More Details on that Painful New Collective Bargaining Agreement

In the weeks leading up to the final sign-off on the new Collective Bargaining Agreement between MLB and the Players Association, we started getting hints that the CBA wasn’t going to be kind to teams hoping to rebuild via the draft. Those hints got worse and worse as the days went by, and the unveiling of the CBA didn’t go much better. Draft and international spending were curtailed greatly, draft pick compensation was limited, and “competitive balance lottery picks” wouldn’t be coming to teams like the Cubs. It was ugly.

And it’s getting uglier.

There were some details omitted from the original press release on the CBA, which are now surfacing. I can’t sugarcoat it: the new CBA is a real bitch for the Chicago Cubs. Among the new lowlights (ok, these aren’t all “lowlights” – you’ll be able to tell which ones hurt the Cubs):

  • Recall, teams are limited to a “pool” of dollars to spend in the first 10 rounds of the draft (and anything over $100k to individual picks after the 10th round are counted against the pool), which pool is basically the total of the slot recommendations for a team’s picks in those 10 rounds. If the team exceeds the pool by more than 5%, it starts losing draft picks. So, if you want to offer a huge amount to a kid, say, in the 4th round, you’ve got to “find” that money somewhere else in the pool. Hey, maybe you can fail to sign your first round pick, and then use that money on a bunch of overslot kids in rounds 2 through 10? You get another first round pick the next year if you fail to sign your first rounder, so that way, you can use that chunk of the pool money twice! Clever, right? Wrong. If a team fails to sign a pick in the first 10 rounds, the team’s pool is reduced by the slot recommendation for that pick. So the only way to “save” money in the first 10 rounds, to be used for overslot bonuses for other kids throughout the draft, is to lowball some kids in the first 10 rounds, and try to get them to sign for less than slot. That, like, never happens – and the reason is obvious: agents know what the slot recommendation is. Maybe things will change now that teams have less wiggle room, but we’ll see. As it stands, going over slot – something the Cubs did to great effect in 2011 – is becoming increasingly impossible.
  • The total money allotted to all teams for the first 10 rounds will be about $185 million – far lower than the $200 million+ first expected when the deal was announced.
  • Any attempt to circumvent the (effective) draft cap by way of an under-the-table agreement is expressly prohibited.
  • If a team fails to sign any of its first, second, or third round picks, it will receive a compensatory pick in the same spot (plus one) the next year. Additionally, if a team fails to then sign that compensatory pick, it will get one more compensatory pick the next year (in the past, if you picked a kid and failed to sign him, you’d get one compensatory pick the next year, but, if you failed to sign that kid, that was it. Now, you get two extra shots instead of one, which should help teams try and negotiate under slot deals, I suppose.)
  • The Cubs, as expected, did not qualify for the competitive balance lottery, which will include 13 teams (including every other team in the NL Central, except Houston). The lottery leads to six picks after the first round, and another six picks after the second round (which second lottery would be among the seven teams who didn’t get a pick the first time around, and any other team that receives revenue sharing (which, again, is not expected to include the Cubs under the new agreement)). Those picks are tradable, but only during the regular season. The first lottery will take place after the 2012 draft, meaning the picks don’t start until 2013.
  • Teams will now be allowed to announce deals as soon as they sign them, rather than having to wait for MLB approval for an announcement.
  • The draft is now 40 rounds, rather than 50. Presumably, there are no restrictions on the signing bonus you can give to an undrafted free agent. How you game the system into having a kid you want to offer a huge bonus slip through the cracks and not get drafted, I don’t yet know.
  • Sources are here, here, and here.

Brett Taylor is the editor and lead writer at Bleacher Nation, and can also be found as Bleacher Nation on Twitter and on Facebook.

72 responses to “More Details on that Painful New Collective Bargaining Agreement”

  1. Fishin Phil

    What a magnificent piece of crap!  I hope Selig is proud of himself.  Selig’s legacy: All-Star game decides home field for WS, and the worst CBA ever devised.

    1. davell

      Brett, here’s the circumvention you’re trying to figure out: spend 6 or 7 top 10 round picks on college seniors. These are organizational guys, which every team has. They almost always sign for 10,000 or so. Bump it to 50,000, if need be. Bottom line though is you can put the difference saved into 3 or 4 “impact” high dollar guys. Much more of a risk- reward situation here, but this is the way to still get the high impact players.

