First Pitch: Draft Picks Don’t Have As Much Leverage As You Think

Ever since the new Collective Bargaining Agreement was announced last fall, people have spent hours upon hours trying to figure out ways to keep the old draft system with the new rules. The new rules made it nearly impossible to add over-slot talent anywhere through the draft, unless you wanted to pay harsh penalties and lose future draft picks. So the theories began:

“Are major league deals still allowed?” (No.)

“What if they paid a player, then a few months later, restructured his deal?” (All deals must be made in good faith.)

“They could take guys in rounds 2-5, pay them $50,000 each, and use the rest of the money for an over-slot guy.” (Probably wouldn’t be worth it to boot your round 2-5 picks).

“What if they just spent a ton one year and ignored the penalties, adding enough players to make up for the lost picks?” (I don’t think any amount of middle rounders makes up for the loss of two future first round picks, plus potential competitive balance picks.)

I could go on, but I haven’t really seen a good idea for spending like the old system under the new rules, so it would be more of the same.

When the Pirates saw Mark Appel fall to them, all of the same discussions started back up. The rumor came out that Appel turned down a $6 M offer from the Houston Astros as the first overall pick. The Astros moved on to Carlos Correa, and will be giving him $5 M instead. But Appel’s signability raised a ton of concerns about how the Pirates could pull it off and get him under contract. And most of those concerns stem from the assumption that the players have a ton of leverage over the teams.

The new draft system was designed so that teams could take the best available player without worrying about these things like signability. It is supposed to resemble hard slotting, creating a situation where the player doesn’t have as much bargaining power. As an example, if the system works as planned, and Appel wanted $6 M, he would have to go in the top two picks. The further he moves down the draft board, the more money he loses. That’s how it’s supposed to work.

Instead, the assumption is that it will be difficult for the Pirates to sign him because he won’t settle for a significant pay cut from the money he passed up at first overall. In other words, Appel turned down money, and instead of him paying for that by getting less, the Pirates need to pay for that and give him more to make up for the fact that he made a bad decision and left a lot of money on the table. It doesn’t really make much sense for the Pirates, but that’s the thought process that I’ve seen floating around, whether it’s on a local level, or a national level.

If we assume that the Pirates need to find extra money for Appel, then we’d have to assume that money would come from the middle rounds. The Pirates would have to sign a lot of players at below slot to find that money. They didn’t draft many guys in rounds 2-5 who would be under-slot signings. In fact, I’m pretty sure that all of those players would sign for slot, or something very close to it. They did draft some guys in rounds 6-10 who will probably get a low offer, allowing the Pirates to come up with some extra money for an above-slot signing. But once again, there’s the assumption that the players have too much leverage.

If a player in rounds 1-10 doesn’t sign, the team loses the ability to spend all of that money. If the Pirates’ tenth round pick signs for $10,000, the Pirates would have an additional $115,000 to spend elsewhere in the draft. But if Pat Ludwig, the tenth round pick, doesn’t sign, the Pirates can’t spend any of that $125,000. So the theory is that Ludwig — or anyone else in the situation since I’m only using Ludwig due to his convenient $125,000 slot price — would have a lot of power over the team. In theory, he could say “you need to pay me more, or I’m not signing and you’ll lose all of this money”.

Let’s back up for a second. We’re assuming the players have a ton of negotiating power. We’re assuming Mark Appel will demand a high price, and absolutely won’t sign for the $2.9 M slot price. On that same note, the assumption is that it won’t be easy to find money in the middle rounds, because those players could just walk away and screw the team over. And that’s the thing about these theories. They all revolve around how the actions would hurt the teams. None of them consider the impact to the player.

If Mark Appel walks away, he’s doing that with the hope that he can get more money next year. I’ve pointed out before that this isn’t likely. If he fell in a weak draft class, then he’s just as likely to fall in a stronger 2013 class. His only hope is that a team structures their draft around giving him much more than $3 M, or that he somehow lands in the top 3-4 picks.

