $3 M budget in previous years.

The difference between Pirates and the bottom team is only about $600,000. The difference between the Pirates and the top team is about $2.5 M. All of this is based on the 2012 standings. The Pirates had the 13th worst record in the league, and because of that they fall outside of the big bonus pools that are awarded to the worst teams (which include the Cubs, Red Sox, Blue Jays, and Mets).

Punishing Success

Under the old system, small market teams only had one path to success. That was finding impact players through the draft and international markets and developing enough to form a winner under a much smaller budget than the big market teams have. Under the new system, small market teams have the same path to success. Only now they get punished for their success.

In order for a small market team to have continued success, they need to keep adding talent through the draft and international markets. The new system makes it harder for them to add that talent once they’ve had success. In fact, they don’t even need to have success. The Pirates didn’t have a successful season last year. In terms of showing year-to-year improvements they were successful, but in terms of winning or contending, they fell short. But a below-average finish is enough to drastically reduce their international spending budget, and give them a low draft budget (which, again, is only top five because of their compensation pick from Mark Appel).

Under the old system, the Pirates could sign their first round pick in 2012, spend $10 M in that draft, then spend $10 M again in 2013. Under the new system they were limited to about $3.5 M in 2012 once Appel didn’t sign. They’re limited to $8.8 M in 2013 with the compensation pick, and would be closer to $6 M without that pick.

Under the old system, the Pirates could finish with a better record than the Cubs, and still spend as much as they could, or more. Under the new system, the big spending Cubs get $2 M more to spend on international players than the Pirates, all because they finished with a lower record one year.

That really highlights the problem with this new system. The Cubs don’t need the draft or international markets. They can sign expensive free agents. They can trade prospects away for pitchers like Matt Garza. They can even do all of this with an albatross of a contract like Alfonso Soriano. On the other hand, the Pirates have trouble signing expensive free agents. They need to proceed with caution before trading away prospects for one player. If they had a guy making half as much as Soriano, with the same production, they’d be in a horrible situation. And they definitely need the draft and international markets.

Despite these differences, the Cubs have $10.5 M to spend in the draft on ten picks, while the Pirates have $8.8 M to spend on 11 picks. The Cubs have $4.5 M to spend on international players, while the Pirates have $2.4 M to spend. So not only can the Cubs take advantage of other avenues of talent acquisition, they also have an advantage on the amateur level.

What this means is that the Cubs will have an easier time building their team up. Then, once they’re to the point where they’re winning more, and not getting big budgets to work with in the draft and international markets, they can rely on those other avenues of talent to keep them at the top.

When it comes to small market success, people often talk about a “window”. That’s a short time period for small market teams to contend before their top players leave via free agency for the big market teams. Well run small market teams don’t necessarily have a window. In theory they could continue on a cycle where they see top players depart, but don’t see a drop off due to strong internal replacements. But if you are a small market team that is limited through the draft and international markets, you’re going to have a hard time adding these replacements.

In short, small market teams had the odds stacked against them under the old CBA, but a well run team could beat the odds and have a team that was successful year after year. Under the new CBA, a well run team has a harder time replenishing their system, since any success in the majors makes it much harder to continue adding talent to the system from the amateur ranks. We’ve already started to see that with the Pirates. Their limited spending abilities cost them a first round pick in 2012, and that compensation pick in 2013 is the only reason they have a decent draft budget. Their below average finish would have put them on pace for a bottom-third draft pool, and put them in the middle of the pack for the international bonus pools — far from the big bonus pools at the top. The Pirates didn’t even need a winning season to receive a big blow to their ability in adding amateur talent. Just think about how difficult it will be to continue adding young talent if they start putting together winning seasons.

Links and Notes

**The 2013 Prospect Guide and the 2013 Annual are both available on the products page of the site. If you order them together, you’ll save $5. Get them both to use throughout the 2013 season.

**For the second start in a row, James McDonald struggled early, then settled down to shut down opposing hitters. It’s good that he made the quick adjustment, but not so good that he’s struggled early two starts in a row. The Pirates managed to come back tonight, but they can’t afford a big inning from the other team in most starts. If McDonald wants to be more like the first half version from 2012, he needs to limit those big innings. It didn’t cost him against the Cubs. Tonight it did cost him, and it probably will if he starts off another game in the same way.

