Wednesday Rockpile: Examining the New MLB Collective Bargaining Agreement

Bryce Harper is sure glad that he was drafted before this CBA was signed.

Yesterday was a great day for baseball labor negotiations, as MLB and the player's union agreed to a 5 year labor deal, guaranteeing 21 years of labor peace. Here's a detailed summary of the agreement from the Biz of Baseball and a less technical one from MLB SBNation. For those of you with ESPN insider, Keith Law gives his analysis on the deal point by point.

Unfortunately, the new collective bargaining agreement (CBA) might have simultaneously dealt a grievous blow to the ability of low payroll teams to compete with their big market brethren by severely limiting the flexibility with which teams like Tampa Bay and Pittsburgh can construct a successful team. I will warn you, folks -- this is the longest Rockpile I've ever written (maybe even longer than my PR Academy articles), and that's saying something.

It's Good

Before I get all doom and gloom on you (oh, and I will), there was quite a bit for me to celebrate in the new CBA:

  • The leagues will now each have 15 teams now that the Houston Astros are moving from the NL Central to the AL West, meaning that every division will have five members. The fact that it took this long to even out the membership of the leagues is mystifying to me, but I'm glad that it happened, as there will be (theoretically) a more even chance of winning a division for every team.
  • On a related note, adding another wild card team, probably as soon as 2012, is good news if you're a baseball fan who loves a good pennant race -- especially if your team has never won a division title (/Colorado). Dave Cameron at Fangraphs suggests that this might turn the July trade deadline into a seller's market -- with as many as 2/3 of MLB teams still in the hunt at that time, fewer teams will be selling and more will be buying, or at least standing pat. More pennant race fever equals more packed houses in more cities, and that's good for everyone. For a team like Colorado who might be in a reloading mode, the playoffs became a much more attainable proposition in 2012. 
  • Replay review will be extended to include fair/foul and "trapped" balls. Again, this sort of thing has worked out beautifully in tennis (a sport perhaps even more reliant on tradition, etc. than baseball), and it will be great here. I'd have liked to see replay also cover safe/out calls, but this is very much a step in the right direction.
  • The Elias free agent compensation rankings are gone, which is music to my sabermetric ears. Instead of relying on a bizarre formula that way off the track in terms of valuing production, compensation picks will be rewarded based solely on the market demand of the free agent in question -- which is how it should have been all along. Now, teams won't get a compensation pick for losing free agents unless they make a qualifying offer the player that is better than the average salary of the top 125 highest paid players (for 2012, the number is $12.4 million in any year of the offer).
  • Mandating the wearing of safer helmets by every batter by 2013 -- this will hopefully improve player safety, and the helmets in question are lighter than the current helmets too.
  • There will be (limited) trading of draft picks allowed (I think). Another thing that didn't make sense is being rectified here -- if teams want to use their draft assets on acquiring established talent instead of lottery tickets, they should be able to.
  • Raising the minimum salary to $480k -- this will compensate pre-arbitration eligible MLB players a little better than the current system -- 16% better than 2011, in fact. 
  • The Rule 4 Draft signing deadline is moved from August to July. Just about the only positive thing about the draft in the CBA is that the negotiating window will be tighter -- with the goal of getting more top picks some professional experience in the season they were drafted. I also don't mind too terribly that Rule 4 draftees can't sign major league contracts anymore (placing them on the 40 man roster immediately) -- while leverage is somewhat decreased for the draftee, the team can't cripple its roster flexibility by giving out spots to players that are a few years away.
It's Complicated

Here are a few things that I had more mixed emotions about:
  • Outlawing smokeless tobacco on the field and in interviews, etc.
  • MLB will begin testing for HGH, with positive tests getting the same punishment as positive steroids tests.
  • Super Two Eligibility (basically, an extra year of arbitration for the player) will be expanded from the top 17% of players between 2 and 3 years of ML service time to the top 22%
As a proponent of civil liberties, I'm a little peeved at the first two provisions, even if the tobacco provision was brought up by the players. From an aesthetic and health standpoint, both of these make very good sense. I've certainly never tried either substance. As for HGH, this is what former union head Marvin Miller had to say:

It's the same as steroids. There's not a single test worldwide (proving) that it improves athletic performance, not one. I don't know if it does, and neither does anyone else.

Steroids are certainly a divisive subject among MLB fans. I'm only against steroid use insofar as it is illegal in baseball, not that it is "cheating". In my opinion, what players put in their bodies is their business -- in using steroids, they are weighing the inherent health risks of using with the purported rewards. I'm against steroid/HGH use by MLB players, as MLB prohibits the use of those substances, but I'm not opposed to the idea of using steroids to improve performance on an ethical level. But I digress.

As for the Super Two issue, it's great for the young players that will get a salary bump sooner, but this policy still only encourages teams to hold their top prospects out of the majors for a little longer, perhaps at the cost of their squad's postseason hopes.

