MLB’s new bonus rules under scrutiny
The first-year player draft has become a crucial part of building an MLB roster in recent years, but confusion now reigns over what baseball’s new labor deal, announced last week, will do to the system.
Teams and agents alike were both unclear as to the full extent of restrictions coming to draft-pick spending, though one thing is immediately clear: The landscape is changing dramatically.
In addition to a host of other sweeping changes, the new labor deal, which must still be approved by owners and the union, creates a new signing bonus pool designed to curb spending on draft picks. Each team will be assigned a cap, based on where it picks in the draft order and the number of picks it has, that will be applied to the first 10 rounds of the draft each year. For next year, the bonus pool for the team picking first, the Houston Astros, will be $11.5 million, and for the Philadelphia Phillies, likely to pick last, it will be $4.5 million.
|MLB’s Selig (left) and MLBPA’s Weiner credited a spirit of mutual respect for getting a labor deal completed.
The new measures are seen as a compromise given that MLB Commissioner Bud Selig, for years an outspoken opponent of rising bonuses paid by teams to draft picks, lobbied repeatedly in favor of “hard slotting” on picks, or requiring preset compensation levels based on draft order, and MLB Players Association Executive Director Michael Weiner was equally adamant that the individual bargaining rights of draftees not be forfeited.
“This was an area where [MLB] bargained hard for their objectives and we bargained hard right back,” Weiner said. “But this is something where we were able to stay true to our core principles.”
But questions remain around the game about how the new labor deal and the draft rules will affect baseball’s competitive balance. Some small-market clubs said the restrictions will inhibit their ability to build rosters through the draft, and tilt advantages back to large-market clubs more willing to pay such taxes, as was the case in the 1990s when luxury taxes on payrolls came into being.
The curtailment in draft-pick bonus spending could be severe. The Pittsburgh Pirates in 2011 alone spent more than $17 million in bonuses, topping MLB for the second straight year. That’s nearly 50 percent more than the $11.5 million that the Astros will be allowed in 2012. Teams in total spent $236.1 million in bonuses and other guarantees in this year’s draft.
“If you’re lower on the pecking order with regard to revenue, there are only so many ways you can obtain talent, such as the draft and internationally, and pretty much of all them have been restricted now,” said an executive with a small-market club who was not authorized to speak publicly on the deal and therefore spoke on the condition of anonymity. “I worry that over time, it’s going to go back to where payroll dictates more where you finish in the standings.”
Lower-revenue teams playing in small markets, however, will have an opportunity through a lottery to garner additional picks outside the first round.
During MLB meetings in Milwaukee earlier this month, grumbling among baseball operations personnel was palpable toward the coming draft changes. The agent community was similarly concerned, with one agent, speaking on the condition of anonymity, saying that “signability is going to be even more of a factor.”
Noted agent Scott Boras, who annually represents a stable of premier first-round selections, said baseball may lose top young athletic talent to other sports.
“I think athletes are going to give up baseball because the other sports offer so much more on the entry level,” Boras said. “Major League Baseball has dramatically limited the ability to recruit the greatest athletes to baseball.”
Selig objected to that view.
“I don’t believe we’re going to lose people,” Selig said. “This sport has seen an upgrade at every level [of play].”
MLB and the union were able to strike their third consecutive collective-bargaining agreement without a work stoppage, ensuring an unprecedented 21 straight years of labor peace. Negotiating as in 2006 without any sort of public rancor, the quietly struck pact contrasts sharply against labor battles in the NFL and NBA that have dominated the sports industry in 2011.
Both sides openly credited a spirit of mutual respect that carried negotiations, a respect Weiner said the players earned over prior decades.
Involvement in the negotiations was extensive from each camp. In addition to the formal involvement of Chicago White Sox owner Jerry Reinsdorf and Los Angeles Angels owner Arte Moreno, the other 28 teams were frequently canvassed. The union, meanwhile, was aided by more than 250 players taking part in some part of the bargaining.
“This negotiation really showed the respect each side has for the collective-bargaining process and the legitimacy of the other’s objectives,” Weiner said.