Mar 30 2014, 1:00pm CDT | by Forbes
It may be the worst time in recent history to be a college senior seeking to perform for a Major League Baseball-affiliated organization. MLB teams must remain below a designated signing bonus threshold under the current MLB Collective Bargaining Agreement. Violation of same may result in stiff fines and/or the loss of early picks in future MLB Drafts. A major consequence is that college senior baseball players are earning less money early in their professional careers, no matter their talent.
The 2014 Major League Baseball (MLB) First-Year Player Draft is a little more than a month away and will span a total of three days between June 5 and June 7. More than 1,000 players will be selected by MLB teams. Among those drafted are high school seniors, junior college players, and 4-year university juniors and seniors. Those with the least amount of leverage are college seniors. This has been the case without reference to the specific terms of the collective bargaining agreement that teams and players operate under. Teams are in a position to tell college seniors, “take it, or leave it,” and if said players decline their offers, they often must look at independent baseball leagues as placeholders until they are able to once again test the MLB market. This is far from an optimal situation for those athletes.
7 of the top 300 players listed on a Top 300 MLB Draft Prospects list from February are college seniors, including University of Florida pitcher Karsten Whitson, ranked No. 34 overall. Each player should know that it is likely he receives a signing bonus term sheet that includes compensation greatly below the recommended signing slot value provided by the MLB Commissioner’s Office.
Just how bad do MLB-bound college seniors have it? In a forthcoming law journal article titled, Foul Ball: Major League Baseball’s CBA Exploits College Seniors in the MLB Draft, author Jonathan Gordon sifted through the null A total of 57 college seniors were drafted in the first 10 rounds and all 57 signed with the teams that selected them. Meanwhile, high school seniors drafted in the same rounds, and certainly controlling more leverage in negotiations, were able to command roughly 20% above their recommended slot values.
On one hand, it is not hard to support an argument that those college seniors who would be drafted in the first 10 rounds, irrespective of the language contained within the Collective Bargaining Agreement, are taking a discount due to teams trying to stay within their allotted cap on spending. However, other college seniors may be benefited by the newest iteration of the CBA — it could be causing teams to draft more college seniors in the first 10 rounds to balance their books and remain below their thresholds despite spending above slot on high school juniors. Signing bonuses are capped at $100,000 per player from rounds 11-40 of the MLB Draft.
In 2013, the No. 1 overall pick was allotted a slot value of $7.79 million and recommended compensation gradually decreased by draft position until the last pick of the tenth round, which had an associated value of $135,000. The numbers attached to each slot within the first 10 rounds are added up to compute an overall spending allocation per team. The lightest penalty exists when a team goes less than 5% over its allocation and must pay a luxury tax of 75% of the amount over the threshold. On the other end of the spectrum is a 100% luxury tax and forfeiture of its next 2 first round picks for any team that goes at least 15% over its allocation.
FORBES previously wrote about how this new, strict system may have been the impetus for the Philadelphia Phillies tattling on its 2013 MLB Draft fifth round selection Ben Wetzler, who decided to decline the Phillies’ offer and return to Oregon State University for his senior season. The Phillies indicated to the NCAA that Wetzler had the assistance of an agent in failed negotiations (in violation of the NCAA’s No-Agent Rule), which resulted in a suspension that kept Wetzler out of 20% of his team’s games. Even though Wetzler chose not to sign with the Phillies, his recommended slot value was subtracted from the Phillies’ overall pool of money accessible to provide to its picks in the first 10 rounds. The CBA has resulted in an environment that makes it tough for teams to use high picks on players they do not sign. It also enhances the importance of signing college seniors below slot value so that they have extra money to entice those in similar positions as Ben Wetzler to forego their remaining NCAA eligibility and enter the professional ranks.
Interestingly, college seniors could engage in a cat-and-mouse game whereby they gain extraordinary leverage in the new system created by the Collective Bargaining Agreement. While all 57 college seniors drafted within the first 10 rounds of the 2013 MLB Draft signed their offer sheets, a college senior who fails to sign at an amount well below slot could serve as a huge detriment to the selecting team. Because the recommended slot value will be counted against the team’s entire spending allocation, the team has an incentive to sign the college senior . . . maybe not at or above the slot, but players should definitely be in a position to bargain for more than an 80% discount to the signing team.
Yet, the ultimate leverage in negotiations between MLB teams and college seniors almost always reverts to the teams. ”[F]or the most part it comes down to money. Juniors know if they get selected in the top ten rounds that they have leverage with scouts,” explained University of Arizona junior Johnny Field who was drafted in the fifth round of the 2013 MLB Draft and signed for $247,500, which was almost $50,000 below recommended slot. ”If the scouts cannot work with them and meet the number they’re looking for, then they can threaten to not sign and return for their senior year. When seniors get drafted that don’t have any leverage and are forced to sign for whatever the scouts offer them, or they won’t get the chance to play pro ball.”
“If seniors could still get slot (the recommended amount) like they could as juniors and not worry about losing money or falling lower in the draft, then I believe a lot of juniors would come back for their senior year to try and improve and compete for a championship and, most importantly, receive their degree and enjoy another year of college,” continued Field. ”I would have highly considered returning for my senior year if this [solution] was implemented.”
Such a solution fails to exist. Expect MLB teams to select many college seniors in the first 10 rounds of the 2014 MLB Draft to dilute the excess of spending on younger players signed above recommended slot value. With limited options outside of MLB-affiliated baseball, expect many of those college seniors to sign their offer sheets.
Source: Forbes Business
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