**Bucs’ Bats Finally Show Signs of Life in Win at Arizona

**Pirates Notebook: Platooning Alvarez? Hurdle Says “No Way”.

**The Book on Justin Wilson.

**Pirates International Bonus Pool Drops For 2013-14 Signing Period.

**Prospect Watch: Lambo Hits For The Cycle.

**Minor League Schedule: 4/10/13.

Tim Williams

Author: Tim Williams

Tim is the owner and editor in chief of Pirates Prospects. He started the site in January 2009, and turned it into his full time job during the 2011 season. Prior to starting Pirates Prospects, Tim worked with AccuScore.com, providing MLB, NHL, and NFL coverage to various national media outlets, including ESPN Insider, USA Today, Yahoo Sports, and the Wall Street Journal. He also writes the annual Prospect Guide, which is sold through the site. Tim lives in Bradenton, where he provides live coverage all year of Spring Training, mini camp, instructs, the Bradenton Marauders, and the GCL Pirates.

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  • tempman89

    Very well said Tim. But along with the international draft, didn’t the pirates spend 5 million bucks to refinish the DR facility? That was suppose to attract those 16 year old players. With the draft, that will be a waste.
    The spending pools should be built on market size, period.

    • http://www.facebook.com/fred.langford.9 Fred Langford

      It always amazes me with Selig being a former owner of a smaller revenue team that he became a giant schill for the rich owners once he became commissioner. What I dont understand is why the small market teams dont revolt and stand up to the mlbs rich teams, whose goal seems to eventually have 8 teams in the league. Do the poorer teams’ owners not have a say? This almost seems like when the players say “We have a bad CBA.” Well, you morons ratified it.

      • http://wkkortas.wordpress.com wkkortas

        Interesting point; I remember years ago, and this was at a time where the local TV revenues weren’t as skewed as they are at the moment, Bill James was writing that small-market teams have power, they were just reluctant to use it. His reasoning was, in effect, that people weren’t paying to watch the Dodgers have an intra-squad scrimmage or an exhibition against Albuquerque–they were watching them play the Pirates and Padres, and that the Bucs and Pads should take the position “Look, we don’t get more of that TV money, screw it–we’re just not coming.” Now that’s a radical position, and not one that rich owners are likely to take, but it’s pretty much the threat that teams like the Bucs will have to use to get some fiscal equity.

        • http://www.facebook.com/fred.langford.9 Fred Langford

          Definitely,…and the NFL has thrived by treating teams equally. I was thinking the same thing earlier…the poor teams should just threaten strike on the next cba. Bill James understands more than anyone as both a fan and a guy who studies the game. I read somewhere that sometime around 1986-88 the Royals had the highest payroll in the majors…and this is nearly 10 years after the advent of free agency. The Royals were loaded and a great team…so much has changed in 20-25 years. I think it’s time for the little guy to take some power back. On any given year a small market team with a ton of talent should be able to approach the upper third of payrolls without completely destroying their business model and their future.

          • bqjd

            I’m not sure if this true or not, but I believe somewhere an NL team could prevent the road team from broadcasting the game. If true, this would be my plan of action.

    • http://www.facebook.com/fred.langford.9 Fred Langford

      A good facility gives you a good place to develop players. Money talks when it comes to top prospects. Latin agents are just as greedy as american ones…if not more.

  • http://twitter.com/BuccoMike BuccoMike

    It would get the pirates closer to winning seasons. The FA period for signing bats is still a huge debacle looks like they wasted 17 mil on russell martin. Only other way for the pirates to accumulate talent is by trades and teams wont deal with huntington cause hes off the wall with what he asks for in return. So the new CBA keeps the buccos from competiting for .500 for maybe another 5 to 10 years or maybe forever in my lifetime.

    • http://www.facebook.com/david.donahue.100 whiteAngus

      “…teams wont deal with Huntington cause he’s off the wall with what he asks for in return.”
      .
      do you actually believe this or is it frustration on your part? NH hasnt had any issues on trading except that we really havent had much to give the OTHER team.
      .
      anyway, wouldnt you prefer your GM to be a hardliner when it comes to trades? did you get upset when NH didnt trade GJones for Jeff Mathis???

    • http://www.facebook.com/lee.young.161 Lee Young

      Thank God all those teams didn’t want to deal with Huntington or we wouldn’t have our pitching staff…
      Oh wait….

      Wandy, AJ, Charlie, JMac, Karstens, etc all came via trade, not to mention Hanny who we (wait for it) TRADED away for 4 guys.

      Where do people come up with this stuff?

  • http://wkkortas.wordpress.com wkkortas

    Well written and well said; goodness knows Grampa Selig has no problem with the Dodgers and Angeels spending a quarter of a billion dollars in a matter of minutes, but the Pirates dropping five mil on Josh Bell? Well, that just HAS to be stopped. In theory, the Pirates could actually end up sending the Yankees and Red Sox money if they went far enough over their pool amount, which is just madness. At some point, small and mid-market owners will have to realize that their primary adversaries (for lack of a better word) when it comes to CBA negotiating is not the players, but big-market ownership with huge local cable deals that erase any hope of a level playing field.

