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Why does MLB want to damage its sport with an International Draft??

14 comments

First we saw what happened to Puerto Rico as a Baseball talent source once it was included as a US territory and made part of the Rule 4 Amateur Draft.  In a nutshell; all the US teams closed whatever academies they may have had on the island and cut back on scouts because there was no longer any competitive advantage to being there and developing talent, and thus the number of players from Puerto Rico has drastically fallen as compared to 20 years ago.  The best article on this topic i’ve seens is by Jorge Castillo of the New York Times in Jan 2012.

Next we saw the gutting of the Amateur draft compensation limits, along with limits on International free agency spending as ramroaded into the latest CBA.  These guidlines were seemingly put in by cheap owners with poor executive staffs who were tired of having the lower payroll teams eat their lunch by spending a few more million dollars on scouting and player development to gain competitive advantages.  You know, instead of just having tens of millions of extra dollars handed to them by Regional Sports Networks in large markets (Jerry Reinsdorf, i’m looking at you here, complicit with the notoriosly cheap Bud Selig).

Now this; now we’re hearing that MLB is actually considering putting in place an International draft.  A June 1st deadline exists to take action and apparently both sides (the owners and the Players association) seem to be in favor of this draft in some form.  MLB is so interested in getting an international draft that they’re willing to give (per Buster Olney) “significant concessions” to the players union (up to and including higher minimum salaries and lowering the time to arbitration) in order to make it happen.  The Union’s argument (as it always has been) goes along the following; amateurs and foreigners aren’t union members, so to hell with them.  If we can guarantee ourselves more money, lets do it.

Why is this bad?

Simply put, I do not trust MLB executives and the collective penny pinching, revenue hounding ownership-driven management of the sport to put in place the appropriate resources to off-set what is sure to be a massive pull-out of Latin American countries by all 30 teams if an International Draft is put in place.  What possible incentives would a team have to develop talent in a place like the Dominican Republic via a privately funded academy, if their rivals could just swoop in and draft them after they’ve been developed for years on end?   I feel that an international draft would destroy the pipeline of Latin American talent into the sport, and it would significantly harm the future of Baseball.  It would be like Puerto Rico, only on a grand scale for every country south of the Rio Grande.

All so that the owners can save a few million dollars.  The average MLB salary last year was $3.2M, or less than most teams now have as budgets for the entire annual Rule 4 draft.  Pennies all-told when compared to the typical 9-figure payrolls they maintain and the hundreds of millions of dollars they earn from gate, concessions, parking, merchandise and TV revenues.

I’m not saying the current situation where 16 year olds are signed and then discarded as washed out 19 year olds in America (and left with no English skills, little education and no future) is good.  I’m not saying that a system controlled by underworld Buscones is good either.  But I have no faith that MLB will take the proper steps and will invest enough money in these countries to offset the impact of a draft.  Zero faith; this is after all the same instution that is currently trying to kill pensions for non-uniformed employees!

I don’t entirely understand why the Players Association is for this either; don’t they understand the long term ramifications of these policies?  I mean, amateurs aren’t part of the union … but EVERY major league player once was an amateur and faced all these same issues (whether they were subject to the Rule 4 draft or they had to deal with international free agency or had to deal with the Posting system).   Are the players so myopic in pursuit of short-term financial gains that they can’t see what the long term effects will be?

Now, the above alarmism being said, there are pretty significant barriers to an international draft.  Take for example the situation going on in Mexico.  Mexican clubs demand large transfer fees for their players, and nearly every player of any consequence over the age of 13 “belongs” to a club (much like the old Reserve Clause in the majors, only its even MORE restrictive); how would you draft someone who has a price tag associated with them?  The issues with the Mexican league are detailed and highlighted in this excellent SportsonEarth.com story by Jorge Arangure Jr about a lawsuit being filed on behalf of a Mexican prospect who is alleging that he’s being tied to a Mexican club via forged documents.  Meanwhile a “handshake” deal exists between MLB and the Japanese league preventing MLB teams from signing Japanese players as youths so as to allow them to go through the “posting system,” which enriches clubs in the country.  How do you handle Japanese players in the draft?  Does the posting fee count against the international FA limit?  It clearly doesn’t now, allowing teams to spend tens of millions of dollars just to acquire the rights to negotiate with Japanese FAs (who come from the industrialized and wealthy Japan) but meanwhile FA teenagers from impoverished Latin American countries now face cap limits on bonuses that often times were little more than a few thousand dollars.  How is this situation in any way justifiable?

