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Improving Draft Pick Contracts

Today was the deadline to sign players taken in this year's amateur draft, with the exception of college seniors. As usual, most of the high-profile picks waited until the last second, and then signed. Here is an updated list, in case you want details.

Instead of analyzing specific players and contracts, I would rather take this opportunity to talk about the draft signing process in general.


First of all, I am a big fan of the August deadline. It has only been around a few years, but it has expedited the process tremendously. Many prospects used to hold out well in the following year after they were drafted, because teams could negotiate with them all the way until a week before the next draft (this is still the rule for college seniors). The current deadline eliminates an excessively long process, which ultimately benefits both sides. It ensures that players will get in a full year of pro ball the following year after they are drafted, and also gives teams plenty of time to reshape plans for the next draft, depending on who they do or don't sign.

Furthermore, I like the recent addition of compensatory draft picks. It gives teams added leverage, and a more viable threat to get players to sign closer to slot level. Thanks to compensatory picks, a team can tell a player that they will walk away and get someone else who will take the money.

However, despite recent improvements, I would like to see the system change dramatically. Baseball has done all it can to tinker with the current set-up to perfect it, and there are still major problems. The majority of the leverage is still in a player's hands, because they know their price will only go up as they approach the deadline. On top of that, many teams have figured out that prospects are worth the investment, because the team controlled years are so cheap. While not every prospect will pan out, enough do to still make it a bargain for a team, even if they routinely go over slot recommendation. It is an easy system for players to manipulate to get more money than baseball wants them to get, and also an easy system for any team with deep pockets to manipulate.

With a little innovative thinking though, I think the way negotiations work can change dramatically.

To start with, I would create an amateur draft fund, controlled by Major League Baseball. It would come out of revenue sharing. The funds would then be allocated to organizations by Major League Baseball, but not evenly. It would depend on a team's draft picks. The more high picks a team has, the more money they would get. The sums given to each team would be determined by the recommended slot amounts.

A team, once handed the money, could use it however they want on draft picks. However, once they use it up, they would not be able to sign anyone else. Teams would not be allowed to supplement the money they get with their own.

These rather simple changes would impact the draft in several positive ways. In general, it should make the draft operate the way it should be.

For starters, the playing field should level dramatically. The teams at the top of the draft will have the most money to play with, guaranteed. That should give those teams the best access to premium talent in a draft. Additionally, if players still fall over signability concerns, the team that picks that player takes a bolder risk. With a hard cap on spending money, a team that signs a player well over slot all but guarantees that they will not be able to sign one or two other prospects. That should make teams think much harder about going over slot than they do right now. It may also make a player think much harder before they demand a figure well over slot too.

One additional requirement I would put is that drafted players must earn a base minor league or major league salary, and the base salary does not count towards a team's draft cash. This would ensure that the only things negotiable are signing bonuses, and all cash given to teams goes towards signing bonuses. Without a rule like this, I worry about crafty teams finding gray area in performance clauses, or multi-year guaranteed contracts, in efforts to use their own money in the draft to gain an unfair advantage.

From a player's perspective, I think my proposed setup would alter their strategy. With a hard cap on draft expenditures, a team never has more money to spend on any player than right at the start of the process. As other players sign, a top prospect only limits the money they could get. My hope is that many of the top players would see wisdom in signing well before the August deadline, before teams are simply offering all that they can. I think this setup has a chance to make a process where top prospects hit a point in the process of diminishing returns, so they decide to just go ahead and sign, instead of trying to penny pinch to the bitter end.

In the end, I think my proposed changes would enforce the slot amounts much better than the current system. It may ultimately bring draft costs down, and I think both owners and the MLBPA would be in favor of that. This may seem counterintuitive for the MLBPA, but a penny saved in the draft tends to be a penny earned for established veterans - the players already in the union.

Maybe I'm old fashioned, but I like the notion of a team simply picking the best player, without too many fears of the cash involved, or the drama of going down to the final seconds in negotiations.  Changes in recent years have pulled the system more towards my ideal. However, I think there are realistic changes that can satisfy it even better.