The New Draft Pick Compensation System

There’s been a lot of talk about the diminished trade value of prospective free agents under baseball’s new collective bargaining agreement, and rightfully so. Teams can no longer obtain draft pick compensation for players acquired midseason. Naturally, that affects the trade value of players on the cusp of free agency like Zack Greinke, Cole Hamels and Carlos Quentin

Zack Greinke - Brewers (PW)

There’s a second change to keep in mind as the trade deadline approaches, MLBTR has confirmed. Teams that keep their players now obtain one compensatory draft pick for losing a top free agent, whereas they previously obtained two selections. If a team loses a player who turned down a qualifying offer to sign elsewhere, the player's original team will obtain a single compensatory selection between the first and second rounds of the draft (the qualifying offers, which are based on the average salary of baseball’s 125 best-paid players, are expected to be worth $12.5MM or so).

Meanwhile, the team that signs the free agent will lose a first round selection (though the top ten picks are protected). However, that lost first round pick no longer goes to the player’s former team. Instead, the pick disappears and the first round becomes condensed.

For example, if the Brewers trade Greinke, his new team won’t be eligible for draft pick compensation. If the Brewers hold onto Greinke and make him a qualifying offer after the season only to see him sign elsewhere, Milwaukee will obtain a selection between the first and second rounds of the 2013 draft. The team that signs Greinke would lose its first round selection, but that selection would no longer go to the Brewers under the sport’s new rules.

Fewer players now bring in draft picks and those that do translate into one selection, rather than two. The changes will lead to to a drop in compensatory draft picks and an entirely new trade deadline dynamic.

Photo courtesy of US Presswire.


39 Responses to The New Draft Pick Compensation System Leave a Reply

  1. Fizzzay 3 years ago

    Wow, now it hurts even more to lose your stars to FA. Didn’t realize that pick just disappeared.

  2. johnsilver 3 years ago

    I was under the wrong impression for sure and like this better.. Don’t sign? Just lose the pick and get a supplemental pick between rounds if the player is in the top roughly 20%. Much better and only 1 pick.

    Edit:

    Thanks a bundle Ben.. Should have paid more attention to the new CBA when read over it, rather than just draft/salary caps :-(

  3. WisBrave 3 years ago

    The new system sucks IMO.
     

  4. AaronAngst 3 years ago

    I guess you do dump guys like Greinke, Hamels, etc for next to nothing then… or rather whatever a team deems greater than the equivalent of a sandwich pick… which probably isn’t much at all. Terrible. Trades like these were a part of the rebuilding process. This is just another roadblock for bad teams on their quest to becoming good teams.

  5. John Driscoll 3 years ago

    Super lame.
    – Sad Brewers Fan
    P.S. Now you guys can really have fun with your low-ball hypothetical offers.

    • WisBrave 3 years ago

      That’s just it Brewers won’t get that great of a return in a trade unless the opposing team can extend the player right away as part of the trade. There might be a team desperate or foolish enough to deal a top prospect but very slim chance that prospect is a top 50 on any top prospect lists. Draft picks and prospects are valued higher than ever right now.

  6. M_Harden 3 years ago

    The pick just disappears completely?

    • Another way to think about it is that the pick is merely being moved from the first round to the sandwich round. Sandwich picks are only created when a team loses a FA after a qualifying offer is rejected, and first round picks are only lost (setting aside draft forfeitures) when a team signs a FA that has rejected a qualifying offer, so in some sense the pick is transferred from the acquiring team to the losing team, but also being moved.

    • johnsilver 3 years ago

       It was a tradeoff between the MLBPA and Selig to get his slotting in place am guessing.. He wants slotting with penalties? Put pressure on teams to sign a FA, or lose a pick altogether and it makes sense.

      The small market teams that didn’t spend in the past got something they wanted in hard slotting in the draft, but many other teams are going to just see a pick go *poof* in the 1st round now for good if they lose a FA and every team gets to pick 1 slot higher now.. Good for everyone who *DOES NOT* lose a FA in round 1.

      Pressure applied by the MLBPA to sign the FA here and yep.. This is Selig’s baby, along with small market owners, who didn’t spend in the draft 100% here.

