International signing rules already crushing bonuses Doug Gray March 7, 2018 45 Comments Two weeks ago the Cincinnati Reds traded international bonus pool cap space to the Texas Rangers for right handed pitcher Miguel Medrano. The move was hailed as smart by this writer for the creativity. But, it was just a sign of the times that the owners and Major League Baseball Players Association agreed to cut off amateurs at the knees once again from earning their true market potential. Yesterday we saw what the Texas Rangers used some of that cap space for. They signed 21-year-old Cuban outfielder Julio Pablo Martinez for $2.8M. That’s certainly not chump change, of course. Surely anyone reading this article would gladly take that kind of check and be thrilled about it. But anyone reading this article probably doesn’t have a true market value like Julio Pablo Martinez does. Ben Badler of Baseball America wrote about Julio Pablo Martinez and where he would rank. The crew at Baseball America slid him into their Top 100 rankings at #60. That ranking is important. Why? Well, strap yourself into your seat and hold onto your butts. Luis Robert, the last big time free agent signing under the old system, signed less than a year ago, is ranked #58 in the same rankings. While there are always going to be some disagreements within the baseball community about how exactly to rank players, the Baseball America rankings do give us a general idea of how the professionals in baseball tend to think about a players value. And right now, today, the value between Julio Pablo Martinez and Luis Robert is the same. The difference that the Chicago White Sox paid to sign Luis Robert and what the Rangers paid to sign Julio Pablo Martinez? Roughly $47.2M. The White Sox signed Robert for $26M. They then had to pay a 100% penalty on the overage of their spending beyond their pool allotment, of which they had nearly $2M remaining at the time. So, they paid about $24M to Major League Baseball as a penalty. Under the old rules, teams were given a pool allotment of cap space they they could spend before facing penalties. In the new system that began with this signing period, you can’t go over the allotment at all. It’s just not allowed. Two players, of the same value within the industry, signed less than one year apart, where one guy cost nearly 18 times what the other one did. None of this even mentions the joke that it is that the Los Angeles Angels only paid $2,315,000 to bring in Shohei Ohtani because of the new rules. How will this play out moving forward? The owners obviously wanted to spend less money on amateur players. The Major League Baseball Players Association clearly wanted that to happen, too. They saw that money as going to players that weren’t themselves, and in some cases, it was a whole lot of money – more than some veteran type players were getting. It would seem that they assumed that teams would just spend that extra money on the big league rosters. As we have seen this offseason, it was just another miscalculation by the current leaders of the Players Association who didn’t seem to grasp where baseball front offices and ownership were heading. It’s hard to imagine either side changing these rules anytime soon. In the long run, having cap space that can’t be broken does help “even the playing field”. Teams can’t just go out and sign 10 of the top 30 prospects in a signing period like the Yankees did in 2014 simply by outspending everyone. At the same time, the players themselves are not going to get anything remotely close to what teams are actually willing to pay for their services. And that’s bad for baseball, even if these new rules could eventually help out a small market team without unlimited finances like the Cincinnati Reds. 45 Responses Bill March 7, 2018 One of the problems with the International Free Agent system is that players can put themselves on the market throughout the year. Under the prior system, that was a huge advantage for a player like Luis Robert as he could generate multiple teams bidding for him when there was no comparable player available on the market (the ultimate seller’s market). It oversimplifies the argument to say a player is worth “$xM” in a situation like this. The former system gave huge leverage to the amateur free agents as larger market teams used their financial muscle to secure an advantage in talent acquisition. Today, its working against the amateur free agents in that teams are constrained in how much they can spend. If these free agents all hit the market simultaneously, they could better leverage there earnings potential. Interestingly, both Ohtani and Martinez elected to start their careers sooner and forgo what would have been a higher signing bonus. A draft would put everyone on a more even playing field where the best players would get the highest payouts while fostering competitive balance across the league. Doug Gray March 7, 2018 It wouldn’t matter much when he hit the market. No team could have spent more than about $10M to sign him this year, and that’s if they traded for all the possible cap