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The New Draft Pick Compensation System

By Ben Nicholson-Smith | July 17, 2012 at 3:46pm CDT

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.

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Collective Bargaining Agreement

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39 Comments

  1. Fizzzay

    13 years ago

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

    Reply
  2. User 4245925809

    13 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 🙁

    Reply
  3. WisBrave

    13 years ago

    The new system sucks IMO.
     

    Reply
  4. AaronAngst

    13 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.

    Reply
  5. Donnie14

    13 years ago

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

    Reply
    • WisBrave

      13 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.

      Reply
  6. M_Harden

    13 years ago

    The pick just disappears completely?

    Reply
    • Andrew Nichols

      13 years ago

      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.

      Reply
    • User 4245925809

      13 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..

      Reply
  7. gamaize

    13 years ago

    never mind already covered

    Reply
  8. drjayphd

    13 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.

    Reply
    • Crucisnh

      13 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.

      Reply
  9. DunkinDonuts

    13 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.

    Reply
    • $6592481

      13 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.

      Reply
      • go_jays_go

        13 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.

        Reply
        • $6592481

          13 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.

          Reply
    • go_jays_go

      13 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].

      Reply
  10. Patrick OKennedy

    13 years ago

    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. 

    Reply
  11. bdub

    13 years ago

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

    Reply
  12. DK8

    13 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.

    Reply
    • WisBrave

      13 years ago

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

      Reply
      • DK8

        13 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.

        Reply
  13. lawries_helmet

    13 years ago

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

    Reply
  14. SRT

    13 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…..

    Reply
    • kcgregory

      13 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.

      Reply

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