      The draft was fine and dandy before..

  7. gamaize 3 years ago

    never mind already covered

  8. drjayphd 3 years ago

    Yeah, this new system’s just… boring. The old system might have overvalued free-agents-to-be, especially considering that time the Blue Jays basically bought a draft pick, but this one basically eviscerates the trade deadline for fans. There’s no incentive to trade for anyone substantial unless you know they’ll re-up with you nowadays.

    • Crucisnh 3 years ago

      The new system *may* increase the incentive to trade potential free agents before their final season starts, so that the acquiring team is able to get the comp pick … which should increase the trade value of the player.

  9. DunkinDonuts 3 years ago

    As others have noted, the new draft-pick compensation system is awful for competitive balance.  There is now significantly less opportunity for non-contenders to rebuild for the future by trading their free-agents-to-be at the deadline, as the loss of compensatory picks for teams acquiring the rental means that fewer established prospects will be on the table.  This is not a good thing for smaller-market teams whose best shot at becoming competitive was obtaining the younger, cheaper players of teams like the Red Sox and Yankees, who could afford to fill out their rosters via free agency.

    Furthermore, what purpose is served by depriving the former team of the acquiring team’s surrendered pick?  The new system still acts as a potential depressant on the market for free agents, as the signing team is still required to give up a pick.  I suppose you could argue that withholding that pick from the former team would prompt those teams to push harder to re-sign their free agents, but why would we want teams that would be better-served by rebuilding through the draft to instead overpay for familiar faces?

    While we’re on the subject, I would love to hear a rational argument as to why MLB does not allow teams to trade their draft picks.  It seems that small-market GMs should be entitled to make their own determinations as to whether their high draft picks could bring more value in trade than actually making the pick.  Trades would add a new dynamic to the draft that places more significance on competent front-office management and, in some cases, the right move could expedite the rebuilding process for a team like the Rays, whose current model (finish last -> draft high -> sign the picks to long-term deals -> wait for all those picks to take the field at the same time) depends upon extended periods of being downright bad.  Trading picks would also make the draft much more exciting for fans.  From the people who brought you Interleague play, Spider-Man bases, and a one-game Wild Card playoff, I would think injecting more intrigue into the draft would be a no-brainer.

    • $6592481 3 years ago

      I would imagine that the reason for not receiving the 1st round pick of the team that signed your lost star is because of the draft spending limit. Please correct me if I am wrong, but I believe the spending limit is determined by order in the draft, and not the number of picks. Or is more complex than that? So, that makes it really difficult for a team to sign 2 first round draft picks (or more) with the spending limits.

      • $17867741 3 years ago

        Each draft pick is assigned a slot value. The earlier the pick, the higher the slot value. The more picks you have, the more you can spend.

        Your spending limit on the draft is the sum of all the slot values.

        I don’t get what’s so complicated about it.

        • $6592481 3 years ago

          It isn’t complicated at all. As I alluded to in my post, I wasn’t sure if it was solely based upon draft order, or the number of picks. I guess you didn’t quite get that. It wasn’t a complicated post.

    • $17867741 3 years ago

      I think you’re forgetting that not all free agents will garner a draft pick.

      Middle-tier free agents shouldn’t reallly be affected by the new CBA; only the stars are affected.

      Even you acknowledge, “The new system still acts as a potential depressant on the market for
      free agents, as the signing team is still required to give up a pick”. That should help slightly curb the growth in cost of top-tier free agents because there is less motivation to sign them.

      That being said, this CBA places emphasis on building through the draft; not just simply by having many picks, but to draft and develop players wisely. For the next part, I’m only speculating, but I can think of two reasons why you can’t trade draft picks:

      1) MLB is not the NBA or NFL or NHL. The average player could easily take 3 to 4 years of development before reaching the big leagues. You don’t want teams mortgaging their futures by trading away all their draft picks. That leads into my next point.

      2) MLB has a lot of dumb GMs. If you allow teams to trade draft picks, 90% of the 1st round will be occupied by the Blue Jays, Rays, Nationals, Cardinals, and [insert any other team with a smart GM].