space they were allowed, and only signed him for their entire class. Sure, he could have probably gotten twice as much as he got – but his true market value, as we’ve seen, was probably closer for $40-45M. A draft isn’t going to do anything – it’s also capped. Because the MLBPA doesn’t care about amateurs at all. They want the money going to a 33-year-old reliever or backup shortstop, not some 20-year-old from Vanderbilt. MK March 7, 2018 A unions first responsibility is to its members who are paying dues, not to the future non-members not yetdues. Should they fight for a member toget an extra million or a nonmember? Please remember their first responsibility. Wes March 7, 2018 Oh players like Greg Holland ? Cause they completely failed him! And you can say that for Lynn and arrietta and moose Cobb and a couple others. It’s owners job to maximize profit- how do u blame them? Players Union has failed and failed again! The Duke March 7, 2018 MK, that’s the type of short term thinking that has helped lead them down the path they are on right now though. It’s like people who want the $15 minimum wage and then are shocked when McDonalds goes to automated ordering machines inside their stores instead of multiple cashiers. Sometimes planning for the long term isn’t just necessary, it’s vital. MK March 7, 2018 Wes I do not get your point of how the union hurt the unsigned free agents, unless the previous negotiations that created free agency is somehow responsible. Duke my thought are the sae as Dougs: “The owners obviously wanted to spend less money on amateur players. The Major League Baseball Players Association clearly wanted that to happen, too. They saw that money as going to players that weren’t themselves, and in some cases, it was a whole lot of money – more than some veteran type players were getting. ” I have been on both sides of that table and his is not an issue the union should get involved with, although their members are better off if there is more money on the table for them. wes March 7, 2018 Mk, yes that is my point. When I see the players union rep- it’s usually a current player that represents the players. Granted, I don’t know enough about it to know if thats a show or who is agreeing to all this, but if I’m players- I want the smartest person in the room representing me. Think about this- for any of your best free agents to sign- you have to give up your first round pick or another really high pick and you give that pick to a rival. Striking gold in draft is a legit probability especially as I see how scouting has improved over past 5-10 years or so. So teams are more reluctant to sign the best players out there and at end of day- they loose money. Holland is not going to get a good deal and I don’t see a few other of those guys getting market value. Why penalize the free agent by straping the loss of a pick to them?!? That’s a terrible thing for the players and whoever agree to that should not have any say so in any future negotiations. Kinsm March 8, 2018 McDonald’s was going to go to automated cooks even if humans were demanding 5$ an hour. Wes March 7, 2018 I completely agree w draft. Spread talent around and force teams to participate. That last dude signed for 2.8 mill. One more blow to Jeter the broke joke! Those dudes bought a team for money grab and have no desire to be competitive. Letting those losers be part of ownership is one of the worst moves I’ve seen in all professional sports in all my life ! Michael Smith March 7, 2018 Great article. Mlb union is running out of toes to shoot off. Wes March 7, 2018 Nice piece Doug! The rule change hurts the reds big time! Where they are willing to outspend competition on international amatures- now they are stuck w a tiny hard cap. How u gonna draw players to Cincy now?!? I’m also pretty disgusted at how players Union is getting destroyed by owners right now. There’s so much money in baseball and it seems like owners are keeping maybe more than half while a lot of quality mlb players are stuck on teams for most their prime and in a lot of cases making a 1/2 mil or just a couple million. I like how teams get a pick when loose a quality big leaguer but it should just be an extra pick and not the team who signs pick. Yet player association deemed it smart to penalize their free agents by tying actual picks of teams to their free agents which is beyond ignorant. And that’s why so many quality players are out there. They aren’t worth loosing their first rounder. All of this deteriates the quality of baseball. I gave up on nfl before it was cool too bc of how they treat their players. Baseball is trending that way. Shawn March 7, 2018 It won’t hurt the Reds at all, it will help. Each team only has a limited amount to spend. Reds should be able to get in on more higher ranked prispects Wes March 7, 2018 Reds set records w signing bonuses last 2 drafts, once they got into the game-signed 3 international prospects and overpaid for all 3 as well as were in on Luis Robert. They are ready to spend and now they can’t. It’s a big blow! Sorry there’s not a lot about cincy that