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Insider

New CBA a net loss for baseball

11/22/2011

Earlier today, MLB announced the details of a new collective bargaining agreement, which changes a lot of rules around the draft and international scouting as well as some rules for minor league free agents, on drug testing, and on the All-Star Game. The net result here is a big negative for the sport -- not enough to counteract the benefit of another five years without a labor stoppage, but enough of a negative to hurt the sport in the long run. I would hope Bud Selig's successor as commissioner is open-minded enough to re-evaluate this CBA's provisions for limiting spending on amateur players after we see its effects over the next five years.

I'll respond to MLB's summary of the agreement point by point, omitting points where I don't have any thoughts to share. (The portions in italics come directly from the summary.)

    III-a-3. Article XX(B) free agents signing minor league contracts who are not added to the
    Opening Day roster or unconditionally released 5 days prior to Opening Day shall receive
    an additional $100,000 retention bonus and the right to opt out on June 1.

So in effect, it's cheaper to add such minor league free agents to the 40-man roster than it is to stash them in Triple-A all year. This is a huge deal, especially for clubs that were aggressive with minor league free agents. (These rule XX(B) free agents have major league experience and have been outrighted off a 40-man roster before, so they can elect free agency at the end of the regular season if they're not on a 40-man at that time.)

(Update: As it turns out, I confused Article XX(B) with Article XX(D) -- I know what you're thinking, you just did the same thing yesterday -- so the impact of this rule is much less than I indicated on Tuesday. The only free agents affected here are major league free agents -- with six years of major league service time -- who fail to land a major-league deal the following season. That is, if, say, Albert Pujols couldn't get a major-league contract offer and had to accept a minor-league contract for 2012, he'd fall under this new rule. That group might include three to five players per year; Dontrelle Willis was one example from 2011.)

    b. Draft Pick Compensation

    1. Starting in 2012, "Type A" and "Type B" free agents and the use of the Elias ranking
    system will be eliminated.

Really, the best news I've had all day. This system was designed to drag down free agent salaries. I think we know now that that didn't happen, but like most such taxes, it had unintended consequences -- in this case, limiting the markets for relief pitchers as teams didn't want to give up first-round draft picks to sign them. And the lunacy of some of the Type A and B designations is best consigned to the historical dustbin anyway.

    A. Only Players who have been with their Clubs for the entire season will be subject
    to compensation.

Also known as the "screw you, Anthopoulos" clause.

    B. A free agent will be subject to compensation if his former Club offers him a
    guaranteed one-year contract with a salary equal to the average salary of the
    125-highest paid Players from the prior season. The offer must be made at the
    end of the five-day free agent "quiet period," and the Player will have seven days
    to accept the offer.

So it's no longer tied to performance -- this is probably good, as the odds of both sides agreeing on a performance measure were effectively zero -- but it's tied to the former club's perception of value. That average salary would be right around $12 million or so this year, so you're going to see very few relievers, fifth starters, or backup infielders carrying draft pick compensation in the future. That's a positive as well.

    C. A Club that signs a player subject to compensation will forfeit its first round
    selection, unless it selects in the top 10, in which case it will forfeit its second-highest
    selection in the draft.

This is pointless. It's a strong deterrent for lower-revenue clubs that depend on drafting and development to sign any qualifying free agent, so while they might still gain picks from losing free agents, they're also much less likely to want to add a key free agent when they're in or near contention. I wish MLB would sever the artificial connection between free agency and the draft entirely.

    D. The Player's former Club will receive a selection at the end of the first round
    beginning after the last regularly scheduled selection in the round. The former
    Clubs will select based on reverse order of winning percentage from the prior
    championship season.

So the boost a team gets from losing a free agent is less than the cost to the team that signs the same free agent. This makes it clear that the agenda here is not to help clubs that lose players, but to continue the 25-year-long attempt to drag down free agent salaries.

    e. Rule 4 Draft

    1. The draft will continue to be conducted in June, but the signing deadline will be moved
    to a date between July 12 and July 18 depending on the date of the All-Star Game.

