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Friday, November 20, 2009
You don’t often hear fans or media talking about these compensation draft picks, but they can have a real effect on the free-agent market, particularly for Type A free agents, effectively penalizing players for being rated at the top of their class.
Overall, the system boils down to a tax on Type A free agents, which teams must pay in the form of draft picks. For a long time, teams seemed to more or less ignore this tax, figuring that most draftees were unlikely to make much of an impact anyway. However, in recent years, teams have started to value their draft picks more highly. The question is, just how much are these late first-round or early second-round draft picks really worth?
Contains some interesting mentions of what “research” determines a first-round pick to be worth, and a win to be worth. No citations to the research, though.
Knowing that they will have to pay this tax on Type A free agents, teams are going to bid less than they would have otherwise. If the Washington Nationals think that, say, Billy Wagner is worth $10 million, they must consider that if they sign him, they’ll have to give up their second-round draft pick, which is worth around $3 million. Therefore, they may only be willing to pay Wagner a salary of $7 million for the entire transaction to be worth their while. This same logic applies to the other teams chasing Wagner, and the result is that the Type A label will knock a few million dollars off of Wagner’s final salary if he chooses to enter the free-agent market.
While this isn’t such a big deal with the mega-free agents—what’s an extra $3 million on top of Mark Teixeira’s $180 million contract?—the effect is substantial on less valuable players, such as Wagner, for whom $3 million may represent a substantial portion of their pay.
This was a major problem last year for Orlando Hudson and Juan Cruz, both Type A free agents who went unsigned deep into the offseason. Cruz in particular was probably only worth a few million dollars, hence signing him at all was a net negative. For these players, the Type A tag became a sort of scarlet letter that deterred teams from signing them. Eventually the Royals (foolishly) signed Cruz for $6 million over two years, and the Dodgers got a cut-rate deal on Hudson ($3.4 million guaranteed, plus incentives).
Part of the problem with the free-agent compensation system as it stands now is that the rankings it produces aren’t really very accurate. For instance, this year John Grabow and Marco Scutaro are Type A free agents, while Vladimir Guerrero is a Type B free agent.
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D'oh! I'm a transaction behind. Did the Red Sox offer him arbitration, then?
TBD. Dec. 1 is the magic date.
Teams originally wanted player-for-player free agent compensation -- you sign one of my players, I can take one of yours. The players compromised so that the compensatory players were from a pool, not just from the team doing the signing. So teams ended up losing players because someone else signed a free agent.
Well, that wouldn't do, so they changed it to draft picks. Teams didn't figure that draft picks were worth *that* much, so it didn't have much impact on free agent values. Especially with the explosion of free agent salaries, draft picks grew in real value and apparent value, and now teams are less willing to part with them.
The entire point of free agent compensation was to lower the value of free agents.
IIRC, that was how the White Sox ended up with Tom Seaver in 1984. That caused quite a stir.
That's absolutely true, but it doesn't address the issue of whether the current system unfairly punishes some players, esp. relievers.
It's also how the Jays ended up with Tom Henke.
Conversely, I don't see many Orlando Hudson's or Juan Cruz's refusing arbitration if they are so offered.
clearly this needs to change - either teams should not be allowed to sign multiple type A free agents if they can't pay the requisite compensation (and if this means we have to let teams trade picks, go ahead), or the compensation package itself needs to be fixed. it's sad that the blue jays/angels get shafted because the yankees signed sabathia first.
actually, was marte a type-A? in that case, the angels got shafted too...
1) That.
It doesn't go in order. Sabathia was the highest rated.
I'm assuming Sky is referring to his own work here:
Draft Picks and Expected Wins Above Replacement
The Draft and Wins Above Replacement (Part 2)
It's one thing for the rankings to be based on a silly formula that has little hope of identifying the best players -- the formula is agreed on by owners and players -- but it's another thing when that silly formula screws over a particular class of players.
2. It's true, a lot of these middle relievers then don't get offered arb. It's also true that the ones that do might be silly to turn it down.
3. It's not entirely accurate to say the (original) point of compensation was to drive down the price of FA. The point was to make sure that the team losing the FA -- always assumed to be some poor, abused "small market" team -- wouldn't be left with nothing. As noted, the original compensation was actual MLB players. It was fear of creating a set of old KC A's whose good players would all be bought by the Yanks and they'd be left with nothing. Yes, part of the "solution" to that is to keep the price down as well so those poor, abused small market teams might be able to afford to re-sign their own guys.
4. As the system has worked out, it's been as much an advantage to the Yanks as anyone. Not only is the marginal cost of signing a 2nd, 3rd, etc. FA fairly trivial, but the Yanks have received tons of compensation picks over the years when teams sign their type A FAs.
5. So I think the easiest fix to the system would be something along the lines of "unless you have a protected draft pick, you don't get compensated", possibly expanding that protection to cover the top 20 or 22 picks. OK, a more realistic variation would be that the only compensation the winning teams get is the supplemental pick. That way the Yanks don't benefit (much) if somebody signs Damon and protected teams don't suffer much if they sign an FA.