attracts international talent Doug Gray March 7, 2018 In baseball, guys are signing for who pays the most – at least from an amateur perspective. They don’t know NYC from Cincinnati from New Orleans. And it doesn’t matter because they won’t be seeing the city in which they sign for 5-6 years. Wes March 7, 2018 That’s fair but when money’s the same then what’s determining factor ? Gotta be City right? Especially older u are…Playing in a city with a large native population comes into play. Cordero March 7, 2018 I actually feel like it’s a double whammy the Reds. First, like was said above, all teams are offering similar amounts of bonus money, so the decision comes down to the city. Asian players haven’t heard of Cincy, but they have heard of the west coast teams, and NY, Boston and ATL. They will google cities, and find that if they want to have easier trips home, more native food, more vibrant nightlife, they should go to those cities. Cincy has had to overpay in the past, and now they can’t even do that. Second, all teams have a limited budget. The Dodgers wasted a lot of their money in the past signing Cuban players that weren’t as advertised. Now, the top 10 players are going to go to the 10 biggest market, but the teams don’t have to risk their capital to get those players. The same 10 teams will have the top 10 draft picks year after year, and will be paying less that teams in the amateur draft have to pay for their first round picks. Doug Gray March 7, 2018 Yes, the one Asian player coming over who is limited to the bonus rules will care about the city. The other 1000 international players are signing for whoever pays them the most. The Duke March 7, 2018 The MLBPA’s long standing treatment of minor league and amateur players is really starting to bite them in the butt now. It’s so much cheaper to replace the aging expensive veterans with young talent that they can gamble on 10 guys who are cheap and controllable. What would help the veterans have a little more leverage would be if the amateur talent to replace them wasn’t so cheap. Maybe if they looked beyond their very short term benefit, they wouldn’t be in the situation they are in now. Cinvenfan March 7, 2018 Excellent Post. I am in no way an owners’ advocate, but it is really disturbing the way the players union has treated minor leaguers and amateur players. I understand “elite” players should be paid as much but not to the point where a professional player gets less than minimum wage. Tom March 7, 2018 More money for minor league players would also, over time, improve the talent draw across the board and pull people from football, basketball, etc. Imagine a minor league salary floor set at 50k with advancement incentives. Stock March 7, 2018 This is old news and maybe Doug did a write-up on it and I missed it but here is what Eric Longenhagen said about our prospects last September. 9/25 Cincinnati hosted Texas in the Reds’ instructional-league opener, and the game featured several pitchers with position-player backgrounds. The headliner was Hunter Greene, who sat 99-101 with a fastball spinning at a rate between 2200 and 2300 over two innings. He used both of his breaking balls quite frequently, first leaning on an inconsistent curveball in the low 80s and, later on, an upper-80s slider. The curveball flashed above average but its depth and bite varied. Greene’s slider was short and fringy, though he threw both breakers for strikes multiple times. His fastball command was less consistent, however, and Greene was hit hard (twice quite literally, by two second-inning comebackers), surrendering six runs. Greene was followed by righty Wyatt Strahan, a 24-year-old reliever who hasn’t gotten out of A-ball yet, mostly due to injury. He was up to 96 on Monday with a plus slider and violent delivery. If he can stay healthy, he’s a potential bullpen contributor. 9/26 Reds third-rounder Jacob Heatherly sat 90-92 and commanded that pitch as well as his average curveball and changeup. He lacks any physical projection and, except for perhaps a bit of breaking-ball and changeup progression from pro reps and instruction, the cement is largely dry on his stuff. Realistically, Heatherly projects as a No. 4 or 5 starter, but his ceiling will be dictated by the level of command he’s able to develop. He’s advanced in that regard and could move quickly. Heatherly, who turned 19 in May, signed for $1 million. SS Jeter Downs, the Reds’ comp-round pick from June, has also been impressive. Downs sprays hard contact to all fields and has shown enough arm strength to stay on the left side of the infield. I’ve yet to see his range and athleticism challenged, but what I’ve seen is pretty good. With his low ceiling I don’t see Heatherly cracking the top 100 anytime soon but with a good season in Dayton I think Downs can move as high as the 50 range. AirborneJayJay March 7, 2018 You have a long running burr up under your saddle with the owners. I agree with you about the minor league salaries. But those IFA’s were getting ridiculous contracts without ever playing a minute in American baseball. Many