International Draft Addendum: Free Agent Compensation Part II

This is the final part of a series looking at a potential international draft and free agent compensation.

Aspects that work well?
1. Subdivision of positions.
It makes sense to value players by subgroups.
2. Taking into account the value of a player for his current team.
At bats and innings pitched connotes a players worth to his own team.

Why is the current system not very accurate?
1. Poor statistics are used.
The numbers used are either of dubious use (fielding percentage, chances) or are rather useless (RBIs, winning percentage).
2. Undervaluing/overvaluing certain positions.
A major issue often encountered are free agents who flounder around due to unrealistic compensation statuses attached to them. For instance, Jose Valverde is struggling to find a decent market for his services because he is a type A reliever, but no team is willing to offer both the cash and loss of their first unprotected pick for him. The same thing happened to Orlando Hudson, Adam Dunn, and Juan Cruz last year.
3. Potential over-compensatory approach for players on disabled list.
There really is little reason why a player like Erik Bedard would qualify for compensation even though he has only seen 164 IP over the past two years. Being able to stay healthy should be a consideration as it affects a player's future cost.

But what is the major failing of the system?
Value lost is not value gained. Losing a top free agent results in getting two players who are, at best, 4 years away from the free agent signing to making a difference on the big league club. This is the most glaring issue with the current approach. The other failings need to be corrected, but making the adjustment closer to real time is a better solution.

After the jump, a better way to identify type A and B classifications and a more fair way to compensate.


How to better classify free agent classes:
Use a condensed statistic like WAR. This system would use all of the attributes from the current one and place them in a more defensible construct. It also incorporates health as a attribute as opposed to assuming a players health is a constant. For defense, the system should use a three year weighted average to determine UZR for fielders. Assume all catchers are average defensively until a dependable measurement technique is devised to measure that.

What is a more fair way to compensate teams?
Get rid of the draft pick compensation scheme. It makes no sense. I think the best way to do it is to issue a signing tax on any type A or type B free agent on the team that signs the player. A type A player contract would be taxed 20% and a type B player contract would be taxed 10%. The tax would be paid from the signing team to the one who lost the player. That team has the option of beginning the program that year or waiting until the following off season to begin. This tax money must be spent on a free agent and must be at least on a 1:1 dollar shared ratio. Any unspent money is forfeited back to the player on which the tax was issued.

For instance:
Lets say Mark Teixeira signed an 8 year deal for about 180MM. That is a yearly average of 22.5MM. Assuming that yearly sum is what the Yankees are willing to offer him, under the new scenario he would be paid 18MM with 4.5MM being sent to the Angels. This would happen in years n to n+2 or n+1 to n+3. The Angels would have that 4.5MM allotment to spend on 9MM or more for a single free agent. If they only spend 8MM on a free agent assigned to this allotment, they can only receive 4MM in compensation and 0.5MM goes to Teixeira.

Why would this be good for teams?
Compensation for a type A players generates on average about 5.6MM in value. In order for a team to get similar compensation a player would need to sign a 3/27MM contract. That is about what an average baseball player would sign for if 1 WAR is worth about 3.5 to 4MM. That seems about right. The better the player, the higher the compensation. The value of that compensation is also more immediate and more dependable than draft picks would be.

Why would it be good for players?
It would probably push for players demanding long term contracts as well as forcing teams to spend money on MLBPA free agents. Money cannot disappear from the market if a team wishes to get compensated. It also encourages the teams to sign a player for 3 years so they can fully really that compensation. Likewise, a team/player is only taxed for three seasons and it is based on his lifetime contract, so it is not a great burden.

Draft Top 20: Mayo on James

Jonathan Mayo put out his first MLB draft top 20 prospects. Below are the rankings along with where Nick James at PNR Scouting puts them in parentheses.