    2. davell

      Another thing to do is this: spend 14 mill this year on the draft, even if allotment is 8. Yeah, you’re paying 28 mill to do it. Unless the penalty is only on the overage, then you’d be paying 20. Haven’t seen that come out yet honestly. Either way, you’re losing your 1st and 2nd the following year. But, you’re spending like cray and accumulating tons of talent in the meantime. Then, with your allotment of probably 3 mill or so for the following year, since you’re missing your 1 and 2, you take 6 college seniors for 300000 total and spend the rest of your allotment on 2 guys over a mill. So, you’re still getting impact guys. Lather, rinse, repeat. Cost average the 2 years together and you’ve spent what Theo probably was going to allocate on a yearly basis anyway.

      1. Kyle

        I’m not convinced you get all that much more talent that way than you would just playing it straight.

        My guess is that without the leverage to hold out for significantly more money, and the new third chance on draft picks, few players worth overslotting will fall out of the top 10.

  2. Sam

    I think that comes out to be around $18,500,000 per player ( in the first 10 rounds) if spent evenly(IF MY MATH IS CORRECT). So it could be worse. Could be better, but it could be a lot worse too

    1. hansman1982

      not per player, not even close…the average (assuming the minimum number of picks) is $616,000 per kid and 1-10 will often times get 7 figure bonuses.

      FACK YOU DEBBIE!

    2. 1060Ivy

      Believe it’s an average of $18,500,000 average per round not per player. The $185,000,000 is for all the teams to divide across all rounds. Considering that the 1st round has a bigger pool than the last round the average is meaningless.

      If it were $18,500,000 per player then the kids being drafted would be make more than the MLB average salary.

      1. hansman1982

        I think you are right.  It would be one thing if Bud put a 10 round cap at $6.16 M per team and then $3M for the rest of the draft but to be such a jackass is amazing.

        Really shows where most of the power in MLB rests.

      2. Sam

        I thought that was per team. Thanks for clearing that up

  3. hansman1982

    Wow, clearly Selig is the Chief of the Douchenozzelian Tribe.

    BOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

    This is a worse concept than Terra Nova

    Selig apparently wanted a lifetime supply of toilet paper

    BOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

  4. JB88

    On the last point, I think actually it is fairly easy to game the system. With effectively a hard slot if you have a kid with late first or second or third round talent, the kid just has to say that he won’t sign for less than say $5MM bonus, which means he is basically going undrafted unless someone calls his bluff. Once the kid actually goes undrafted, you sign him.

    Frankly, if the Cubs are *cough* *cough* gaming the system right, they might let agents know that the Cubs would be willing to pay X dollars if the kid makes it through the draft and then let the kid and the agents do the rest.

    1. hansman1982

      Not allowed:

      “Any attempt to circumvent the (effective) draft cap by way of an under-the-table agreement is expressly prohibited.”

      1. JB88

        No, that isn’t what that means. What that means is that you aren’t allowed to sign a player for slot and then rip up his contract a year later. That has actually happened a fair amount under the old CBA.

        If UFA aren’t subject to the slotting restrictions that is actually an opening for teams like the Cubs.

        1. hansman1982

          I understand what you are saying there, I guess I could see it where agents will let teams know that a certain kid will only sign for 1st round money or nothing at all.  Hoping that kid makes it through the draft, which the small markets will draft him in rounds 35-40 to block that from happening.

          1. JB88

            That might happen, but frankly there is no benefit for small market teams to do that as when they fail to sign the kid they lose that draft money and don’t get a compensatory pick.

            The Cubs will really only be able to try this for a year, maybe two before other teams try what you say. Then, you aren’t going to see small market teams do the blocking but smarter teams perhaps like Tampa, Toronto, and the Yankees.

            1. hansman1982

              drafting someone outside of the top 10 has no effect on any other pick, meaning if you dont sign your 12th rounder it has no effect on the amount of money you can spend on your 13th rounder.

              My question is if you dont sign the compensatory pick in does the slot $ come with those picks?  Additionally, if you dont sign the compensatory picks do you get 2 compensatory picks the following year?  I dont believe so, but if you do there is the new explotation angle.

            2. Luke

              That’s another good point. The most draft picks a team can lose by going over budget is 2.

              So if a team gets to round 35 and sees 4 of the top 6 players left on the board, it has to be tempting for a big budget team to load up at the end of the draft, pay whatever it takes to sign them, and either just give up their first round pick in the next two drafts, or try to trade for a compensation round pick to offset the loss.

              1. JB88

                Really, I think that is the other inefficiency. Yes, losing a 1st round pick would be a huge detriment to certain teams, but say the Cubs tried that strategy with Tim Lincecum, like they did in 2003. You sign him way over slot because you recognize his talent, and now you basically lose the chance to draft him in the first round the next year. This is where scouting really comes into play. You basically have to figure out the best guys to sign a year early. Sometimes that is easier, but really it will only work with college players, and really it will only work with college pitchers IMO.

