One of the major topics in the upcoming CBA negotiations will be around the Amateur Draft. The slotting system, sign ability, free agent compensation and the implementation of a global draft will all at the forefront of the discusses.
Here is a paper I wrote about the draft and player development as part of a class assignment. I hope you find it an interesting read. Any comments on the future of the draft and what direction Major League Baseball should head with regards to the draft are more than welcome. MLB Draft and Player Development
This paper looks at the history of the Major League Baseball Amateur Player Draft as well as the importance of player development to an organization’s success on the diamond. The draft like any such unscripted event: extremely unpredictable. But is there a way to increase the likelihood of turning out a major league ballplayer? And what does the future of the draft hold?
The first Major League Baseball Player Draft was held in 1965. The main reason the draft was implemented was to solve the problem of signing bonuses which were increasing exponentially due to bidding wars between teams over the top talent available. Players could only sign with the club that drafted them, so drafting talent was crucial. . In 1961 the Pittsburgh Pirates signed Bob Bailey for a bonus of $175,000 and in 1964 the Los Angeles Dodgers signed Rick Reichardt for $205,000 (Staudohar, Lowenthal, & Lima, 2006). The implementation of the draft had the desired effects as the first overall pick in the ’65 draft, Rick Monday, signed for $100,000 and nobody would sign for more than $200,000 until the 1979 draft when Todd Demeter, a 2nd round pick of New York Yankees, signed for $208,000. However, that mark would not be reached again until 1988, when 1st overall pick Andy Benes signed with the San Diego Padres for $235,000 showing that the draft brought down signing bonuses significantly (Baseball America, 2010).
A second reason for the draft was to help overcome the inequality of distribution of talent due to the fact that the bigger market teams had an increased likelihood of getting the top players. The draft was set up so that the teams with the worst win/loss record the previous season would select higher in the draft (Spurr, 2000). The draft did initially help improve the competitive balance as the Yankees, White Sox, and Indians all saw their win/loss record decline while teams such as Baltimore, Minnesota, and Kansas City/Oakland had a considerable improvement to their records. The standard deviation of win/loss records shrunk during the ten years following the draft prior to free agency (Surdam, 2006).
The player draft is held every June among all thirty major league teams lasting fifty rounds. Eligible players must be residents of the U.S, Puerto Rico or Canada and have never signed a professional contract. A player is considered a resident if he attended high school or college regardless of where he is from (Carfagna, Farrell, & Hazen, 2006).
Just because a player is drafted in the first few rounds there is no guarantee they will even make it to the majors and obviously less chance that they will become a productive big leaguer. The odds of making it are 3 to 1 for first round picks, 9 to 1 for second round picks, and 15 to 1 for third round picks (Burger & Walters, 2009). In total only 8% of players drafted in the first 10 rounds will become big league regulars with most spending extensive time in the minor leagues developing (Burger & Walters, 2009). A breakdown has been made of the players selected in the first 10 rounds of the 1990-97 drafts; it looked at 2,115 players. The results were that 67.1% failed to make the majors, 17.1 % got a cup of coffee, 7.8% were fringe players, 5.1% became regulars, 2.1% where good and 0.9% where considered to be star players (Callis, 2003). A player must become at least a regular to generate a positive cash flow for their teams (Burger & Walters, 2009).
Currently each MLB team spends millions of dollars each year when signing draft picks. In the 2007 draft the 30 first-round picks received a combined US$62.9 million in guaranteed money via their signing bonuses showing that teams are taking gigantic economic risk, in hopes of getting a return on their investment in the future (Burger & Walters, 2009). This raises such questions as “How much should a team spend on scouting, signing, and then developing players during their time in the minor leagues?” and “What kinds of organizational philosophies should exist to maximise the potential of turning out a major league player?” A book that brought these questions into the mainstream was “Moneyball” by Michael M. Lewis that looked in depth at the Oakland Athletics and its focus on building a competitive ballclub despite being at a financial disadvantage. The focus under general manager Billy Beane was to take a more analytical approach that went against the traditional scouting and drafting based on sabermetrics which is statistical, rather than the perceived physical attributes of a player.
A big emphasis under “Moneyball” was the focus on drafting college players over high school players with the thought that the learning curve is less and therefore less development time is needed. There is a higher level of predictability because college players are both physically and mentally more mature because of experience (Lewis, 2003).
The debate over drafting a college player vs. a high school player is nothing new as both bring different tangibles to the table. For example a college player might make the majors sooner but on average is considered to have a lower ceiling for future development then that of a high school player. Also it might be easier to sign a college player since you do not need to convince him to forgo college altogether as is the case with any high school player. If you do draft and sign a player out of high school then your team will get to keep a close eye on him and have the chance to develop him into the player that you envisioned on draft day (Burger & Walters, 2009). One would think that because the level of competition is higher in college, the college player would have a higher chance of making it to the majors (Spurr, 2000). In the first rounds of the 1990-97 drafts the probability of a high school player becoming a star was 4.8%, a good player, 10.3% and a regular player, 12.4% whereas for the college player probability was 4.0%, 6.7%, and 16.1% respectively. In terms of time (average number of years) that it took for each group to make it to the majors it took high school stars 2.44 years, compared to college stars at 1.97, high school good players, 3.56 versus college good at 1.84, and high school regulars,4.21 versus college regulars at 2.25 (Burger & Walters, 2009). This shows that development time for the college players is lower, based on the fact that once signed they typically begin their professional careers at a higher classification than that of the high school player. This shows the importance of baseball at the minor league level, as it is extremely rare for any player to go directly to the major leagues after being drafted without being required to spend further development time in the minor leagues.