of those multi-million dollar contracts were huge financial busts. A better system was needed. You blame the owners and MLBPA, but most blame should go where it belongs, Tony Clark and the MLBPA. They devised the current system. Got to live with it for 4 years. Teams are still paying millions of $$$ to Cuban players not even in the majors or minors anymore. If anyone cut the players off at the knees, it was the MLBPA and Tony Clark. When the next CBA is negotiated, the players are going to seek changes to the free agent market, the 6-7 year team control time frame, and salaries for young stars. The owners will seek non-guaranteed contracts, or team opt-outs similar to what the players agents negotiate now with player opt-outs. Gilbert Keith Chesterton March 7, 2018 Set a salary cap (min & max) which covers a team’s total expenditures on all players in majors, minors, draftees, foreign signings. Let teams decide if they want to throw $20M at some unproven 18 year old kid from Cuba, or use that $20M on an elite player like Votto. Teams would likely opt for spending the $ on proven players, lowering the bonuses that foreign players get. If that gets anybody worked up, then just lower the # of years that teams have control on foreign signed players, so if the player outplays their initial signing bonus, they hit a better payday sooner. Bill March 7, 2018 That would be an interesting concept. Also, if I were advising the MLBPA, I would recommend looking to drop arbitration to 2 years of service time vs. 3 years. This would raise the cost of younger players who in my opinion are preferred over veteran players due to cost, not expected performance. The caps should be set to ensures revenues are shared approximately equally between players and owners. Recent reports indicate revenues are split close to evenly. MLB is a game and needs rules to level the playing field. The best way to grow revenues in MLB is to have nearly every team approaching each season with a reasonable expectation of winning. Tanking needs to be disincentivized and their needs to parity for talent acquisition. Drafts accomplish that purpose. Gilbert Keith Chesterton March 7, 2018 I agree that ideally nearly every team should be able to approaching each season with a reasonable expectation of winning. Small market teams shouldn’t be forced into long rebuild gambles because the system is stacked against them for not being able to spend their way into loaded rosters. The cap works well in the NFL, with pretty much every team not named the Cleveland Browns seemingly in the hunt for a playoff spot in Week 1 on an annual basis. For example, 8 of the 12 playoff teams in the NFL this year were not in the playoffs last year. The salary cap keeps the rosters fairly balanced across the board, and last year’s loser can be this year’s winner. But in baseball, last year’s loser is still a loser, because he had to trade away his top talent and is waiting to see if the trade returns will ever amount to anything. Shamrock March 7, 2018 The man child is only getting $2,800,000 to play a game?? WHAAAAAA!!!!!!!! Doug Gray March 7, 2018 What is your profession? What if every boss in that profession decided that, you know what, despite knowing you are worth $X, they were going to create rules that moving forward, you could only make 20% of $X because they get to make the rules and there’s nothing you can do about it? You crying WHAAAAAAA!!! now? I bet you wouldn’t be. And yes, I understand that it’s hard for some people to feel bad for a guy who just brought home a million bucks after he pays everyone their cut – but it is what it is. He’s worth $40M. He got less than $3M. Shamrock March 7, 2018 I am a professional Taxi Driver up in Stowe Vermont. I’ve been working driving cab up here for years, and used to make a somewhat handsome living. ($50k-$60k yearly) And yet, a couple of multi-billion dollar international conglomerates (Uber and Lyft) strolled into town two years ago, rolled back the prices to what they were in the early ’90s, and nowadays I’m lucky to be pulling $25k. Yes, it absolutely sucks brother….but times change and I don’t see anyone crying me a river. Doug Gray March 7, 2018 Here’s the difference: The taxi companies didn’t all get together and say “you are worth this, but we don’t want to pay it” – more people with the exact same skill as you became available, thus making the demand for your services lower. That is not what happened here. This was just the bosses deciding they don’t want to pay. But, I, and many other people actually do complain about what things like this do to industries like yours – where the loopholes in the law create a very unfair market advantage for companies to operate as certain types of companies without actually have to follow the laws that those companies have to. You just don’t look for those stories I guess – but I’ve seen and read plenty of them. sixpacktwo March 8, 2018 Doug, What was is not anymore, and I think the way it was still favored the rich clubs. Someone with a 2 million plus bonus never has to work again, and they still have