2) Joe Mauer signs with Yankees.
3) Yankees don't have to give draft pick compensation because the Twins made the playoffs.
I'm a Yankees fan, and I say that stinks.
I agree. I'd like to see something more drastic: draft picks, minor leaguers, and major league talent go to the team whose player was taken. Each team can protect 20 players, and the team whose FA was taken can choose to select a draft pick, a minor leaguer, or a major leaguer from the signing team. For every free agent signed, the number of protected players drops by one (the signed FA must remain a protected player). If the price extracted is too high for the signing club, the signing team can attempt trade the FA back to the original team for the already signed contract minus 15% or more of AAV (which they have to pay), if both parties agree.
They'd accept a hard cap before they accepted that.
It was the Brewers and Blue Jays that got screwed over. Teixeria was the highest rated player in the 2009 off season.
Oh, I know, but I really am tired of all of the free agent movement. I hate how predictable it is that the same few teams always end up with the best free agents.
Players should have the right to sign where they want to.
Like Soriano to the Cubs, Lee to the Astros, and Gary Matthews Jr. to the Angels? :)
Angels came out fine. Tex was rated higher than Sabathia, Angels got the first rounder. Brewers only got a 2nd for C.C.
Maybe rather than 'sandwich round' -- stick in the middle of the 1st or something... say - whereever the +/-.500 line in draft order, insert 5 five picks of say... the "biggest contracts".
If I'm the Twins and I lose Mauer, and Mauer signed the most expensive contract this offseason, I get the 16th pick (if team at 15 was +500, original team at 16 was below 500).
Obviously, I don't know the legalese behind 'compensation' per se (does that compensation have to have a 'cost' to the signing team?) -- but this way, you provide some level of recompense to small market clubs losing players without rewarding really bad organizations.
man, i knew i was gonna get that wrong, but it doesn't matter - 2 teams got screwed over.
really interesting idea, but the players' union won't go for it. as intrugging as it sounds would restrict free agency too much.
i don't mind free agents going where they want. it'd be nice if some of them make their way to other teams besides the usual suspects, but that's icing on the cake for me.
i just don't understand how any team (like last year's yankees) can get away with not paying the required compensation after signing a free agent. i mean, that's like telling a player: we're gonna sign you for $100 m. oh wait, we don't have $100 m, so here's $90 m.
other leagues aren't a fair comparison because:
a) no other league has 50 rounds of drafts (you wanna talk about mr. irrelevant? you have to count up to 1500!)
b) no other league restricts the trading of draft picks
c) no other league has the has the same "prospect failure" ratio as mlb
d) every other league now has a salary cap
too many differing factors. i mean, in football, teams get draft pick compensation for hiring away a head coach.
i want to say that the purpose of compensation is actually to deter teams from doing what the yankees did: sign every single (useful) free agent available on the market. team budget should cover that, but obviously when you have unlimited resources like the yankees, that doesn't matter.
otherwise, why not just make up sandwich/compensation picks out of thin air? why do they have to take the first round pick from the signing team.
Well, I think it was put in place to 'punish'/lower FA value -- i.e., the yankees sign Mauer, so the Yankees pay the twins a pick.
Does the MLBPA come into play if ceding of picks - but retention of compensatory sandwich style picks remain in place?
In other words - if the Yankees didn't LOSE a pick, but the Twins GAINED a made-up pick slotted somewhere - does this mean that the MLBPA is still going to care?
It seems to me that this doesn't raise the implied 'cost' of signing a FA, simply provides recompense to the losing team.
I would think the teams would care. The problem with inserting picks is that you're punishing all of the teams in the lower end of the round who might not have signed a big-ticket free agent. To put it in perspective, the Twins lose Mauer and get pick 16, but then, lets say the Brewers make the post-season by catching lightning in a bottle, and they pick lower in the round, 5 or 10 slots lower than they would have just because they made the playoffs and because the Yankees picked up some other team's free agent. I'm of the opinion that the first round is inviolable: you can't mess with the order of it and I think MLB is of the same opinion, which is why we have sandwich round picks. A team's first pick is the most important (even though some teams waste it because they're stupid).
Something's always gonna stink. The 30th pick in the draft isn't much compensation to the Twins so it's not gonna screw them over that much (and gives them an equally tiny extra incentive to extend Mauer).
In 2006, the Yanks picked Ian Kennedy and Joba Chamberlain with compensation picks. In 2005 Carl Henry (part of the Abreu deal right?). In 2004, Philip Hughes. They picked up John-Ford Griffin and Jason Arnold (part of the famed Jeff Weaver trade!). He didn't sign but back in 98, they drafted Mark Prior with a supplemental pick. And I say that stinks.
The owners won't get draft slotting (or a worldwide draft) by "just" the elimination of draft pick compensation. As I have pointed out before, the Clarett decision indicates that the draft is considered a "mandatory" subject for collective bargaining, even if there is no tie whatsoever to the compensation of union members, because the draft defines the terms of entry into the labor market.
-- MWE
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