This isn’t Professional Basketball, where professional leagues are now established and are popular the world over and an international draft in the NBA makes sense because player development occurs naturally without the required investment of the US professional league.  There’s no summer-long pro baseball in the Dominican Republic or Venezuela where so many of these players come from; there’s barely organized amateur baseball there outside of the academies run by teams.  Sure there’s Winter leagues … but are these winter leagues more for returning players from stateside or showcases for local talent?

If you take these Latin American academies away … you will destroy baseball in the country.  And you’ll shut down the pipeline of talented players coming to play in America, which will lessen the sport.  Is that really what these owners want?

(Here’s some additional reading material on the topic: Maury Brown‘s BizofBaseball take, MLBTradeRumors’ running blog of updates on the topic, and Jay Jaffe‘s op-ed piece).

Written by Todd Boss

March 21st, 2013 at 9:24 am

14 Responses to 'Why does MLB want to damage its sport with an International Draft??'

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  1. Seems like one part of the solution would be using pooled resources to fund baseball academies in those countries. That would help to continue the pipeline while giving all teams equal access to monitor player development (akin to the NFL combine, but long term).

    tom

    21 Mar 13 at 10:42 am

  2. It should absolutely. How much faith do you have in MLB spending anywhere close to the amount the collective 30 teams currently spend in the D.R.?

    Todd Boss

    21 Mar 13 at 10:54 am

  3. The only way that I can understand these kinds of changes is that large revenue teams are squeezing small revenue teams by trying to reduce the ways that small market teams can be competitive. Otherwise, it makes no sense to me, even financially. These rumored trade offs will result in more pay going to players (and therefore less to owners) than is saved by amateur FA spending. I think that an international draft, and the previous caps on spending for US draft and international FAs, have hurt small market teams like the A’s and Rays, but it pales in comparison to the hurt that they will feel by seeing arbitration be reached sooner, or years of control being reduced further.

    Maybe I am missing something, but that kind of power play is the only way these moves have any logic to them

    Wally

    21 Mar 13 at 11:13 am

  4. Agree completely. I view this draft in the same light as I view forced limits on amateur spending; these are entirely about ways that inept larger market teams can reign in the creativity and flexibility of the small market teams. Why bother spending a dime on international scouting if there’s a draft that allows you to just pick players who you’ve learned other people are talking about?

    Todd Boss

    21 Mar 13 at 11:33 am

  5. On the players’ end, this seems like an “I got mine and screw those who come behind me” move, just like the new draconian limits on draft spending. I guess we should not discount the digruntled feelings of veterean players against the huge contracts given to the likes of Strasburg and Harper before they ever play a professional game.

    Short-sighted? Absolutely. But then again, Bud Selig has always been Mr. Magoo’s doppleganger. He and the billionaire boys club are seeing huge dollar signs from these insane new cable and satelite television deals (another financial bubble just waiting to pop), and it’s clear they are trying to maximize their gains while throwing enough spare change the players’ way to get them to go along with it.

    bdrube

    21 Mar 13 at 12:11 pm

  6. I can see the other side of it, though. The big market teams are responsible for bringing in a disproportionate amount of the revenues, and they resent not only sharing a lot of it, but also finding it harder to compete than you think. I mean, the big market teams, let’s just use the Yanks as a proxy, don’t have the luxury to run their team the Rays way. The Rays can gamble on young players and if they work out, great, and if they don’t, their market revenues don’t move all that much anyway because they get such a large % from MLB. So there is a freedom to experiment, because the downside isn’t so different from the upside. But the Yanks – they pretty much have to keep their market happy 24/7, and that usually means a high diet of established players, usually through big dollar FA acquisitions. I mean, look at how much grief they are getting this year for trying to avoid multiyear contracts, and they still have a payroll near $200m. And what happens to their revenues if they go 80-82 this year? I don’t know exactly, but I think the Mets showed how mediocrity in NY can lead to a steep fall in revenues (I know the Wilpons got into Madoff trouble, but if the club was cash flow positive based on its own revenues, you wouldn’t have seen that impact them as much as it has). So it doesn’t surprise me that the big market clubs are pissed at how all this is playing out, and want the playing field a little more slanted towards them. And the weird thing is, the Tampas of the world can’t fight that as hard as you might think, because they benefit greatly from healthy teams in NY, LA and CHI. (As for us, I think that we still don’t know whether we are big, small or midsized until the MASN reset is finally determined. The WAS market is certainly big, but I suspect Angelos’ deal may keep us as a small or mid market (meaning he gets the lions share of the money). And honestly, if Angelos didn’t have a great position legally, wouldn’t this be settled already?).