not proved they can play. AirborneJayJay March 7, 2018 A side note, whatever happened to Hernan Iribarren? I haven’t seen a mention of him all winter or in spring training. Still in the organization? Did the Reds sign him to a minor league contract and he is just about to report to camp with other minor leaguers? He seemed like a very solid clubhouse guy to have around that would rub off on all the younger players, not just the young Latino players. Krozley March 7, 2018 I had not seen anything that he re-signed, but he was listed on the minor league ST roster for the Reds, so evidently he is still in the system for another year. Doug Gray March 7, 2018 Yes – he’s still with the Reds. In minor league camp. He’s the oldest player in camp by 4 full years. Shawn March 7, 2018 I know your not going to like this Doug but you have to put limits to keep small teams competitive. The cap space for the draft and comp picks help. if you ain’t willing to have a hard cap which high revenu teams and the union don’t, you have to do more to help smaller revenue teams. Limiting bonuses is another way to help. Look at the Dodgers and other high revenue teams prospects. Loaded with high priced international signings. You have to even it out or you will end up with a 6 team league. It’s getting old rooting for a team that can’t compete Doug Gray March 7, 2018 The Reds can compete, though. That’s the thing. Gilbert Keith Chesterton March 7, 2018 But can the Reds compete on a yearly basis? No. Once their best players hit free agency, the Reds are forced to dump them and rebuild. A team with a much higher salary ceiling aren’t forced into that situation. Doug Gray March 7, 2018 Sure they can. IT won’t be easy – but you’ve got to continuously make smart moves, good draft picks, good free agent signings, good trades – and almost as important, have solid health from your cornerstone type of guys. sixpacktwo March 8, 2018 Doug, It won’t be easy? Easy is defined as having a 250 Million cable contract. Making it easy is defined as everything going right, which is basicly impossible. The Rays coming the closest. Stock March 7, 2018 How about the possibility that the White Sox over paid and not that Texas underpaid. Robert is a 55 prospect. Per FanGraphs a 55 prospect is expected to earn 38 million for their team over the first 6/7 years in the majors. This is FanGraphs rating which I am sure you know of. Out of the gate The Sox spent more on Robert than he will provide in compensation (expected value). If he never makes it to the show they wasted $50 million. If he does and he becomes 1 WAR per year player they still lose. If he becomes an All-Star after 3 years they still lose because he makes his money in arbitration. The only way the Sox win is if Robert is an all-star right out of the gate and so many Cuban’s have fallen flat on their faces the chances of the Sox winning this deal money wise seem remote. The players are not dumb. They understood players who have not proven a thing were being paid large amounts of money that should be going to players who have proven themselves in the majors. The players changed the rules in an attempt to funnel that to them. Additionally, go look at the 25 richest 16 year old’s in the world. I am willing to bet that a majority of them if not all have just signed ML contracts. Other businesses do not hand out millions based upon potential. Not many HS genius’ get offer $1 million. For that matter not many HS graduates get offers like that. Only in baseball do you not have to prove yourself first. Bill March 7, 2018 There’s no doubt the White Sox overpaid, but did so willingly. While they were not competitive at the major league level they diverted potential salary dollars to acquire a potential future all star. The price was high as there were other clubs willing and able to pay top dollar as well and most importantly there were no other premium players available. Luis Robert was able to time his arrival on the market to take advantage of this situation and earn a premium signing bonus as a result. Michael Smith March 7, 2018 Stock, I think that zero mlb signings will make the list of 25 richest 16 year olds. The trust in the names of kids whose parents are billionaires are astronomical. Doug Gray March 7, 2018 There are probably 100 youtube millionaires worth more than every 16-year-old baseball player alive. Kinsm March 8, 2018 The MLB spends over a half a billion $ a year paying 1,800 amateur young men bonuses to become professionals. Just over 200 of those players will ever see one game in a mlb uniform. Doug Gray March 9, 2018 And they’d be willing to pay a lot more if they didn’t get to create the rules to not have to truly compete against each other for them. Doug Gray March 9, 2018 I’ll also just point out that with the new rules for both the draft, and the international period, if teams spent every penny in their caps, it’s now $399M. Of course, we can count, what, another $25M or so for those $125K signings after the 10th round, plus whatever the rest of the guys get. MLB is spending far less than $500M+ these days.