                For HS’ers, you’ll need those kids to go undrafted and then try to sign them for huge dollars. Of course, we are all performing this exercise in a vacuum, so the dollars in play could bar a lot of teams from employing this strategy. With a dollar-for-dollar tax at a certain point, you really need Ricketts to buy in because the year they employ that strategy in the draft is going to be a VERY, VERY expensive year.

        2. MoneyBoy

          @JB88 … per Callis “I’ve been told the $100,000 limit (anything over that counts against a team’s draft cap) after the 10th round also applies to non-drafted free agents.”

          One of the more amazing stats is, per Callis, that 36% of 2011 draftees did not sign (555 of 1,530 picks in 2011).  That the $100k cap applies to NDFAs further punishes a team with both high numbers of and good scouts.

          While some teams (Boston, TB) have long taken advantage of the draft, it’s the small market teams that have recently made BIG moves … KC, Pitt, Nats as examples.  They seem to be the ones most likely to be hurt due to their inability (Werth aside) to spend big $$ for either their own players entering FA or competing with other “big market” teams.

          Not only does MLB as a whole risk losing generations of players to other sports … but in an odd way, might this push HS kids to JUCOs, where (I believe) they can be signed after one year?

      2. JAB

        If you’re not cheating you’re not trying.  There are tons of things that are prohibited in by-laws by professional sports but still happen everyday.

        1. BetterNews

          Amen

        2. BetterNews

          Its a shame!

      3. Luke

        I think agents will ensure that a handful of the very top guys don’t go drafted.

        Also, teams can sign players for well under slot even in the first round… if they don’t draft first round talent. Now the math becomes this: would you rather pay slot in rounds 1 -10, or would you rather draft 7 guys who would have been 3rd round talent last season and sign them to third round money, and fill in with slot in rounds 8 – 10 (estimates are approximate)?

        I think we’ll see a lot more speculation on those lines as the draft gets close. The 2012 draft has the potential to look rather strange.

        1. JB88

          To me you overshoot in rounds 1-3 and then sign less expensive players in rounds 4-10. Frankly, I think you hope you land 1st round talent in those three rounds and just draft “guys” in the remaining rounds.

          Then, hopefully, you have a real competitive advantage when kids go through undrafted. With another 300 kids suddenly not being drafted, but the minor league systems not being impacted, I think that is going to be your new inefficiency in the draft.

  5. jstraw

    Is there an “A” in this CBA? Did the players association and the owners approve this? Is this by fiat? This is bigger than the Cubs. This benefits free agents enormously. Who are the winners and losers? Follow the money.

  6. Kyle

    This really isn’t bad for the Cubs in the long run. It does mean that Epstein will have to call an audible, but on the balance these restrictions favor teams with good scouting and teams that can afford to outspend the rest of the league in the majors (the only place left where you can outspend someone). The Cubs under Epstein should be both of those types of team.

    Yes, the dream of dropping $40 million on the draft and IFAs to become an amateur talent Evil Empire is over, but new rules create new market inefficiencies, and the teams that are smartest will be the quickest to find and exploit them. We were late to the “amateur spending” party, but we can and will be among the first to the next party.

  7. JasonB

    “Presumably, there are no restrictions on the signing bonus you can give to an undrafted free agent.”

    Interesting – so it seems to me that this is where teams can spend their “overslot” money?  If this is the case, I suspect that the Dillon Maples’ of the world are going to go undrafted and then it is going to be a bidding war for their services (kind of like the current IFA market).

    Or am I not thinking about this correctly?

    1. Luke

      I think that’s a likely scenario.

      The cream of the crop will get drafted at the top of the first round, and will probably sign.

      Guys who went well over slot in later rounds (Maples, Gretzky, Dunston) will probably be the guys most likely to slip into free agency.

  8. Cheryl

    Is there any chance that the teams decide to forego the usual draft and agree to a second draft completely separate without these restrictions? If enough teams went this route wouldn’t it scuttle the CBA until something better comes along? I’m not sure this would be considered as circumventing the CBA aince in reality it would be a totally different operation.

    1. JB88

      Technically, the teams already had this chance, but, by agreeing to the Collective Bargaining Agreement, MLB teams and players have agreed that this formula will be the formula utilized for the next X years (can’t remember if this is a 5-year or 10-year deal).

      In other words, this is what you get for the life of this deal.

      1. Cheryl

        Given the information that is now coming out on the draft I wonder if they realized what they were agreeing to with the CBA.

        1. Kyle

          The teams are businesses. The CBA significantly lowers the cost of one of the business’s expenses. What’s not to like?

