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Mark Appel And Negotiating Leverage

One year after passing on pitcher Mark Appel with the first overall pick in the 2012 amateur draft, the Astros nabbed him with the number one slot on Thursday. Yesterday, Dave Cameron of Fangraphs took a look at Appel's bargaining position as a college senior who went in the number one slot.

When Houston bypassed Appel last year, the righty fell all the way to the Pirates at number eight. Despite a reported $3.8MM offer to join the Pittsburgh organization, Appel decide to return to Stanford for his senior season. In doing so, Appel utilized the only substantial leverage he had, gambling that he would force his way back to the top of the draft board in 2013 and be selected with a higher draft slot (with its accompanying higher bonus allocation). Indeed, that is exactly what happened. 

Having already played his prime negotiating card last year, and now entering the draft as a college senior, one might suspect that Appel will have a relatively weak bargaining position in working out his bonus with Houston. But that may not be the case, explains CameronPlayers drafted this year must agree to terms with their teams by July 12th at 5:00 PM EST. That rule, however, excepts college seniors that have no remaining NCAA eligibility. Such players can continue to negotiate until the very eve of next year's draft.

With Appel's selection slot representing a huge chunk ($7.79MM) of the Astros total $11.7MM bonus pool, says Cameron, the team must be cognizant of the trajectory of its negotiations with Appel before inking deals with the remainder of its selections. The reason is that a team can only use the bonus pool money it is allocated for a given draft slot if it actually signs the player it chooses in that slot. And if a team spends more than 5% above its total bonus pool allocation, it will lose its first pick in the next draft -- a particularly heavy price for an Astros team that figures to pick at the top of the draft next year. So, signing other players at above-slot rates before agreeing to terms with Appel carries a lot of risk for Houston. With a later negotiating deadline than other top picks, Appel can, in Cameron's words, "basically hold the Astros bonus pool hostage." (It is also worth noting, as Cameron does, that Appel is being advised by the notoriously aggressive Boras Corporation.)

While the possibility for gamesmanship exists, Cameron notes that several other factors -- including Appel's ties to Houston and the lack of appealing alternatives to signing -- make it more likely that he will end up signing at or near the recommended slot bonus. Indeed, there would be major risks to both sides if Appel were to extend negotiations beyond the July 12 deadline. For Appel, there is no room to improve his draft position; a one-year tour through an independent league would carry risk of injury (and/or lowering of his prospect stock) but no possibility of achieving a higher draft slot. The current feel-good story of Appel returning to his Houston roots should create some nice marketing opportunities that he could jeopardize by overly aggressive bargaining. And perhaps most importantly, Appel would very likely be slowing his progression to the majors. Appel is often characterized as a highly polished pitcher who is expected to ascend quickly, and the Astros have intimated that he will start his professional career at the upper levels of the Houston system. The sooner Appel forces his new club to call him up, the sooner he can begin accruing service time. An additional arbitration year and/or an earlier free agent start could mean upwards of tens of millions of dollars down the road. 

In sum, Appel's new means of exercising leverage brings more balance to the table, but does so by setting up the potential for a game of chicken. Both sides seem likely to take this into account in advance and not allow the July 12 to pass with such risk and uncertainty on the table. (Indeed, the Astros may have already signalled their intention to avoid the issue by drafting six collegiate players against just three high-schoolers amongst its other selections in the first ten rounds.) Nevertheless, the tacit threat could certainly help to elevate the bonus that Appel receives, and it will be interesting to see how negotiations progress and where they end up.








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