    But just because I can see their point of view, doesn’t mean as a fan that I like it or think it is smart. At the end of the day, I think that this leads to less talent playing baseball, which means less enjoyment from a fans perspective and ultimately declining interest in the sport. But these guys figure that will happen 10 years out, and be someone else’s problem.

    Wally

    21 Mar 13 at 1:05 pm

  7. But I don’t understand why the players would feel disgruntled against big bonuses to top players (Harper, Strasburg). Is there proof that because Strasburg got $15M guaranteed before playing a day for the union that established veteran players did NOT get that $15M? If anything by virtue of the Nats getting Harper and Strasburg, the team got better, they drew more, and the payroll rose (from $60M in those years to this year’s $120M). PLUS, the highest bonuses ever given out (Harper, Strasburg, Teixeira, etc) pale in comparison to the guaranteed monies that the #1 picks in the NFL get (Mathew STafford got a 6yr $72M contract with $41M guaranteed before ever playing a down of the NFL).

    Todd Boss

    21 Mar 13 at 2:55 pm

  8. I’m not sure the Yankees are the best example; they were down for years and years; Mattingly made the playoffs once in his entire career with them. They missed the playoffs from 1982 through 1994. Then, by virtue of an amazing class of rookies (the “core 4″ or whatever) they had a great run. I read it somewhere that someone was quoted as saying the “worst thing” that could have happened to the Yankees was that run of success because, as you’ve pointed out, they now feel pressure to compete every year. And I think that team construction mindset is about to majorly blow up in their face. They have absolutely no payroll room, have way too many mediocre FAs on 8 figure salaries, and I think they miss the playoffs this year. Meanwhile I don’t think that pressure exists for any other team; do we hear people complaining about the Mets, Dodgers, Cubs, Angels or White Sox in the same manner?

    Meanwhile … these RSNs have so skewed revenue distribution in the sport that teams like the big 6 have these huge safety nets to fall back on when they screw up personnel moves. How would baseball look if all revenue was split evenly as is done in the NFL? I’ll bet dollars to donuts there’d be a vastly different set of World Series winners over the last 10 years if everyone had a level playing field. If anything I believe the sport should be trying to do MORE to level the playing field, not take away the advantages the smaller market teams had.

    When the draft restrictions were put in, a lot of scouting pundits said that “more guys were going to choose to play other sports now” instead of baseball b/c they couldn’t get the money they wanted. I think that’s BS. If you want to play baseball, and someone offers you $2.9M instead of the $4M you may have gotten 5 years ago, are you really going to go to college on the football scholarship that you’re being offered instead? In the grand scheme of things that’s still life changing money whether its 2.9 or 4.0M, and there’s just no guarantee you’re magically going to make it in the NFL. The bigger concern for me is the drying up of talent from the D.R. as they see the magic ticket of international free agency going away.

    Todd Boss

    21 Mar 13 at 3:03 pm

  9. As for the union, I don’t think it is necessarily the Strasburg money that gets people angry – everybody kind of understands that once in a lifetime guys get treated differently. I do think that there was a lot of resentment towards the seemingly commonplace $1-3m bonuses that used to get handed out to guys that never sniffed the majors, while journeyman MLB types in their early thirties struggled to get offered major league deals (Ryan Theriot types). Guys who have proven at least something in the majors, don’t understand why they can’t get a job when kids nobody has or ever will hear of pull down millions in the draft because he is 18, 6’3″ lefty who can touch 90 mph once every 15 pitches. And I think that there are a lot of those journeyman guys in the union, meaning votes matter.

    And I do think that the cap on spending will have a detrimental affect on kids choosing baseball. I agree with you that the elite prospect getting $2.9m now still chooses baseball, but the kids who would have gotten $350-500k a few years ago that are now offered $50k will not all choose baseball. I think it takes a few years to see how that plays out, though.

    But in case it isn’t obvious, I am Sgt. Shultz – meaning I know nothing. I am just guessing what is going on.