1. (3) Anthony Ranaudo, RHP, LSU
2. (7) Drew Pomeranz, LHP, Ole Miss
3. (2) James Taillon, RHP, The Woodlands HS, TX
4. (1) Bryce Harper, C, College of Southern Nevada
5. (13) Dylan Covey, RHP, Maranatha HS, CA.
6. (11) Chris Sale, LHP, Florida Gulf Coast University
7. (10) Jesse Hahn, RHP, Virginia Tech
8. (8) Zack Cox, 3B, Arkansas
9. (30) Manny Machado, SS, Miami Brito HS, FL
10. (21) Kaleb Cowart, 3B, Cook County HS, GA
11. (25) James Paxton, LHP, Kentucky
12. (6) Deck McGuire, RHP, Georgia Tech
13. (4) A.J. Cole, RHP, Oviedo HS, FL
14. (22) Kevin Gausman, RHP, Grandview HS, CO
15. (20) Brandon Workman, RHP, Texas
16. (12) LeVon Washington, 2B, Chipola JC, FL
17. (60) Micah Gibbs, C, LSU
18. (15) Stetson Allie, RHP, Olmstead Falls HS, OH
19. (9) Christian Colon, SS, Cal State Fullerton
20. (18) Yordy Cabrera, SS, Lakeland HS, FL

Mayo might be crossing the line that has been established by conventional wisdom placing Bryce Harper at number 1. We saw something similar with Kevin Goldstein suggesting that Harper would not go number 1 (though not outright saying he is not the best prospect). Stotle (Nick) ranks it differently. True, much time remains between now and the draft, so things could change. The rest of the list appears similar enough until we reach the 9th slot.

It will be interesting to see how these rankings change over the course of the year.

Keith Law on the Fan Tonight

Keith Law appeared on the Fan with Jeremy Conn's Playmakers tonight to talk about prospects on the Orioles.

On Matt Wieters:
Law said he was not surprised that Wieters needed time to adjust. Few players come out and perform when they hit the big leagues . . . there are few Ryan Brauns. He thinks he will be a star by 2012 and 2013 when the Orioles will be ready to compete in the AL East.

Thoughts on the Orioles not signing a big name this offseason:
Law said he has been a supporter of Andy MacPhail devoting money to the minors leagues and developmental system. You won't win by trying to outspend the Yankees and Red Sox. The GM needed patience for the system to replenish itself and prepare them to having waves of talent rising up every year. In a year or two guys like Wieters, Jones, Reimold, and Matusz will be performing at a high level. A year or two after that another wave of talent will arrive in the form of guys like Britton and Joseph. Then another wave will come with guys like Hobgood, Coffey, and others.

On Brian Matusz:
Matusz is a player who was not going to develop in the minors. He secondary pitches are very good and overmatched HiA and AA batters. Add that to an above average fastball and it was clear that he would need to develop in the majors. The only aspect of his game that needs work is fastball command. When he solidifies that he will profile as a no. 2 starter or even as an unconvential no. 1 starter. He has a David Cone style approach where he uses his secondary pitches against both right handers and left handers to set them up on his fastball.

On Zach Britton:
Law is high on Zach Britton. He is a traditional sinker/slider pitcher with a good slider and a plus sinker. He uses these quite well to miss bats and induce groundballs. He should be able to be a top of the rotation pitcher. The high grade (no. 25) in this year's rankings is in large part due to his improving changeup which makes him more of a threat to batters on both sides of the plate. Law then talked about how he talked to three scouts who each said he was one of the best if not the best pitcher they watched all season. They gave very high praise including one who joked with Law not to place him too high on the list because he is trying to talk his GM in trading for him. Law mentioned that that won't happen as the Orioles are high on him as well. It may take about a year and half more development, but if Britton cuts down on his walks and improves the changeup he could be very special.

On Josh Bell:
Bell needs some developmental time. He has one of the best left handed swings in the minors, but his right handed approach needs a lot of work. His defense is a work in progress. His feet and athleticism are there, so Law thinks he can make it. He views the Dodgers system as one where players do not get a high level of instruction and that the Orioles do a better job of that. He thinks Bell is good enough that it would have been foolish for the Orioles to lock themselves in place with a 3 to 4 year deal at the corners and block Bell.

On Brandon Snyder:
The big question is if Snyder will have enough power. His swing is very nice, but it has never produced any power. His defense is solid at first, too. The power needs to show up if the Orioles are going to slot him in at first. If he does start hitting home runs he will clearly be an everyday player.