          1. hansman1982

            Because draft expendatures are a lot like spending on marketing.

            The results don’t show up for a while but they are worth every penny, if you spend wisely.  There is a reason why the Rays are competative now, they spend BIG in the draft.  We spent $12Mish last year and were one of the big spenders because we could spend when and where we wanted.  If we were to spend the same amount in the same manner in the next draft it could costs anywhere from $18-24M (due to the new taxes) and a couple draft picks.

            Additionally, some of the kids we drafted we paid a few extra bucks on to get them to stay away from football.  Now, we will either have to draft them higher or pay the tax on that money.

            The new changes really don’t benefit anyone outside of the teams that already dont spend much on the draft.

  9. CubSouth

    I tawt I taw a putty tat…..I deed, I deed see a putty tat.

  10. ferrets_bueller

    The only possible way around that I can think of is to use your 8-10th picks to draft later round talents, who could be signed greatly under slot, freeing up money to throw at previous picks over slot.

  11. Curt

    What is the point of this crap of a cba I don’t get why baseball would do this to itsrlf

  12. Joe

    All this is going to do is push more kids to go to college instead of direct to the pros and it will make two sport stars ALMOST impossible to sign. Pud Selig should be fired. This deal doesn’t even help the smaller market teams other than the competitive balance lottery.

  13. Spencer

    I think if you win a World Series you should be excluded from the following year’s competitive balance lottery. Just sayin.

  14. Jim

    As much as I dislike Bud Selig, the players union is just as much to blame for this CBA as the owners. They could have stepped up and protected the current system but their greed took over and they allowed this CBA to be ratified.

  15. Edward

    Could someone explain why this hurts the Cubs more than another team? Won’t players just get less money than they did before? Same number of players + less money available total = less money per player. I can’t imagine that the players will expect bouses anywhere close to the Strasburg / Prior / Harper levels with these new restrictions in place.

  16. Chris

    Hi Brett,

    I have an idea to manipulate the draft to your advantage. First, forgive me if this has already been posted in the comments section, which I have not read in full.

    So the idea of giving ~$15 million to your draft class is that if you draft and spend well, then that ~$15m nets you ~25-30 players (several of which should have blue chip prospect talent). Thus your system increases its total assets and overall value. Conversely, you can spend ~$15m on one or two free agents and they may or may not give you their expected ROI. The simple math overwhelmingly favors the former strategy. I don’t think there is any argument to that on BN.

    As noted, with the new CBA, this strategy is severely hampered. Here’s my idea on how to still manipulate the system. As a caveat, my idea necessarily assumes the club’s ability to spend more money on the draft class than they have in previous years.

    Ok – the idea is fairly basic and it involves a two-part cost. 1, pay the luxury tax and 2, forfeit first round picks. Starting in the draft class of 2012, the Cubs could draft players that are not expected to sign (as you would in drafts prior to 2012) and pay them overslot, as well. As a penalty, you’ll have to pay a luxury tax and if you overslot as the Cubs did in 2011, the tax will be 100%. So if the Cubs spend in 2012 what they did in 2011 ($11.99455 million), then that would be ~$24m.

    The other cost/penalty would be forfeiting your first round picks. My logic of this being acceptable is 1) if players know a club is spending handsomely in rounds 2 through 10, they may tell their agents to tell clubs they will not sign if drafted and 2), the types of players who have fallen in previous drafts will continue to fall in 2012 and on and those are the players the Cubs could target (e.g., Josh Bell, Dillon Maples, et al.)

    Now $24m seems like a lot, but with the new CBA, the financial demand in the amateur talent market will naturally decrease, perhaps significantly. I would imagine the Cubs could spend ~$8 or $9m and still get a comparable draft class to 2011. Thus, the overall financial cost would be ~$16 or 18m. And my logic that suggests this being acceptable is the same logic as to why clubs previously allocated significant funds to the draft. ~25-30 drafted amateur players is a better investment with a stronger likelihood of delivering your desired ROI than is an investment in 1 or 2 free agents.

    Do the Cubs have the financial resources to commit to this strategy? Absolutely. Do they have the will to be baseball’s “bad boy” or “rebel” when it comes to the draft? Not so sure.

    Another thing to consider is this: what does Selig/the CBA mean when it says “Any attempt to circumvent the (effective) draft cap by way of an under-the-table agreement is expressly prohibited”. Could my strategy be taken as an “under-the-table agreement” and what is the penalty for making such an “agreement”?

    Brett, I’d love to hear your thoughts on the matter. If I had Theo’s ear, this is absolutely an idea I’d suggest, because, frankly, I wouldn’t really care what MLB thought of me, as long as it gives us a competitive advantage and helps to increase the overall value of the organization. Thoughts?