If you followed the draft yesterday, you noticed a trend. A lot of the top guys left on the board are high schoolers. After ten rounds, the top eight players on Baseball America’s top 500 were high school players, and all of them were top 100 prospects. In previous years, teams would have taken those guys in the top ten rounds, and would have given them huge bonuses. A lot of those guys did get selected in rounds 11-15, including Walker Buehler to the Pirates in the 14th round. And a lot of teams took very signable players in rounds 6-10, specifically college seniors. That created the potential for half a million dollars, but that’s about it.

Teams weren’t going with the strategy of saving money in the middle rounds to give all of that money to one pick. The way things were shaping up, it looks like teams are finding just enough extra money in rounds 6-10 to give to those round 11-15 prep players, which would be enough to equal second round money. Teams aren’t saving a ton of money so they can pay their first round pick significantly more than slot. The one exception might be Washington with Lucas Giolito, but Giolito also has a lot more bargaining power than Appel, who is a college junior and is unlikely to improve his stock going forward.

The new draft system was designed to allow teams to pick players without having to worry about signability. If a player gets picked eighth overall, then it should be easy. He gets up to $2.9 M. And if every team plays by the rules — which they have been so far — then the player would have very little power. Appel isn’t going to find a team next year who will punt their entire draft and give him a significant raise, as the majority of teams aren’t doing that this year. So his only option is turning down the $2.9 M, and hoping that he somehow makes it in to the top four next year, even though that’s a stronger draft class and his 2.37 ERA and 116:24 K/BB ratio in 110 innings this year didn’t get him a top four selection in a weaker class.

It would hurt the team if Appel didn’t sign. Sure, they’d get a compensation pick next year, and it would be in a stronger class. But they wouldn’t get Appel in the system this year, with the shot of having him up in 2014 if all goes well with his development. And their 2012 draft would look bad, as they would be lacking a first round pick, which provides the best chance of an impact player. But I don’t think the team would be hurt as much as Appel. They’d get an extra pick next year. As bad as the 2012 class would look by lacking a first rounder, the 2013 class would make up for it with an extra first rounder. And in theory they’d see that player arrive in 2015, rather than Appel in 2014.

On the flip side, Appel could sign now, arrive in the majors as early as 2014, and (assuming he comes up mid-season 2014) be a free agent after the 2020 season. If he signs next year, he’s pushing all of that back a year, putting him one year further from a big payday. That would be worth it if he was getting more money in the short term, but as I’ve pointed out, that’s not happening. So Appel is hurt much more than the Pirates if he doesn’t sign. They just get another pick next year, and wait an extra year for an additional first round talent to arrive to the majors. Appel pushes back his free agency, turns down guaranteed money, goes in to a draft with less of a chance of getting more money, and risks injury or a poor season in the process, which could result in him getting less money than the $2.9 M the Pirates have.

And that’s the same for the middle round picks. The idea that a middle round player could hold a team hostage is absurd. A college senior has no negotiating power. You don’t sign, you don’t play baseball this year, and you’re probably going to have a hard time catching on with a team and being considered any type of prospect after a year in Independent ball. We’re focusing on how much it hurts the team if they don’t sign, but the negative impact for that individual player is much bigger. No player is going to throw away his career just to foil the plans of a team. That’s an empty threat and a ridiculous theory, as it doesn’t take in to consideration the impact on the player.

We look at things from the team perspective because all we care about is the player signing. That leads us to thinking that the player has more leverage than the team. If we go in thinking that the team NEEDS to sign a player, then we’re giving that player artificial leverage. The reality is that the team doesn’t NEED to sign the player. It would hurt if they missed on a player. However, the team isn’t going to feel the loss of one prospect as much as the player’s career is going to be hurt by refusing to sign.

Going back to the beginning, we keep trying to fit the old rules in to this new system. But let’s consider that this is a new system, and just throw the old rules out the window. Mark Appel no longer can get $6 M, regardless of where he is taken. Players don’t have much leverage as long as teams stick to the slot prices, which they seem to be doing. As long as teams stick to those slot prices, the only way to get more money is to get drafted higher in a future year. That’s easier for a guy like Walker Buehler in the 14th round, but it’s incredibly difficult for a guy like Appel, taken eighth overall.