Jake Arrieta
Law sees him as a fourth starter, but mentions that the O's brass think higher of him than that. He has improved his control, which was the big knock on him. The consensus from scouts is that he is a 4th starter and that is not a bad thing as there are several pitchers in the pipeline that will challenge him for a slot in the rotation.

On Chris Tillman:
He looks light a number 2 pitcher, but has more development to go. The Orioles were somewhat forced to promote him before he was ready and will need to do that development in the majors. His curve has good depth on his curve and he has a good body. His command needs improvement. Very high potential.

bergesen
Law thinks Bergesen is a bottom of the rotation type of pitcher. He does not miss enough bats, but he does work down in the zone so that minimizes the damage of batted balls. His main role on the team will wind up being someone who can hold a rotation position warm on the cheap until another arm pushes him out of the way. He could be a 5th or possibly a 4th starter on a good team.

Connecticut would do good for a bad team.

This past week NESN's own Peter Gammons stated that there have been some (probably minimal) discussions about relocating the Tampa Bay Rays to either New Jersey or Connecticut. The idea is spurned by the fact that the Rays have been around for about two decades and have been recently successful, yet they have proven to be a tough draw. They were 11th in the AL with a draw of 1.875 million people. Their average ticket price was $18.35 and their premium seats were averaged at $59.82 last year. In comparison to the Orioles, the average ticket price is cheaper ($23.42), but the premium price is more expensive ($42.86). The final price index shows going to either the Orioles or Rays games to be rather similar in cost.

Again, the problem is that the best the Rays can do when they are coming off a World Series is the best the Orioles can do after more than a decade straight of losing records. That is pretty much the definition of a poor market. Moving to an area with more cash flow would be ideal. The is where New Jersey and Connecticut come up first. They have money and they have well established markets to set up in. Problem is though that they will be in the Red Sox and Yankee markets in Connecticut or in the Yankee/Mets/Phillies market in Northern Jersey. It would seems that the people in these markets who would follow a team probably already have sworn allegiance to a club. Furthermore, the Yanks and BoSox have been incredibly successful, so even the band wagon fans are appeased at this point. The money generated by a new club will probably be more about siphoning money already in the market as opposed to generating a new, money laden fanbase.

The big negatives:
1. Yanks, BoSox, Mets, and Phillies may need to be given a monetary incentive for letting another team in their markets. It would probably be cost prohibitive for any owner to meet these prices and set up shop in a new locale and it might not be something the MLB office wants to handle.
2. Little new revenue. MLB probably won't get richer because the money in these markets is probably already spoken for.
3. Stadium and infrastructure construction. No MLB ready existing facilities are available in the region, so new facilities and infrastructure related to those would need to be built. We are probably talking somewhere between 700-1000 MM. Neither state would be willing to help out.

So, knowing all of that . . . it is unlikely that the Rays will move in either of these locations. It will probably take a building/tax boom as well as the Rays outright tanking and watching their awful attendance halving before a move would be considered.

That would not make this a fun column though, so after the jump . . . what may be the most cost effective way to get either of these places to work. Be weary, this is kind of long and rather rambling.


The first assumption is that the Rays would be able to get tax cuts to equalize Tampa and their new home. This might be a faulty assumption. The second assumption to be made is that there will be little to no money available for stadium construction. In light of this, it will be necessary to use existing stadium that would be modified slightly to fit baseball uses. Stadium size will also be an issue because the team would rely greatly on Red Sox and Yankee travel to boost income. This will help on a couple fronts as it would prevent the need to immediately invest a great deal of capital into construction and it would allow the team to saunter around and find a suitable place to build a stadium several years down the line.

So, what level of support would make the Rays break even?

As mentioned earlier, the Rays pulled in about 1.875MM fans last year. Each person paid roughly $41.35 based on the fan cost index (FCI). In comparison, Yankees fans FCI was $102.75 and the Red Sox FCI was $81.61. As this is an Orioles blog, I'll note that the average cost for an Oriole fan is $40.92. So you can see why Camden Yards is full of BoSox and Yankee fans, particularly on weekends. You can get much closer to the action and break about even if you carpool and get a room with a person or two next to the stadium. The way a Connecticut team would work would be by bankrolling on these two fan bases. As this region only has a population of 3.5MM, it probably makes sense to use more than one stadium. Smaller stadiums for non-BoSox/Yanks games and temporarily convert a football stadium for BoSox and Yank games.