  • Y2JGQ2

    Tim-

    You make some great points, and its scary. I have a question though, since at least half of the teams in the ML can be considered small market teams or mid market teams at most, how did the CBA get approved that seemingly only favors the largest new york, chicago and southern california teams? Did the owners not understand the same things you do, or were there other concessions we aren’t discussing?

  • Curtis

    I think it was only a matter of time before the big spenders took away the small spender options in the draft under the old CBA. Yes, we can no longer do what we did to sign Bell; but the only reason that we had that chance is all the big spenders passed on him at the end of the first round. I think we were close to the point where the big spenders would no longer pass up a chance to spend a meager $5M like that.

    Given the fact that teams like the Yanks are lowering their spending and we were able to get two mid-level free agents in Burnett and Martin, I’m willing to give the new CBA another couple of years.

    But the Pirates have to learn how to draft in the new system, last year was a disaster (apart from the Appel gamble, which was a good one) and the decision to trade their sandwich pick really hurts their pool.

    • bqjd

      Curtis,
      The yankees may have taken bell, but then whoever they drafted would have fallen. The fact that a team can only draft so many players, prevented big market teams from throwing a bunch of money at the draft and outspending smaller market teams

  • piratemike

    The only answer is to have a draft where the small market teams are given permanent high draft slots based on market size not won lost records.
    Mid and large market teams will always have the advantage of large payrolls the small market teams have no advantage but by losing for long periods they acquire a group of good players through the draft and when those players leave through free agency they have to start that long process over again.
    .
    Smaller market teams need some sort of advantage and the draft is the only way to do it without the large markets giving them money.
    Teams like the Yankees should go for it because the always draft in the high 20′s anyway.

  • leadoff

    The system is not designed for small market teams to win in MLB, but it is designed for them to succeed. It is designed for teams to succeed and win in hockey and the NFL.
    Lets define winning?
    The real victory in pro sports to franchises is how they do financially.
    The Pirates had a far better record than the Boston Red Sox, guess who made more money? The Rays got in the playoffs, guess who made more money between the Rays and Sox?
    The NFL owners are in charge of their product, the players are in charge of the product in MLB. The union wants the big money spent on FA players, not the draft, if the union wanted big money spent on the draft this system would never have happened.
    The owners can vote on anything they want, it still has to be approved by the union.

    • http://www.facebook.com/fred.langford.9 Fred Langford

      Exactly, the system was designed for an upstart to win on any given year but not be able to sustain it…it appears even that will be fading…teams in the poor will continue to defy odds and scout and develop great and win for a year…but it is nearly impossible to sustain. …then again when you have the bucs getting rid of young pitchers and hitters to keep the Inges and McDonalds of the world…it makes the hopelessness even worse.

  • jg941

    Outside of the REAL permanent solution – a salary cap-and-floor system similar to the NFL – you could just keep attaching other market/payroll-based factors to smooth out the equation a little more.

    Once you calculate the various domestic and international draft pools based on prior year performance, couldn’t you just introduce another variable based on EXISTING payroll and/or market size factor?

    If it was a payroll-based thing – you could still give the second-highest draft pool to the Cubs because they were the second-worst team. But, if they also had a payroll of $104 mil, and that was (roughly) 3.4% of total MLB payrolls, you could give them a “haircut” off of their bonus pool of some factor of that 3.4%.

    For instance, if you thought, say, 3 times that was fair, then the Cubs would get their performance-based draft pool, less 10.2% (3.4% X 3) as a ‘large-market/luxury adjustment’ to their pool. Maybe it needs to only be 2X their percentage of payrolls, maybe it needs to be 5X, don’t know, whatever everyone agrees on as the factor.

    What you don’t want/need to happen under the current rules is to REWARD poorly managed teams who already spend boatloads of money on current contracts and free agency – and still lose – by throwing even MORE money at them in all of the other areas of talent accumulation.

    I think an approach that continuously blends performance AND spending AND market size is a little more intuitive and might create a better metric than sticking to a non-salary-cap system that focuses on only one of those variables. IMO

  • leadoff

    IMO, I don’t think draft spending ought to be performance based in any way.
    I think it should be based on Market size, how that would be broken down might get a little complicated, but IMO, it could be done. The Pirates could win the world series and never have the money to afford one Grienke, not that he is anyone I would spend 25 mil on, and with the current system they would not get enough money to draft me, well maybe they could!