    Wally

    21 Mar 13 at 6:15 pm

  10. Fair point using the Ryan Theriot comparison. But it doesn’t take into consideration basic supply and demand for potential athletes. Lets say that I’m a high school baseball player with some good talent; i have a college scholarship on the table and a team says they’re drafting me. There is always an amount of money that I will take from the baseball team in order to forgoe college, despite the fact that, in the end, I also want to sign with the team. That number is a moving scale depending on my quality and my draft position … but it exists for nearly every player. I can’t think of a single example of a high school player drafted in the first round who didn’t eventually get offered enough money to forgoe college. The same situation follows generally with college juniors; they can always return to school instead of signing, so there has to be an incentive to get them to leave.

    But it also doesn’t take into consideration this fact; EVERY UNION member was also once an amateur! I just don’t think there’s a complete blind side to that aspect of the business on the behalf of the union. This isn’t a worker’s union like Plumbers or Electrical workers, where the barrier to entry is relatively low (you can learn how to be a plumber relatively quickly). This is a highly specialized union whose members have one of the most unique skillsets in the world. I can see how a union of plumbers would always look out for their own best interests 100% at the expense of non-union members … but to assume the Baseball Players union behaves the same way may be a mistake.

    Plus, i go back to a previous point; what proof is there that a $2M signing bonus given to an amateur correlates to one less major league job for a journeyman? I’ve never seen any. What I do see is that teams generally have draft budgets and payroll budgets. And I also believe that money paid out in bonuses for upper end guys has a greater ROI than veteran contracts. How would you have rather spent $15M: signing Steven Strasburg and getting him for 4 years guaranteed or spending it on 2 below-replacement years of Jason Marquis? Because they both cost the same amount.

    Todd Boss

    22 Mar 13 at 9:00 am

  11. Wow! Thanks to all above. What an interesting discussion. I go back to first principles. ANY restriction on the free market rewards mediocrity and punishes exceptionalism.
    By putting a ceiling on the $ spent on the draft MLB dumbs down the scouting and risk taking of all clubs. This particularly hurts the NATS who appear to be much better informed than their competition and willing to make the hig risk-high reward decisions.
    All should be reminded that the moral pinnacle of Bud’s life was as a used car salesman.
    Let’s Play Two!

    SlowPitch63

    22 Mar 13 at 1:24 pm

  12. Plus, i go back to a previous point; what proof is there that a $2M signing bonus given to an amateur correlates to one less major league job for a journeyman? I think that this is a great point, and I would love to know how teams think about this. My gut tells me it is just two baskets: (i) money spent on baseball operations (minors and majors combined), and (ii) money in owners pockets (or out of, in the case of Ilitch). So, as you say, saving $2m on signing bonuses might just go straight into their pockets, not to the Theriots of the world.

    EVERY UNION member was also once an amateur! I just don’t think there’s a complete blind side to that aspect of the business on the behalf of the union. maybe, but I probably am in Bdrube’s camp

    By putting a ceiling on the $ spent on the draft MLB dumbs down the scouting and risk taking of all clubs. Slowpitch – I completely agree that Matt Purke never gets $4.4m under this new system, but not sure that I agree with the overall conclusion. Wouldn’t it raise the stakes of scouting success, because you no longer have the luxury to sign guys in the 3rd round for first round money (and therefore only need to hit on a lower percentage of picks), but now you really, really have to get it right with your first round pick. I think it may also mean that the toolsy guys get fewer of those big bonuses, as teams value ceilings a little more?

    Wally

    22 Mar 13 at 6:10 pm

  13. Sorry, meant floors in that last line.

    Wally

    22 Mar 13 at 6:12 pm

  14. Great point on the last; consider the Nats 2012 draft. It is going to now be entirely about Giolito, because we skimped on other picks in order to save enough money to convince him to sign.

    The one big effect the new draft rules seem to have had on teams was immediately seen this last draft; instead of drafting players and THEN figuring out how to negotiate with them, teams were calling guys, saying “will you sign for $X dollars yes or no?” and if they said no or hesitated, click and call the next guy. Suddenly college seniors were getting drafted 5 rounds earlier than they would have in years past. These guys are seniors in college for a reason; they were’t nearly good enough to be coveted as juniors. Name me one impact college senior draftee ever (notable b/c we very well may see one this year in Mark Appel, but only because he refused the meager signing bonus he was offered last year).

    Todd Boss

    23 Mar 13 at 8:41 am

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