MLB’s New CBA Forces Small-Market Teams to Adapt
on April 18, 2012 at 11:02 AMLast November Major League Baseball (MLB) announced its new Collective Bargaining Agreement (CBA) which ensures the sport will have more than 20 years without a single labor stoppage. Sports fans across the country, still bitter from the debacle that was the NFL and Players’ Association standoff and the ongoing NBA labor disputes, commended MLB and said, ‘That’s how it’s done,” without giving second thought to the terms of the agreement. The bottom line is that there will be plenty of baseball for the foreseeable future, but there are some CBA clauses that are cause for concern. Amateur spending has spiraled out of control in terms in recent years. The new CBA tries to address the issues by introducing “Signing Bonus Pools” for both markets, but according to Deadspin “[T]his new deal just took a maple Louisville Slugger to the kneecaps of small-market front offices.”
Under the new system, each club will get an aggregate bonus pool for the first 10 rounds of the draft. The size of the bonus pools depend on the number of draft picks a club has and where those picks fall each round. While clubs will not be required to adhere to the suggested value of each pick, they will be expected to come in under the overall budget number. Teams are allowed to exceed the money in their pool, but not without cost – and the price is steep. 
Under the new rules, teams that exceed the budget by up to 5% will pay a 75% tax on the overage. Teams that go over by 5-10% will pay the same tax and lose a 1st round pick in the next draft. Teams that go over by 10-15% will pay a 100% tax and lose their 1st and 2nd round picks. And finally, teams that go over by more than 15% will pay the 100% tax and lose their 1st round picks in the next two drafts. So why does this matter? In a league where free agency will always favor the big spenders, the amateur draft was the last refuge for small-market ball clubs.
Deadspin’s Jack Dickey writes, “Player movement at the major league level will always favor big-market teams. The Red Sox will always take Carl Crawford from the Rays, the Yankees will always take C.C. Sabathia from the Indians, the Angels will always take Vladimir Guerrero from the Expos.” Small-market teams have known for years that they would have to develop their organization through the draft and they have adopted a philosophy that entails aggressive amateur spending. Now they will have to adjust their strategy.
Essentially small markets teams have opted to spend a little extra on a draft pick rather than spend a whole lot later on a free agent. Certainly, spending on amateurs carries greater risk with a less immediate dividend, but there is also the potential for greater reward, too, as amateur players are under team control for six seasons with three of them typically compensated with a salary at or near the major league minimum.
This change is a blow to teams like the Pirates and Royals, who don’t have the money to chase prime big league free agents but are willing to outspend anyone in the draft. Pittsburgh paid a draft-record $17 million in bonuses last year, and the new system means they’d incur a penalty unless they didn’t give $5 million to second-rounder Josh Bell and find another $2 million to trim. Kansas City couldn’t have given $1.5 million to its 3rd-rounder and $575,000 or more to seven other non-first-rounders without a hefty tax bill and the loss of two future first-round selections. According to a National League crosschecker, “[Y]ou’re no longer going to be able to sign players after top rounds.”
Building through the draft will continue to be the most cost-effective way to construct a team, but smart teams will now have a harder time using their aggressiveness to their advantage.