12 February 2015

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.


Jon Shepherd said...

I could see this being a good way to handle things, but I do think a form of contract slotting would be needed. http://camdendepot.blogspot.com/2009/12/fixing-amateur-talent-acquisition.html

This would both give players the opportunity to choose their own destination and balance that with lower performing teams having more freedom to offer larger contracts. The only difference I would make to that original system would be to make half of it performance based and half of it revenue based.

Unknown said...

First, I don't accept the premise that amateur talent acquisition needs to be tilted in favor of small-market teams. But that's another article ...

But granting the premise, I propose two changes to your proposal. First, and less controversial, there should be a floor below which bonuses don't count - $10,000, $20,000, whatever. This will ensure that organizations can stock all their teams.

Second, and more controversially, I would allow each team to sign one player each year (or every other year, I don't much care which) exempt from the limit. This will ensure (1) that the super-premium talent - Stephen Strasburg, Yoan Moncada, etc. - gets fair value. But also it will also a really bad team the opportunity to sign a super-premium talent without blowing their entire pool.

Jon Shepherd said...

I would argue if there is not a small market revenue correction system in place for cheap, controlled talent then we need to do away with geographical rights. I imagine ownership is more fond of keeping those rights than getting rid of the welfare programs.

Matt Perez said...

@Joe - I should have made it clear in the article but I agree that all bonuses under 100k shouldn't count against the cap as is the case currently.

I think the draft should be tilted in favor of small-market clubs. Given that the majority of the cap will likely go to one player (as it is currently), that would defeat the entire purpose of this proposal. I understand that we disagree on this point.

@Jon - I looked at that article while writing this one. I don't have a problem with that idea but I don't think it's necessary.

Matt Perez said...

"I would argue if there is not a small market revenue correction system in place for cheap, controlled talent then we need to do away with geographical rights."

Getting rid of geographical rights could potentially hurt small-market clubs more than large-market clubs.

In theory, an RSN could try to sell the rights for the Royals in New York. But they wouldn't find anyone willing to pay for it. But teams like the Yankees and Red Sox have strong fan support anymore. In fact, NESN has gone national despite the fact that they can't broadcast games outside of their geographic region and people are willing to pay for it. If NESN and YES could broadcast games in Kansas City then they'd probably be picked up.

Now I do agree that it would help small market teams if no teams controlled their media rights and revenue was split equally between all teams. But how are you possibly going to get the Dodgers and Yankees to agree to that? It's simply a non-starter.

Jon Shepherd said...

I think the breaking down the geographical holds would take time for fan bases to grow, but I would argue that a club like the Rays would immediately benefit from a move to NYC. Even a middling TV rights contract would be probably double what they currently see.

Matt Perez said...

The FCC ruled that Time Warner doesn't need to provide carriage to MASN in North Carolina partly due to bandwidth concerns and partly due to the Nationals and Orioles having no fans in the area.

I see no reason why the FCC wouldn't make the same rule for the Rays in New York. There's only so much bandwidth and the Rays probably don't have a large fan base.

But the Yankees are popular in Orlando. I'd be willing to bet that YES could get carriage there.

Jon Shepherd said...

The Rays do not need their own station, they can be kept within the existing bandwidth on another station. I would assume that it would be enough of a bet that it would garner them a better position than what the XFL saw with their market.

Matt Perez said...

Except you would need 28 stations.

Here's the deal. Your plan would kill MLB.tv. Basically, if I can watch my team via normal cable then I don't need to pay for access to MLB.tv. And revenues from MLB.tv are split equally among each team. That means that the money that the Rays earn from broadcasting by themselves needs to be more than what they earn via MLB.tv plus the amount they'll lose in their home network when they're faced with competition from the Yankees and Red Sox.

I wouldn't risk it if I was the Rays.

Jon Shepherd said...

I might be slow on the take here, but I do not understand how using the current range of broadcast options would kill MLB.tv which exists in spite of the current range of broadcast options.

Matt Perez said...

I think I'm totally misunderstanding your argument. Are you saying that the Rays should be allowed to actually physically move to New York?

If so, we've just been having two different conversations.

Matt said...

@Joe- your first comment about 1 exempt player per year would destroy the entire point of trying to balance the scales. Yes there are instances where players signed for very little money develop into big league stars but this is based more on luck than on any other argument. Your argument would make sure that no small market team would ever be able to sign players like Yoan Moncada or Masahiro Tanaka or Miguel Sano etc... because the big market clubs (NYY, NYM, Red Sox, White Sox, Cubs, Angels, Dodgers, Rangers, Astros (when they get their act together), Giants, and Mariners) would sign all of the super-elite talents before the small market clubs have a chance at them forcing the small clubs to rely on luck rather than scouting...

Erik said...

The system does not fix the difference in risk tolerance, and therefore the ability to take on high risk/high reward players. Mid-market to small-market organizations will still need to be more conservative because they cannot make up for bad luck with free agency.

I have no idea what could, though.

Matt P said...

I think it's simple enough to put a draft limit on how much any one prospect can receive. Say one million less than the average draft pool? Whatever, the exact number doesn't matter.

If so, there are only so many top draft prospects available. The poorest teams will have enough money left over that they can go after high risk/high reward guys