The draft has had some issues when it comes to the long term stability of a franchise. Although weak teams are able to draft more talented players, they might not have the economic ability to actually sign the pick. Therefore on draft day they might select a player based on signability rather than pure talent (Staudohar, Lowenthal, & Lima, 2006). This was the case in the 2001 draft when the Minnesota Twins selected local high school catcher Joe Mauer with the first overall pick and signed him for $5.15 million instead of a college starting pitcher Mark Prior. It was believed the Twins could not meet the $12 million dollars it would have taken to sign Prior and didn’t want to risk getting nothing under the draft rules as they existed at the time (Staudohar, Lowenthal, & Lima, 2006). Looking back however, the Twins got the better deal as Mauer to date has had a better big league career then Prior who has battled injuries, although when he was healthy was a top performer. This was again the case in the 2004 draft when the San Diego Padres decided to select hometown shortstop Matt Bush and signed him for $3.15 million. However, Bush wasn’t considered the top talent as both shortstop Stephen Drew, who ended up on the Arizona Diamondbacks, and future Angels’ pitcher Jared Weaver were both rated higher and have made it to the big leagues while Bush never made it above A ball and is no longer in organized baseball (Baseball America, 2010).
Although the draft has made some changes in recent years with regards to compensatory picks for not being able to sign a player, and adding a signing deadline of August 31st, it is clear that the teams with the money will be able to draft and sign players that would otherwise not be available except for the issue of signability (Staudohar, Lowenthal, & Lima, 2006). It appears that the draft is in need of an overhaul as much has changed since 1965. The draft has a slotting system that is the recommended amount that teams should pay for a player in a certain position; however there is no penalty for going over the recommended amount: it is merely a guideline suggested by the commissioner’s office and serves no real purpose. Under the current system it is impossible to trade draft picks or recently drafted players meaning that the leverage in a contract negotiation is with the player and his agent. The idea of a worldwide draft has been tossed around to help achieve competitive balance as teams like the Red Sox and Yankees continue to have the ability to outbid everyone on the open market for international players, and as bonuses are skyrocketing out of control. Whatever the future of the draft, one can expect a few significant changes that will modernize the draft system and bring it into the 21st century (Stark, 2009).
Each MLB team and its affiliated farm teams have an agreement called the player development contract. This relationship is vital to the development of players because of the amount of money involved in signing top level talent out of the draft. If a strong relationship exists, then it is more likely that players will feel comfortable in their surroundings, playing better, as they play in high-quality facilities. From the MLB team perspective it makes it easier to follow the progress of players if your teams are closer to the big league city.
In the case of club executives, they must ensure that proper staff is in place, such as scouts, coaches, medical staffs, marketing people, players, etc. A successful organization requires different resources within that organization to be managed in a way that will produce the desired results. These resources could include people, facilities, business agreements, and the allocation of funds within the organization. In order to maximize resources to remain competitive with other organizations, an executive must not be afraid to think outside of the box and be willing to try new ideas that might go against the traditional way of looking at problems in order to solve the current issues.
The MLB draft has been around for over fifty years and is still as unpredictable as ever. Teams invest millions of dollars and other resources in an attempt to find players that will help them remain competitive for years down the road. In some ways the gap between the big market teams and smaller-market ones is getting bigger as money makes it easier to quickly transform a team into a contender while the lower income clubs must make smart decisions in order to compete as most of their talent must come via the draft. It will be interesting to see what the future will bring with respect to the draft in hopes of maintaining a certain level of competitive balance.
References
Baseball America. (2010). 2010 Almanac. Durham: Simon & Schuster.
Burger, J. D., & Walters, S. J. (2009). Uncertain Prospects:Rates of Return in the Baseball Draft. Journal of Sports Economics , 10 (5), 485-501.
Callis, J. (2003). Breaking down the 1990-97 Drafts. Retrieved March 2, 2010, from Baseball America: http://www.baseballamerica.com/today/draft/90-97draftbreakdown.html
Carfagna, P. A., Farrell, J., & Hazen, M. (2006). The Business of Minor League Baseball:Amateur Eligibility Rules. Case Western Reserve Law Review , 56 (3), 695-719.
Lewis, M. M. (2003). Moneyball. New York: W.W. Norton.
Spurr, S. (2000). The Baseball Draft- A study in the ability to find talent. Journal of Sports Economics , 1 (1), 66-85.
Stark, J. (2009, August 18). Draft in desperate need of repair. Retrieved March 3, 2010, from ESPN: http://sports.espn.go.com/mlb/columns/story?columnist=stark_jayson&id=4407622
Staudohar, P. D., Lowenthal, F., & Lima, A. K. (2006). The Evolution of Baseball's Amateur Draft. Nine: A Journal of Baseball History & Culture , 15 (1), 27-44.
Surdam, D. G. (2006). The Coase Theorem and Player Movement in Major League Baseball. Journal of Sports Economics , 7 (2), 201-222.
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