    1. Kyle

      I’m not really interested in missing out on a Javier Baez every other year just so we can pay way too much for a bunch of the Shawn Dunston Jr.s of the world.

      I know Cubs fans were emotionally attached to the idea of spending big on amateur talent. It was a major market inefficiency that the Cubs were late to the party on. But there will be new market inefficiencies and I look forward to the Cubs finding them without trying to shoehorn in strategies that only made sense under the old system.

  17. hansman1982

    What happens to the tax money?  Seems like a crappy way to take money out of the players hands and give it to MLB.

    1. Luke

      I believe it is split up among the teams that receive revenue sharing funds, but I need to check the details on that before I’ll say for certain. There may be a couple other conditions that apply.

    2. ferrets_bueller

      Well, considering this stupid CBA is incredibly biased towards (existing) players than any previous one, it seems like a small tradeoff if it does in fact take money out of their hands. The entire thing is designed to force teams into overpaying and throwing ridiculous amounts of money at declining and aged free agents.

  18. john

    Maybe it would suit the Cubs to draft best player available rather than stock piling arms.
    Pitchers are the meat of any draft and too many are taken higher than their ability.

  19. EtotheR

    This is obviously lousy for big-market teams, and I’m way impressed by the analysis of everyone on here. It’s not the easiest thing to comprehend…that’s for sure.

    I do have to wonder whether or not this will inspire a better college system…a lack of money in the draft might keep more guys in school, so they can showcase and develop themselves into higher slot territory. The end result would (hopefully) be a generally older…more well-developed draftee, with slightly less expensive development costs for the team(s).

    Truth? I guess it’s a potential scenario, but I have my doubts that it would happen in some sweeping manner. Teams will adjust. It will still be hard for small market teams to hold on to some of these impact players they’re drafting, so free agency might become an even bigger attraction at the ML level.

    Tough case.

    1. Kyle

      “This is obviously lousy for big-market teams”

      Why is that obvious?

      The big-market teams weren’t the ones doing most of the amateur spending. It was teams like the Pirates and Royals, who knew it was their only chance to have major big-league talent.

      1. EtotheR

        You make a good point. I guess this is my rationale..

        While small market teams work hard to make an impact with the stud players in earlier rounds, it is still difficult for them to take a flyer on one of the hard-to-sign-middle-round types (i.e. Dillon Maples, Dunston, Jr.). So…they may occasionally get that bigger name, but they still face an uphill climb with some of those guys who become smaller building blocks. There’s more pressure on them to get it right…with fewer chances.

        The larger market teams have always had the ability to spend what they want. Whatever anyone feels/felt about the Samardzjia signing…that kind of contract is not a viable option for Pittsburgh or KC. When the Cubs miss…it’s still frustrating, but it’s less damaging (in theory) to the sustained effort.

        1. Kyle

          That’s not been the case though. The Pirates, for example, have been among the most aggressive late-round overslotting teams in recent memory.

          1. EtotheR

            Really?

            Okey-doke…if I’m wrong, I’m wrong.

            1. JasonB

              Under their new GM, the Pirates have become one of the largest spenders in the amateur draft.  I think they’re right up there with the Royals as the top two spenders.  They’ve re-allocated their money to increase their young talent because they feel that this is the only way that they can compete.

              1. EtotheR

                Got it…I guess my point was that the larger market teams don’t have to make a choice. They can sign free agents or impact draftees, without much concern over the bottom line.

                On the flip side…it might have been Brett who mentioned that we will still have more money put into scouting and evaluation, so we’ll just have to make that work.

                The NFL has pretty much achieved parity, and it’s been successful for them…it will always be harder to achieve in MLB. This is clearly one of those things they’re pushing to try and improve competition.

                I agree that it sucks…that said…will it work?

    2. Jim

      “a lack of money in the draft might keep more guys in school, so they can showcase and develop themselves into higher slot territory.”

      I think the players would get better instruction in a professional organization rather than college.

      1. JulioZuleta

        Yeah…but they can’t get re-drafted once they have gone pro. If they stick it out 3 years in school, refine their game and get more exposure, it’s very realistic to think a lot of guys would shoot up in the draft. Some will fall, naturally, but I bet we will see it happen a little more. No way the Cubs could have signed Maples this year, for example.

      2. EtotheR

        I agree…just wondering about this as an effect.

  20. tex134

    With the new CBA in place, I think ownership made an excellent choice in bringing in Theo and the troops. I can’t think of a better brain  trust to adress an issue such as this. I have complete confidence no matter what the circumstance. the new regime will make it work for us.