  10. Well done, Ben.  One noticeable impact of the new rules is that the number of “sandwich round” picks will be reduced.  There is a lottery for some new sandwich picks, but not nearly enough to make up for the loss of compensation picks that won’t be there in the new structure.

    The overall number of picks won’t change as a result of a “qualified” free agent signing, as the signing team loses a pick and the losing team gains a pick, so that’s a wash as long as the lost pick is a first round pick. 

    Also noteworthy is that the signing team loses it’s highest available draft choice, so if they have a protected pick (top ten in the first round) or if they have lost their first round pick either because of signing another qualified free agent, or because of a penalty for going over the slot recommendations in the previous draft, they will then lose their second round pick as well.  If they have no second round pick, they lose their third, etc.

    Finally, the sandwich round picks will be allocated in reverse order of the previous season’s record. Under the old rules, comp picks were distributed in the order determined by the value of the player under the Elias formula rankings. 

  11. Also now, the compensatory picks are tradable as well correct? All the other picks are still not tradeable from what I’ve understood.

  12. DK8 3 years ago

    I don’t really see any change in the trade deadline this year versus years past.  Sellers have more incentive (and less leverage) to unload high end guys because they can only collect one pick.  But on the other side, the second wild card creates more buyers, which should drive the price up.

    Sellers also have huge incentive to trade the Jonathan Broxtons of the world, because they would get nothing if he walks (because they won’t make a qualifying offer).  I think there will be lots of action in the middle tier FAs to-be like Marco Scutaro, Carlos Quentin, any reliever, or pretty much any player who is not quite worth a 1 year/$12 million free agent contract.

    • WisBrave 3 years ago

       It might raise the price for someone like Jonathan Broxton but lowers the price for someone like Greinke.

      • DK8 3 years ago

        Has the price of 2 months of a star really been that high over the last few years? I’m of the opinion that of the top-end pitchers that have moved over the past 3-4 years, the price has been surprisingly low.

        But my perception could also be influenced by the fact that almost none of the “great prospects” traded for SPs over the last few years come to mind as guys who have turned into stars.

  13. lawries_helmet 3 years ago

    Does the team with the 10th worse record lose the protection, because Pittsburg now gets the 9th pick as Appel comp?

  14. SRT 3 years ago

    I’ve read this 5 times and still don’t get it:

    ‘Teams that keep their players now obtain one compensatory draft pick for losing a top free agent…’

    Isn’t this sentence contradictory?  What is this saying?

    Example:
    Brewers trade Greinke mid season, Brewers get no pick.
    Gaining team (mid season) has to make a qualifying offer to him end of this season to get a sandwich pick?
    Or does the gaining team not even have that option?

    Confusing…..

    • kcgregory 3 years ago

      You’re still misunderstanding.  Read your quote this way:

      “Brewers that keep Greinke now obtain one compensatory draft pick for losing Greinkie (at the end of the season”

      The acquiring team does not get a pick even if Greinke leaves.
      To qualify for a compensatory pick the leaving free agent must have been on that teams roster all season and they must then submit a qualifying offer.  If he leaves, then they get a pick and the team that signs him loses one.

  15. AaronAngst 3 years ago

    Right – but now I just wouldn’t trade an upcoming FA to a contender out of spite. “Wanting pitching help, but not wanting to give up anything of value for it? I’m sorry… we’re not selling.”

  16. Crucisnh 3 years ago

    Actually, the owning/seller teams still have the leverage of standing pat.  They just get 1 pick, whereas the acquiring team wouldn’t even get that.

  17.  There was some pretty good coverage of the new CBA.  For one, Maury Brown had all the details as they were announced.  It took some time for the actual document to be signed off and printed, but the critical details were all out there.

  18. AaronAngst 3 years ago

    I don’t know that anyone was saying anything other than it makes no sense to trade for less than the value that two compensation picks would get you… and for me, an offer that didn’t include someone like Olt (if only Olt and a lower prospect or two) would be less than the value of picking a couple of guys your scouts and player development team are high on, early in the draft. Olt’s value is high right now because he was dominating Double A. Who knows where his value goes next year, assuming the Rangers don’t move him to the Bigs prior… You’d be selling high, which is what most people want to do.