At the end of this, I wouldn’t be surprised if Appel has to sign for close to the $2.9 M. He might get a bit more than that slot price, but I don’t think it will be significant. I also wouldn’t be surprised if Walker Buehler gets a bigger over-slot amount than Appel, since he has more bargaining power with a better chance of increasing his draft position down the line. The new CBA has given teams much more leverage in these situations. If Appel decides he won’t sign, then ultimately that hurts him more than the team. The same could be said for any other player in the middle rounds, based on how the Pirates picked. And that’s why the teams have much more leverage in this new CBA than the players do.

Links and Notes

**The Draft Street Freeroll has returned! You can win money just by playing a one night fantasy baseball league. There’s a $150 prize pool, and it’s FREE to join. Click here for the information.

**Almost 12 hours late for First Pitch. I decided to hold off on it last night when I somehow was typing while falling asleep writing the day three preview. I have no idea what I wrote in that article. It was like Will Ferrell in the debate scene in Old School. I’m afraid to look at it. But that won’t stop me from linking it below.

**Here is that day three preview.

**Here is a recap of the guys taken on day two, with input from Neal Huntington.

**For individual draft stories, check out the 2012 Draft archives.

**The Draft Pick Signing Tracker has been updated with all of the players, including links to their player pages.

**The Pirates won 8-4 yesterday. Kristy Robinson’s notebook looks at the struggling bats that came alive.

**Alex Presley was recalled, and Gorkys Hernandez was optioned to AAA. Presley had a big game in his return.

**Prospect Watch: ZVR returns, and a good outing from Hunter Strickland.

**Alen Hanson, Gregory Polanco, and Matt Benedict were named SAL All-Stars.

Analysis

  • Middle round picks who are college players have a bit more leverage than Tim claims. Teams need to sign them so that they do not lose the money allocated to that slot. Signing middle round picks becomes important for teams looking to maximize the high-ceiling talent they acquire through the draft.

    • What you say is true: teams lose the money if they don’t sign the player. But that doesn’t mean the players have leverage. Because it hurts the player more if they don’t sign.

      This whole “the player could refuse to sign and hurt the team” theory is looking at it from a fan’s perspective. It’s a worst case scenario that only focuses on the negative impact to the team, and ignores the negative impact for the player. And because it ignores the negative impact for the player, it ignores the reality that players don’t really have leverage. Unless there are a lot of players out there who would throw their baseball careers away to screw a team over.

      • With respect to the money involved, I’d say it hurts the team as much as it hurts the player. Both have much to lose. But teams mostly cannot just punt a pick. Teams need players to sign contracts that are below slot if they want to sign their hard-to-sign picks.

        • But players can’t afford to not sign. I’d say it hurts the player much more. I’m not saying there’s no impact for the team. I’m just saying the impact of losing one player is very small for the team, compared to the impact of not turning pro for that player. That’s especially true if the player is a college senior.

          • Having leverage and using leverage differ. Draft prospects overvalue their opportunity to play professional baseball. If they accurately assessed the probability of their reaching the majors, they’d use their leverage to extract additional money from the team that drafted them. Most won’t take that path because they value the opportunity more than they value the money.

            But the leverage exists, and they can use it if they want to.

            • If all of these guys have leverage and if none of them are using it, then I think it would be more accurate to say that they don’t actually have leverage at all.

              • I disagree. The leverage they have is both actual and potential. They can’t destroy it by not using it. Eventually, someone will use it, thus revealing its existence.

  • Greatone1210
    June 6, 2012 5:35 pm

    I really am not high on Appel and if he does not sign, that is fine by me. Considering the strength of next years draft class, having two first round picks come up in 2015 is just as good as one in 2014.

  • Tim, Could Appel go to Japan and get more money?

  • Excellent article, Tim. I’m amazed at some of the clueless National articles I am reading.

    I will be surprised if Appel doesn’t sign. Btw, despite what he and Boras thinks, he is no sure thing and ‘can’t miss’.

  • great! thanks for adding stats, thats very helpful 🙂

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