How to Fix the MLB Draft

Fangraphs writers have recently written two articles discussing how they would fix the draft. David Cameron wrote the following:

So what if there was no draft? Instead, what if we just lumped all new players -- foreign or domestic -- into a single acquisition system where each player was free to sign with the team of his choice, only with firm spending caps in place to ensure that young talent flows more freely to clubs that can't compete on major-league payroll alone? In other words, a team's talent acquisition budget would be inversely tied to its major-league payroll; the more you spend on big leaguers, the less you get to spend on prospects, and vice versa.

This proposal has a few problems. The first problem is that it will likely convince teams not to spend more money on payroll than other teams. Carson Cistulli created a graph showing how large each team's draft pool would be in 2015 based on this proposal and determined that the Dodgers would have no money in their pool and the Yankees would only have $2.2 million. It is unlikely that teams are going to be willing to spend a lot of money on players if it means they can't afford to draft any talented prospects. In addition, teams like the Yankees are currently able to add international talent with only minimal repercussions. If this method is implemented then this loophole will be closed and it will make teams really loathe to spend more money than anyone else.

The second problem is that even if teams like the Yankees were still willing to spend a lot of money on players they would likely fail in this system.  The Yankees have one of the largest payrolls in the majors but are struggling to remain competitive because they've been unable to develop quality homegrown talent. Most production is contributed by team-controlled players. If teams like the Yankees and Dodgers are prevented from drafting any of the best players then they will struggle even with large payrolls. This will cause fans of the Yankees and Dodgers to stop attending their games and therefore a significant loss in revenue, which would be disastrous for baseball.

However, it does make sense to disassociate draft position with record. Associating draft position with record encourages the Astros to spend minimal amounts on free agents in order to pocket revenue and receive top draft picks. Does baseball want to encourage the Astros to tank? Nor is it reasonable to give the Mets or Phillies better picks than teams like the Royals, Orioles, and Pirates simply because they had a worse record. Shouldn't we want MLB to reward small-market teams for being successful? If the draft is a way to ensure parity by rewarded small market teams then it should reward small market teams. The current method rewards failure instead of supporting small market clubs.

I think Cameron's idea of a draft pool where players can be selected is a good idea but using payroll is a mistake. Rather the draft pool should be based on an obscure metric called the Revenue Sharing Performance Factor.

The Revenue Sharing Performance Factor is discussed in the CBA and one can find a chart with the factor for each team on attachment 26, page 235 in the PDF and page 222 in the paper copy. Basically, this factor is meant to ensure that each team is paying a fair amount into revenue sharing based on revenue earned and market size. You can find a more detailed description starting on page 132 in the PDF and 119 in the paper copy if you're interested.

Using the metric, the pools would look like this in 2012 and 2013 presuming that teams could spend a total of $295M in each of 2012 and 2013:

The Yankees would have a pool of less than $7 million while the Royals would have a pool of nearly $10.3 million. This would allow the Royals to sign better prospects than the Yankees but would still give the Yankees ample opportunity to add talent. In addition, the Astros no longer receive a reward for tanking as their draft pool is at $9.4M each year while the Mets and Cubs would have a draft pool of about $8.5M. This wouldn't force those clubs to spend money in free agency but it would make it harder for them to succeed if they didn't.

Implementing this method would lead to other changes. It would no longer make sense to allow teams to give qualifying offers to potential free agents because small market teams would have a built-in advantage due to the fact that they can’t sign their best players when they become free agent eligible. In addition, it would make sense to completely abolish the luxury tax. This method encourages teams in large markets to spend money on free agents if they want to be competitive. If so, it isn’t fair to penalize them for spending money. It would also make sense to eliminate the supplemental revenue sharing plan. That way, teams that have a larger revenue and market size than average but aren’t likely to spend enough money to be subject to the luxury tax would see some benefits from this deal and would be more likely to support it.

This deal is good for small market clubs by ensuring that they have a larger draft pool than large market clubs regardless of record. It would help large market clubs by ensuring that they no longer need to pay luxury tax and wouldn’t have to share as much money via revenue sharing. It would be good for all clubs because it would control spending on both foreign and domestic prospects. The richest clubs wouldn’t need to spend millions on foreign prospects and the poorest clubs would have a fair chance to convince foreign prospects to join their organization. It would be good for the players union because prospects would be able to choose their team and the elimination of the luxury tax would encourage spending by rich teams. Unlike Cameron's plan, this has benefits for all teams as well as the players union.

It seems like a win-win-win-win situation to me.