So, if the FCI for premium games was set at $70 with the non-premium games at $40, what would be needed for the teams to break even?

Assuming, at $70 you are able to pull in 50,000 for Yankee games and 40,000 for Red Sox games then, in those 18 games, the Rays will have earned 73% of their current annual revenue. Although incredibly unlikely, if the premium games were sellouts at 57,000, that would account for 92% of the current income. An average of 61,250 would generate the same revenue that the Rays currently enjoy. Under the 45,000 average assumption, the rest of the home games can depend on a relatively small fan base for the remaining money (20.8MM).

Stadiums to use for non-premium games:

New Britain Stadium in New Britain , Ct
capacity 8,200
14 years old

The Ballpark at Harbor Yard in Bridgeport, Ct
capacity 5,500
12 years old

McCoy Stadium at Pawtucket, RI
capacity 11,800
64 years old

Sixty three non premium games will be played each year. A non premium game is defined as a game played against someone not named the Yankees or Red Sox. Each stadium here would serve as a home field for 21 games. The specific series for each stadium would be decided before the season and adjusted for what the team desires. For instance, the season may be split into three sections with each stadium serving as the home field for two months.

Perhaps the nicest stadium of those three will also be the most difficult to include. The Ballpark at Harbor Yard has a capacity of 5,500. Each game has to make 330k to break even with the Rays mark assuming the Yanks and BoSox can average 45,000 for each game. That would make a FCI of $60.60, which would be a very expensive ticket. Based on the current design of the ballpark about 1,000 temporary seats could be erected for games. That would bring the cost down to $51.28, which is still rather expensive. More serious construction could probably maximize the stadium at 7,500, which would drop the per game FCI to $44.44. That would need to include a solution to add 500-1000 seats to the outfield corners and maybe left field. This is the weakest one of the three, but may be a good idea as it would reach another location to generate interest in the team.

The other two stadiums would suit the team fine (which may mean ignoring Harbor Park and just settling in on New Britain and Pawtucket). In New Britain, existing infrastructure allows for an FCI of $40.65 to break even. Temporary stands could raise the capacity to roughly 10,000 which would drop the FCI to $33.33. In Pawtucket, existing infrastructure allows for an FCI of $28.25. If only New Britain and Pawtucket were used with a $40 FCI, then with 80% and 70% fill of their respective stadium (8,250 tickets sold per game) would break even with the Rays current system. If they would be able to sell out their home schedule in those stadiums, they could make another 7.5MM. That is a 10% increase over their current draw based on the FCI.

Premium Games:

Yale Bowl in New Haven, CT
64,246
97 years old

The east end of the stadium would have to be closed off as those seats would be too far away from the action. Some replacements could be placed out into the right field. A reasonable estimation would be that the stadium would be able to fit about 57,000 fans. If need the far end of the stadium could be opened up to allow for another 10,000 fans to congregate in the stands and field. In addition to this, a see through fence would need to be erected in left field to make the short distance playable. Otherwise, you will have a 215 ft porch. It would quickly recess back to about 370-380 is left center, so the wall would only be needed for a short distance. An example would be the Los Angeles Coliseum when the Dodgers first moved out west. Another potential fix would be to put home plate at one end and have two extremely short porches that quickly move back. Essentially the porches would be about 195-200ft, while the alleys could be as deep as 430 feet. In this scenario the high walls would be present for about 25-30 ft. It would also make it easier to seat the fans close to the infield. It is not an ideal situation, but it has been done before. The hope would be that Red Sox and Yankee fans would be interested in coming to a road game within driving distance of home with a ticket price that is less than what it would cost in their respective stadiums.

Benefits:
1. Minimal cost in temporary seating and field adjustments.
2. Current infrastructure is already designed to meet attendance levels.
3. Greater region to draw fans. It may be easier to get one person to buy season tickets in New Britain and someone else to buy the other other season tickets in Pawtucket as opposed to one person buy a full season slate in New Britain.
4. Provides greater scarcity of a product in some locations. Fewer games means that the games take on more importance as an entertainment good.
5. If it is a complete fiasco, nothing large and expensive has been built to keep the team staked down to an area.
6. Greater cost efficiency in running a game as larger venues could be sought for larger crowds and vice versa.