This is about 90 percent good. Players typically signed near the deadline anyway, so why not move it up and get them out and playing in the complex leagues or short-season minor leagues? You might even see a few first-rounders get to low Class A in their first year out, pushing them a little closer to the big leagues.

The earlier signing date means that the draft process will be completely over before the trading deadline, before the Cape Cod League holds its All-Star Game and finishes up its season, and before the series of major high school showcases that run from Aug. 1-15. Those last two points are particularly relevant to scouting directors who often had to cut short their August scouting of the following season's amateurs to finish signing some of their top picks.

The 10 percent that isn't good? It hurts the Arizona Fall League. College players who didn't sign until August would make their pro debuts out here in the AFL. That group of players will largely disappear from AFL rosters because they'll have played six weeks of pro ball after signing.

There was some sentiment a year ago among scouting directors that the draft should be pushed back until late June, after the College World Series was over, but that is not addressed in the language that's currently available. There are still a lot of details for the union and MLB to hash out now that the Memorandum of Understanding is done.

    2. Drafted players may only sign Minor League contracts.

This just protects teams from themselves. Very, very few draft picks actually merited major-league contracts and the 40-man roster spots those contracts bring with them, but teams handed them out far more often than they should have. It does remove a small bit of leverage from the players, who would often use the demand for a major-league deal as a way to get more money in a straight bonus on a minor-league deal.

    3. Signing Bonus Pools

    A. Each Club will be assigned an aggregate Signing Bonus Pool prior to each draft.
    For the purpose of calculating the Signing Bonus Pools, each pick in the first 10
    rounds of the draft has been assigned a value. (These values will grow each year
    with the rate of growth of industry revenue.) A Club's Signing Bonus Pool equals
    the sum of the values of that Club's selections in the first 10 rounds of the draft.
    Players selected after the 10th round do not count against a Club's Signing
    Bonus Pool if they receive bonuses up to $100,000. Any amounts paid in excess
    of $100,000 will count against the Pool.

    B. Clubs that exceed their Signing Bonus Pools will be subject to penalties as
    follows:

    Excess of Pool Penalty (Tax on Overage/Draft Picks)

    &bull; 0-5 percent; 75 percent tax on overage

    &bull; 5-10 percent; 75 percent tax on overage and loss of 1st round pick

    &bull; 10-15 percent; 100 percent tax on overage and loss of 1st and 2nd round picks

    &bull; 15-plus percent; 100 percent tax on overage and loss of 1st round picks in next two drafts

This is the part where MLB tells talented young amateur athletes -- who, by the way, aren't union members and had zero voice in these negotiations -- that baseball is a lousy avenue for them to take, at least financially, and they should probably check out other sports. Yet MLB does not realize that it is to their substantial benefit to sign players early, and at relatively higher prices: You get the athletes into your system where football or basketball can't poach them, and you get to develop them yourselves rather than farming out that effort to the NCAA.

College coaches must be thrilled, as this will likely mean a lot more teenaged arms for them to blow out through overuse. It's also a boost to Team USA and the Cape Cod League, which have seen their quality drop over the past several years as players increasingly signed out of high school. I'm sure the NCAA is thrilled as well as they have the prospect of more high-profile prospects to harass for using attorneys during the draft process.

The one thing we don't know here, however, is how big those signing pools will be. Perhaps the pools will be large, indicating that MLB understands the importance of paying for elite talent, but the fact that the figure for after the 10th round has been cut by about 40 percent to $100,000 is a terrible sign. The draft was the biggest bargain in the sport, and MLB, through some bizarre obsession with cutting bonuses (led by Chicago White Sox owner Jerry Reinsdorf, perhaps the cheapest owner in the game when it comes to the draft), didn't realize it. The only possible effect here is to limit the pool of talent entering the sport. If anything, MLB should have looked to raise draft bonuses to attract more athletes. It's a huge disappointment to any fan of the game, and I know many executives who are unhappy with these changes.