  19. johnsilver 3 years ago

    Small market teams are in a pinch now. I see some.. Brewers for instance settling for less than many would have expected for grienke, because do not think they will want to pay him the over 110m he thinks he can get on the open market.

    Philly? Still think they go overboard and some last minute deal materializes and a mind blower to boot, like the Sabathia numbers.. 5/125m range and partly because the offers they were getting were not anywhere near what they thought was commiserate to his value.

    Your guy Hamilton? I thing the Ranger FO is going to let him have a look-see, but he is coming back. His heart is in Texas.

    Sanchez, Dempster, those guys have not gotten what their teams have thought were worth offer wise either.

    Whole new ball game now and can’t just magically rebuild a farm system with a couple of the old style Type A FA like the Rays did…

  20. AaronAngst 3 years ago

    Of course, now that point is moot… so now we’re just working with spite!

  21. AaronAngst 3 years ago

    “Whole new ball game now and can’t just magically rebuild a farm system
    with a couple of the old style Type A FA like the Rays did…”

    This was part of what gave baseball at least a small amount of competitive balance though. The big markets will continue to spend, and they can continue to not have great farm systems and not be penalized for it. Also, claiming the Rays built their farm off of this practice is a misnomer, if not patently false.

  22. johnsilver 3 years ago

     I have already proven this false before.. Now have to prove it yet again here??? Why do some of you believe all the time the large market teams spend some much on the draft?? Maybe look at draft spending sometimes instead of rant??

    2011 vs 2012 large market “cap” draft for large market teams:

    NYY: 4,192m/4,202m
    NYM: 5,070m/7,151m
    LAD:  2,978m/5,202m
    PHI:  3,855m/4,916m
    BOS: 10,048m/8,882m
    LAA:  2,656m/1,645m
    TOR:  8,990m/8,885m

    Those BIG MARKET teams SURE did spend huh??? Some got a LOT MORE 😉

    Lets go over some SMALL MARKET teams now…

    MIN: 5,072m/12,368m
    HOU: 4,705m/11,077m
    OAK: 2,612m,/8,649m
    Pit:   16,445m/6,563m
    TBR: 11,309m/3,871m
    WAT: 14,551m/4436m
    KCR: 11,405m/6,101m

    That separates the SMALL MARKET teams into 2 groups.. The ones who NEVER spend and the ones HEAVILLY penalized that DID spend MORE than large market teams.

    Looks like just tossed a hand grenade into ur haversack…

  23. AaronAngst 3 years ago

    Ummm, I’m not talking about what teams spent on the draft. I’m talking about small market teams no longer being able to get a package of prospects for impending Free Agents that they very likely wouldn’t have the money to sign in the offseason anyway. I don’t know how you’ve steered the conversation into draft money… Free Agency money is the problem, and it will always be the problem in terms of the MLB achieving a level of competitive balance on par with the other major sports.

  24. AaronAngst 3 years ago

    Also, the other point: The Rays team was not built on trading off Type A’s.

  25. melonis_rex 3 years ago

    1- You have to look at the number of picks each team had in the top 2 rounds in 2011 and 2012. a team with more picks will naturally spend more money, and if a team only has one pick in the top 2 rounds (from signing a free agent, another way to improve a team), they’ll naturally spend less.

    2- also: under the old cba, smaller market teams were more likely to trade their impending free agents to bigger market teams as opposed to letting them walk and collecting picks. in conclusion, they had fewer picks on average.

    hard slotting doesn’t hurt big or small market teams specifically. it hurts the talent pool (more incentive for a high schooler to go to college instead of signing late in the draft, which means more injury risk).

  26. Ben_Cherington 3 years ago

    It was build off the 15 consecutive first round picks

  27. AaronAngst 3 years ago

    You still have to hit more than miss in the draft, which they did. Washington wouldn’t be in a good position now without some downright terrible years as well. A history of failure, really… going back decades.

  28. drjayphd 3 years ago

    WAY too long, considering my line of work (print reporter). Our readers aren’t exactly the best educated ones out there.

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