It's Ugly

Up to this point, we've seen a number of things that can and should be construed as positive elements of the CBA. Unfortunately, it's at this point where MLB and the PA decided to screw over amateur players (domestic and international), small market teams, and fans of creative management. Here are the main issues:

  • Minor league free agents not added to the Opening Day roster or released 5 days later will cost an extra $100,000 and can opt out on June 1. This means that teams who want to stockpile a bunch of AAAA depth just in case will have to pay quite a premium to do so -- and as a result, 40 man roster spots will become even more precious than they are now. It's not necessarily a bad rule, but it's a rule that limits roster flexibility somewhat.
  • The establishment of a signing bonus pool (and cap) for the Rule 4 draft. Monetary will be established for all the picks in the first 10 rounds, then a limit will be placed on a team's draft spending that is equal to the sum of the suggested value of those picks. The pool for 2012 seems to be between $4.5 million and $11.5 million depending on draft slot. If a pick after the 10th round is given more than $100k, that amount will also be counted against the pool (yes, that's 14th rounder Dexter Fowler for you). Penalties for going over the limit are draconian:
    Excess of Pool Penalty (Tax on Overage/Draft Picks)
    • 0-5 percent; 75 percent tax on overage
    • 5-10 percent; 75 percent tax on overage and loss of 1st round pick
    • 10-15 percent; 100 percent tax on overage and loss of 1st and 2nd round picks
    • 15-plus percent; 100 percent tax on overage and loss of 1st round picks in next two drafts
    Guess what folks -- according to Baseball America's Jim Callis, 20 MLB teams went at least 16% over MLB's slot recommendations in 2011. That's right, 2/3 of MLB would have paid a 100% tax and lost two first rounders this year. Hey Bud, that means your forecast of the free market of these players is vastly skewed! I'm sure that the slots will be demonstrably higher in 2012, but they will still be far below the market value of the players in question.

    This policy, ultimately intended to depress salaries paid to amateurs, is unfathomably stupid for multiple reasons:
    • It might not be a violation of the legal rights of these amateur players, but it sure feels like a violation on an ethical level. Their potential earnings based on their skills have been artificially capped and they had no voice in these negotiations. There's already a huge difference in the salaries of young prospects and even major leaguers with very little service time when compared to free agent eligible players -- and this will make the gap even wider. MLB and the PA went after the group that had no leverage in the negotiation process, and they went hard.
    • In an era where baseball has been losing many top athletes to other sports, MLB has decided to encourage the many high caliber multi-sport athletes to choose another sport to focus on for their professional aspirations. I agree with Rob Neyer that there might not be that many athletes affected by this, but losing just one Joe Mauer or Matt Holliday to football would be a darn shame for baseball fans. Limiting the talent pool of the sport, especially in an environment where talent is at a premium, is just asinine.
    • In a similar vein, many top high school players will instead choose to attend college -- and while that is an admirable thing for the most part, college isn't an ideal developmental channel for MLB (just imagine how many promising young arms will get blown out by college coaches). Instead of filling Rookie levels with 18-20 year olds, clubs will field squads full of 22-23 year olds who are comparatively further behind on the developmental curve.
    • The draft was just about the biggest bargain left to smaller market teams (we'll get to another in a minute), wherein teams could sign premium talent at artificially below market prices...and could, if they wanted, spend a lot more than other teams instead of pouring all of their money into the ML squad. There's a proposed Competitive Balance Lottery that will award compensation picks to low revenue teams...but with the new bonus pool system, the effectiveness of these picks will be diminished somewhat. Spending heavily on the draft is now a bad, bad thing -- sorry Pirates, here's another 20 losing years for you.
    Okay, so that whole Rule 4 Draft thing looks like a disaster for small market teams looking to get an advantage through creative resource allocation and great scouting. Oh well, at least there is still an advantage to be gained by investing in international prospects...oh wait, they screwed that up too! The last bastion of a free market for amateur players has effectively been bastardized by this new policy: 
    • A signing bonus pool has also been established for international players...for 2012, this was set at $2.9 million, though in the future, worse teams will get to spend more internationally than better players. Similar (draconian) penalties to the Rule 4 draft will be in effect for teams spending above these bonus pools.
    This will have similar effects to the Rule 4 draft bonus pool in that the talent pool will decrease (though not by as much given the relative lack of options in Latin America). In addition, teams that have built up a great Latin presence, as the Rockies have, will have to rely even more on scouting and trying to get great bargains. Unfortunately, teams might have to decide to sign only one high caliber prospect instead of signing several good ones. And forget about defecting if you're a Cuban player...at least, not until you're 23, when you can be paid a free market salary.

    In Summation

    The effects of this deal are a positive for current MLB players and teams financially, at least for the next few years. However, after a few drafts/international signing periods with diminished talent pools, the competitive gap between the haves and have nots will continue to widen. Amateur players will continue to be taken advantage of, while owners in many cases will just pocket the savings instead of passing them on to the players.

    The most ironic piece of all of this is that the intention of the new CBA was to improve competitive balance -- but by limiting the avenues through which small market teams could overcome the revenue disparity, baseball is making their competitive balance issue much, much worse.

    As for the Rockies...well, they aren’t necessarily a small market team, but they’ve tended to build their teams through the draft and through international scouting. That makes me worry very much about the effect the new CBA will have on this team. Will management be able to adapt to a new way of building a roster? I certainly hope so.


    Articles that I referenced but didn't directly link to

    These rules are fantastic for big market teams who can maximize the advantage of their revenue streams by spending on Major League talent. These rules are absolutely terrible for teams who cannot afford to build teams by paying the market rate for those same players.

    Congratulations, Major League Baseball, you just screwed every team that doesn’t have the capability of running out a $100+ million payroll, and you just made winning a lot more about Major League payroll size than anything else. In the name of cost reduction, you just made it even less likely that teams like Tampa Bay or Oakland will be able to build long term winners. This agreement will set competitive balance back significantly, and now the best hope is that the damage is so obvious that these changes get repealed as quickly as possible.

     

    Oh, and Ryan Braun won the NL MVP over the slightly more deserving Matt Kemp. Troy Tulowitzki came in 8th while Ryan Howard still managed to come in 10th.

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