THE BOOK--Playing The Percentages In Baseball

"Free agents get a premium because MLB management has made their supply so limited (how’s that for shooting yourself in the foot?).”

More like they fell right into Marvin Miller’s trap.  Baseball pretty much got the deal Miller thought was best for the players, with the owners divided between the impossible goal of holding onto the reserve clause, and Charlie Finley’s idea of making everyone a free agent.

The owners didn’t listen to Finley because they thought he was a nut.  Miller kept his mouth shut and hoped the owners would ignore him, which is what happened.

If the owners had offered unlimited free agency, there is no way the player’s union could have turned it down in the aftermath of Messersmith/McNally, but it is not what they wanted.

If the owners were even half conscious, they would have listened to Seitz and made a deal before he made the ruling, while they still had some sort of leverage.

It’s called the amateur draft correct?  Is there a rule preventing Strasburg (or any other prospect) from signing with some independent league making him a professional, and therefore open to bidding from the MLB teams now?

Right on.  Others should read Miller’s book.  It’s a great story.

Miller laid out what he though he wanted.  He knew he didn’t want unlimited free agency, and was worried that Finley’s idea would catch on.

The league offered 8, Miller asked for 4, and they settled on 6.

What the league should have done is run simulations as to what would happen at various points.  That is, if everyone is a free agent after their first contract, what would happen?  What if they could control up to age 25?  What if they control up to 3 years?  etc, etc, etc.

They didn’t do it, so this is what we have.

However, things have no choice but to change, and drastically.  Players are getting squeezed like crazy now, and they can’t be too happy about it (if they even realize what is happening).

tom this is a great perspective and i’m glad youve written this as opposed to the common reply to the draft and boras of anything not status quo to baseball is bad.  MLB is a quirky business and to get a real good look at how baseball finance works vis a vis the CBA etc requires a much broader view than is often used.  there needs to be far more comparison and contrast with other major sports leagues throughout the world and people need to get past the reactionry responses to the eye popping salary numbers and dig into the actual financial mechanics that produce these numbers.

anyway, good stuff, i enjoy it when you make posts like these.

It’s called the “First Year Player” Draft.  It doesn’t matter what word they use (they could use Amateur or Quatlu), as it only matters what words they actually use in the terms and conditions for the draft.

Ken: cool, thanks.

#3- Playing in an independent league doesn’t get you out of the draft (see J.D. Drew, among many others). But I would think that giving up one’s U.S. citizenship and establishing citizenship outside US/Canada/PR would.

Perhaps China wouldn’t mind boosting their baseball program by granting citizenship to Strasburg and Bryce Harper?

I believe Strasburg would have to wait two years to become a free agent.  Strasburg has unique leverage in that he could very likely get a life changing amount of money to play in Japan.

Signing a 2/$8m deal in Japan (with a clause granting him his release after two years) and then becoming a major league free agent might be significantly more attractive then getting $25 million from Washington.

Sidney Crosby could have bypassed the rookie entry limits by signing in Europe or Russia.  As a Canadian boy, he chose not to.  The amount of talent not in the NHL and choose to play elsewhere is more than a smidge.

Crosby however did sign a nearly free agent deal following his rookie contract, even though he was not a free agent.  That’s because the NHL does not have the enormous skew in contracts against pre-free agents that MLB has.  (I would guess that the pre-free agents in the NHL leave less than 50% of the free agent money on the table, and for the star pre-free agents, likely closer to leaving only 10-20%.)

I would not be surprised if the Japan leagues will go Russian-hockey on MLB’s a$$ at some point.  These artificial constraints eventually break.

"This can’t miss player is likely really worth one-third less than that if the free agent market was more plentiful.”

Tom - I’m curious about where that number comes from.  Educated guess?  Some back of the envelope calculation someplace?

The draft name was changed from “amatuer” to “first year player” sometime in the 90s.  I think it might have been in response to Boras steering Drew to the Indy League.

I beleive there are some codified agreements between MLB and the Japanese League that might preclude some of the suggested Japanese scenerios.

I’ve collected a bunch of bonus data and made some comparisons to MLB salary data that I think are interesting.  I’ve never written everything up, but here are some highlights.

The ave 1st rd pick in 1968 received 44k.  Ten years later the average had barely moved to 49k.  It would take until 1983 - 16 drafts - for the average to double. 

Of course, MLB players recieved FA rights in that interval so their salaries dramtically increased as the amatuer bonuses were flat or slowly increasing.

As a result, in 1968 the ratio of ave 1st rd bonus to ave MLB salary was 1.7.  That ratio steadily dropped to 1.0 in 1976 the year FA rights were granted.  Soon after that the ratio plummetted to 0.3 and stayed in that area into the late 80s/early 90s, aka the time Boras and other agents became more involved with amateur players.  The ratio started climbing again and was back to 1.0 in 1997 which was one of the first big “signability” drafts.  In that year Boras clinet Ankiel was the clear top talent in the draft, but he dropped to the 2nd rd and Boras got him a then huge bonus anyway.

The ratio stayed right about 1-1.1 for a few years and then dropped again in the early 2000s when MLB initiated their recommended slot bonus system.  The ratio has been 0.7 or 0.8 every year since.

I’m not sure what the “right” ratio should be, but the catalyst for it’s change has very clearly been financial decisions made in MLB. 

Pre-draft the ratio was even more advantageous for “bonus baby” amatuers.

Tango, you often refer to someone being “worth” a certain salary based on performance, as though there were some relation between baseball performance of an individual player and baseball profit.  It is quite likely that the Nationals marginal profit from having Strasburg, because of their other organizational problems, will be far, far less than $130 million over six years even were he to perform at exactly the level he is projected for.

If Japanese teams keep posting their best players, I’m not sure how Tom’s last point in #10 would work. Darrell Rasner (quad-A type pitcher formerly with the Yankees) signed a deal worth a few million with a Japanese team, but he’s obviously no big star. I don’t think the Japanese teams are in such great shape financially that they can pluck America’s young stars away, due to the high rate of failure in baseball.