Of course, it also transfers wealth from these teenagers, many of whom come from lower economic strata, to the billionaire owners. So yay for the 1 percent, I guess.

    4. Proceeds generated by the tax will be distributed to payee Clubs under the Revenue Sharing
    Plan that do not exceed their Signing Bonus Pools. Draft picks that are forfeited by Clubs will
    be awarded to other Clubs through a lottery in which a Club's odds of winning will be based
    on its prior season's winning percentage and its prior season's revenue. Only Clubs that do
    not exceed their Signing Bonus Pools are eligible for the lottery.

If you're a good little boy and save something from your allowance, we'll give you extra money for you to not spend on players.

    5. Competitive Balance Lottery

    A. For the first time, Clubs with the lowest revenues and in the smallest markets will
    have an opportunity to obtain additional draft picks through a lottery.

    B. The ten Clubs with the lowest revenues, and the ten Clubs in the smallest
    markets, will be entered into a lottery for the six draft selections immediately
    following the completion of the first round of the draft. A Club's odds of winning
    the lottery will be based on its prior season's winning percentage.

    C. The eligible Clubs that did not receive one of the six selections after the first
    round, and all other payee Clubs under the Revenue Sharing Plan, will be
    entered into a second lottery for the six picks immediately following the
    completion of the second round of the draft. A Club's odds of winning the
    lottery will be based on its prior season's winning percentage.

    D. Picks awarded in the Competitive Balance Lottery may be assigned by a Club,
    subject to certain restrictions.

Part D hints at potential trading of draft picks, which is interesting. Mostly this section hands out a few extra draft picks to teams that were horrible the previous season. This is essentially baseball welfare, if welfare checks were disbursed via bingo games.

    E. Top 200 prospects will be subject to a pre-draft drug test and will participate in a
    pre-draft medical program.

The drug test isn't new, but I believe the medical program is. Standardizing some medical reporting would be great for scouts and for the players, who could (in theory) undergo one test and fill out one form and be covered for all 30 clubs.

    5
    f. International Talent Acquisition

    1. By December 15, 2011, the parties will form an International Talent Committee to
    discuss the development and acquisition of international players, including the potential
    inclusion of international amateur players in a draft or in multiple drafts.

    2. For the 2012-13 signing season, each Club will be allocated an equal Signing Bonus
    Pool.

    3. For each signing period after 2012-13, Clubs will be allocated different Signing Bonus
    Pools, based on reverse order of winning percentage the prior championship season
    (i.e., the Club with the lowest winning percentage the prior season shall receive the
    largest Pool).

    4. Bonus Regulation of International Amateur Players

    A. Beginning in the 2013-2014 signing period (July 2, 2013 - June 15, 2014), Clubs
    may trade a portion of their Signing Bonus Pool, subject to certain restrictions.

    B. Clubs that exceed their Signing Bonus Pools will be subject to the following
    penalties in the 2012-2013 and 2013-2014 signing periods:
    Excess of Pool Penalty (Tax on Overage/Draft Picks)

    &bull; 0-5percent; 75 percent tax

    &bull; 5-10 percent; 75 percent tax and loss of right to provide more than one player in the next signing period with a bonus in
    excess of $500,000.

    &bull; 10-15 percent; 100 percent tax and loss of right to provide any player in the next signing period with a bonus in excess of $500,0000.

    &bull; 15-plus percent; 100 percent tax and loss of right to provide any player in the next signing period with a bonus in excess of $250,000.

    C. The penalties for exceeding the Signing Bonus Pool will increase beginning with
    the 2014-2015 signing period if a draft or drafts is not agreed to by July 2014.

Major League Baseball would like to inform aspiring athletes from Latin America and Europe that you should go play soccer.