Detriments:
1. Entire plan is based on the assumption that Boston Red Sox and New York Yankee fans would be willing to travel 1.5hr to New Haven to spend 30-40% less while potentially getting better seats than they would have gotten at home.
2. Few box seats.
3. Modifying a football stadium for baseball is somewhat difficult as one or both foul lines will provide for a short porch.
4. Local populace is not very large.
5. Local populace is largely divided amongst Yankees and Red Sox fans with the rest mainly consisting of Mets fans. Baseball is awash in this environment and there are probably very few fans who have no affiliation.
6. Fans are willing to watch MLB in minor league parks where the FCI is probably twice what it costs to watch a minor league game in the same park.
7. That the facilities could be upgraded well enough to provide proper clubhouse amenities for the players.

How would it make sense?

I think there would have to be an increase of about 20%. By using Pawtucket and New Britain, you could probably average about 8000 tickets sold per night. If their FCI was $40 and the premium games were $70, the premium games would need to have an average attendance of 57,000. That does not look very good. If both Pawtucket and New Britain could sustain sell outs every night, then an average premium attendance would be 53,000 to meet the 20% increase goal. I think the 20% goal would be far easier to make if the team was not good at all.

In 2005, the Rays had a season draw of 1.14 million tickets. According to the FCIs, that would be an income of 47MM, 30MM less than they are receiving right now. To get the 20% rise under such a scenario, if the non premium games averaged 8000 tickets, then 29,000 would be needed for the premium games. If the non-premium games were sold old, about 26,500 would be needed to the premium games. In terms of FCIs, with a draw of 1.14 million tickets, if the premium games had an attendance level of 38,000 . . . they would break even. In 18 home games, they would break even with what they could do in Tampa. All else would be increased profit. That should be pretty simple. I think it is pretty easy to say that if the Rays don't move and have a period of about ten years where they have difficulty to compete, their attendance will fall and a place like Connecticut and Rhode Island would look nice.

What about New Jersey?
I think it is more difficult here. First, it would be either going into the AL and depending primarily on Yankees fans to arrive as opposed to Yankee and BoSox fans. They could also try to draw on the Phillies and Mets fans. Also, there are no large minor league stadiums here. They are all in the 5,000 to 7,000 range. Assuming you could fit about 40,000 Yankee fans up in Giants Stadium. If you could get average 37,000 for Yankees and Red Sox games at Giants Stadium, to hit the 20% mark the FCI would have to be $22.68 in those non-premium games for those stadiums. The problem is that if the team is more successful and capable of selling more tickets in Tampa, an FCI of about $110 would be required for non-premium games . . . so you can see that this arrangement is even more limited than what Connecticut and Rhode Island could offer.

If you try to draw on the Mets and Phillies, you probably have to reduce the FCI to about $55. In this scenario, you can reach a 20% increase over what the Rays would make with a 1.14 million attendance mark if you can pull in an average of 35,000 fans in the Mets/Phillies games while hitting 7000 in the non-premium games with an FCI of $45.35. The assumption of Yankee fans being more present and willing to travel to watch a game in addition to the slightly higher draw of a BoSox game and you have a higher attendance rate and higher FCI. New Jersey is probably a better place to have a bad team, but not a better one to have a good team without a larger capacity stadium being built.

So in conclusion, the Rays would do just as well in Connecticut by drawing an average of 45,000 fans for premium games and 8,000 for non-premium games. Under 2005 attendance levels in Tampa, just 18 games of 37,000 attendance for the BoSox and Yanks games would have accounted for all of the revenue Tampa generated that season in 81 home games. An NL team would have very little draw in this region and should not be considered. If the team was placed in New Jersey, a 1.8 million ticket presence in Tampa could not be reciprocated in Jersey with the existing infrastructure. On the lower end of the spectrum, a team could probably get by in the NL, but would probably have a much easier time of it in the AL.