    5. All international amateur players must register with the Scouting Bureau to be eligible to
    sign, and the top 100 prospects will be subject to a drug test.

I'm all for this, particularly the registration part, which may help to eliminate the phenomenon of teams locking up players before the July 2 free agent period opened. Transparency in the process will be a net positive for both sides.

    6. The Office of the Commissioner and the Union will form a joint committee to assist
    international players with their transition to educational/vocational programs after their
    baseball careers are over.

Looks like someone else saw "Sugar" too.

The rapid escalation in bonuses for top Latin American prospects is a reflection of the hidden value there, but also a reflection of the lack of information that causes wide variances in opinions on players. (The Rangers gave $5 million to Nomar Mazara this year, when other clubs saw him worth one-tenth of that. You don't typically see that kind of disagreement on a draft prospect.) Improve transparency, increase the organization of tryouts and games there (which has started, at least, with the Dominican Prospect League), and you will see some normalization of bonuses. They may not go down, but they will become more rational. This CBA section uses a machete on a problem that demanded a scalpel.

    IX. DRUG PROGRAM

    Commencing in Spring Training 2012, all players will be subject to hGH blood testing for reasonable cause at
    all times during the year. In addition, during each year, all players will be tested during Spring Training.
    Starting with the 2012-2013 off-season, players will be subject to random unannounced testing for hGH. The
    parties have also agreed on a process to jointly study the possibility of expanding blood testing to include inseason
    collections.

For one thing, there's no evidence that HGH actually improves athletic performance in men of playing age, so this is tilting at giant windmills. For another, HGH is very difficult to detect, as it doesn't stay in the bloodstream for very long, so any test has to rely on proxies. And for yet another thing, what the heck is "reasonable cause?" If a player just, you know, "looks" like he's using something, is that reasonable cause? Will we have players ratting out other players? And what happens to the samples? Are we headed for a day when a team voids a contract because they used a blood sample from an HGH test and discovered that a player has a degenerative disease?

I can't believe the union went for this. Their members may make more money than members of most other unions, but that should have only increased their resolve to fight this silly, wasteful invasion of their privacy.

Stephania Bell offered this quick reaction to my query about the efficacy of HGH testing, given how briefly it stays in the bloodstream: "There are confounding factors (like how much is present naturally and fluctuations that occur under various conditions) along with what happens with supplemental injections."

    X.. OTHER

    a. Participation in the All-Star Game will be required unless the Player is unable to play due to
    injury or is otherwise excused by the Office of the Commissioner. Players Trust will receive an
    increased contribution and players will receive additional benefits.

I don't particularly like the All-Star Game, but if the union is fine with this, I am too. If you're going to have the game, you need the best players there. Wouldn't hurt to shrink the rosters a little.

    b. All Players will be subject to a policy governing the use of Social Media.

Also known as the "Logan Morrison rule."

    c. Weekend waivers during the regular season will be implemented beginning in 2012.

So if you ask for waivers for a player on Thursday, those waivers will now expire on Saturday instead of Monday. It makes roster management a little easier.

    d. The parties will agree upon a comprehensive international play plan in which Clubs and Player
    will visit countries in which games have not been staged in the past.

Approve. Approve. Approve. To market the game overseas, you must play the game overseas.

    e. Non-discrimination protections based on sexual orientation were added to Article XV.

There's no reason a gay player should face any discrimination at any level of this industry. It's sad that this even had to be stated explicitly.

    f. Instant Replay will be expanded to include fair/foul and "trapped" ball plays, subject to the
    Office of the Commissioner's discussions with the World Umpires Association.

'Bout time.

    g. Modifications to Fourth Option and Outright Assignment rules.

This could be quite interesting, but we lack the details. I know many agents who loathe the fourth option rule, and it could be gutted or eliminated.

    h. The parties agreed to an improved process for challenging official scorer decisions.

Official scoring is hopeless. It's funny to me that the CBA summary ended on this note.