How To Get A Job In A MLB Front Office

Jul 02, 13 How To Get A Job In A MLB Front Office

At the 2012 MIT Sloan Sports Analytics Conference, Dallas Mavericks owner Mark Cuban was asked his advice to college students and graduates who want to break into the sports industry. His answer was short, simple, and quite striking: “Don’t.”

Cuban cited factors such as ridiculously low pay and saturation of the market among other reasons why graduates should not seek entry level positions in sports. While his response seemed like a candid remark that came off as a joke, there definitely was truth to his words.

I laughed when I first read the story of Cuban’s response. I thought, well of course, it is easy for a billionaire and owner of a sports franchise to say that. What about the students who are passionate about sports? And the die-hard fans that just want to get into the game? I was one of those students. I was doing everything possible trying to crack into a baseball front office.

A month after the 2012 Sports Analytics Conference, I received an offer to join the LA Angels. I would spend one full season, offseason, and spring training with the Angels before deciding that it was best to leave the position.

Although I am out of the sports industry and I do not wish to get back into it, I continue to receive LinkedIn messages and emails from students and recent graduates who are trying to break into the baseball industry – specifically into the baseball operations or player development part of a front office. I have the same advice for almost everyone who contacts me, so I decided to take the time to write an extensive and concentrated post on what I learned from breaking into the industry and being a part of the game.

Before I begin, here are a couple important items to understand before beginning your search for a job in a front office.

1) Being a “die-hard” fan is not a good enough reason to want to work in sports. It takes just a couple months on the job before you realize that it’s just a job and you can no longer be a real fan of the game anymore. Don’t get me wrong, it’s awesome to wake up and roll into a ballpark every morning for work. It’s surreal to have conversations on the regular with current and former players and coaches, especially when they are all-time greats or guys you grew up watching. But what happens after some time is that you become desensitized to the awesomeness, the same way your brand new car becomes simply a means for transportation after owning it for a few months. Be prepared to lose the ability to sit back, relax, and enjoy yourself while watching a game.

2) Why should you be hired by a MLB front office? Does your answer have anything to do with the fact that you are extremely passionate and hard working… you are willing to work for free… you are willing to work an unlimited number of hours per week… et cetera et cetera? Well good for you, because none of that makes you special. All those points are minimum requirements that are expected for anyone who works in the front office. So it is in your best interest to never mention any of those points in an interview because it just makes it sound like you don’t have any unique skill sets or knowledge that will add value to an organization.

Becoming A Unique Candidate

First of all, never settle. Understand what your worth is. This isn’t just for sports, but it is important for life in general. People will tell you to do whatever it takes to “get your foot in the door”. I really don’t like that phrase for a number of reasons, most importantly because majority of the time that phrase is simply another way of someone telling you that you should settle for the easiest and quickest option.

When people tell you it’s tough to get a job in baseball – they aren’t lying. It’s really difficult to get a front office internship. And I say internship because the majority of people will have to start off as an intern unless you can show that you are extremely unique. To be categorized as extremely unique, you either need to have extensive work experience in an analytic or baseball-related field or you need to have a really good connection in the game.

Either way, you need to distinguish yourself in some way in order to truly be considered as a candidate for a front office internship. There are many ways to do this but the general idea is that you NEED to show a team exactly how you can add value to the organization the first day you step into the office.

How To Add Value

If you want to work in the front office, make sure you understand the rules and regulations on how the front office operates. That means, read, re-read and analyze the MLB Collective Bargaining Agreement. This is extremely important for both baseball operations and player development.

Focus on the transaction-related elements of the CBA. You should understand exactly how every single transaction (trade, free agent sign, amateur sign, international sign, waiver claim, etc.) works. What are the basic rules of the transaction? Is there a grey area in the rule that teams can take advantage of? Become an expert on this.

Next, you need to prepare yourself to create an analysis report which shows you identifying an issue a team is dealing with and gives a detailed solution on how you can solve that issue. This is tough, but it will nearly guarantee you a job if executed correctly.

There are many ways to do this, especially if you already know a topic that you are interested in researching, but here is a rundown of what this process might look like if you are starting from absolute scratch.

Try to categorize each team into general groups based on the way their front office operates. Do this by studying each teams’ payroll initially to get an idea whether they are a big spending team (NYY), small market team (PIT), or somewhere in the middle (ATL). Next, study the GMs of each to get an idea of their strategy and biases. Example – the Angels are a big spending team but their front office is composed of folks coming from smaller market clubs (GM Jerry Dipoto from Arizona and AGM Matt Klentak from Baltimore). Therefore you can understand that comparing the Yankees front office to the Angels simply based on payroll is not necessarily accurate. You getting the point?

After getting a general understanding of each team in baseball, you can start identifying the common issues that teams face each year. Maybe you find that big market teams are busting on blockbuster free-agent signings at an abnormally high rate. Why is that happening? Is there difference in performance between players who sign long term contracts with new teams in free agency versus those who sign long term extensions with their existing teams? If your preliminary research shows that there may be something interesting here then run some numbers to do a full statistical analysis comparing the historical results between free agent contracts and contract extensions.

Another example is performing an analysis on spending in the MLB draft vs spending on amateur free agents in Latin America. You can start by filtering historic comparisons based on position, age, signing bonus, and stats. Does any of the data show statistically significant correlations?

There is a lot of leeway here of course. You need to be creative to come up with a relevant problem to solve and a statistically significant answer the that problem. Even if your solution isn’t perfect, what’s important is the process you went through to find that solution and what you learned through your experience.

You will succeed with this step if you find a topic that you are really passionate about, whether it is the amateur draft, rule 5 draft, international signings, waiver wire, DFA, minor league free agents, injury history and prevention, defensive metrics, catcher defensive metrics, etc. There are hundreds of areas in baseball that are in need of far more research and analysis.

Statistical Analysis

I’ve thrown this term around a lot and I understand that it sounds scary for people who don’t have confidence in their math skills. Good thing is, you can have average math skills and still conduct valuable statistical analysis. What’s even better is that there are plenty of ways to master programming skills and analysis tools for free online.

Start by understanding what stats are important and why they are important – You should be familiar with everything on the Fangraphs Library and start reading as many Baseball Prospectus articles as possible.

Beef up your Excel skills. Knowing how to make pivot tables and how to use vlookup is cool but if you are serious, get your hands on a VBA book and learn how to program macros.

Get an understanding of what SQL is. If you are going to start anywhere, this is probably the best way to go because nearly every team in baseball employs people with SQL skills in the front office.

Test out your skills by downloading free raw statistical data from Sean Lahman. You can also purchase various data including minor league stats and college stats from The Baseball Cube.

Learn How To Program

Need to learn SQL or VBA from scratch? Start with YouTube. You will be amazed at what you can learn on YouTube.

Other places to learn programming for free: Udacity, CodeAcademy, and Udemy.

In short, the more programming you know, the better off you will be. But please, MAKE USE OF YOUR PROGRAMMING SKILLS. What I mean by that is exactly what I have stated throughout this post – find a problem on your own and solve it using your skills.

Example – Victor Wang of the Cleveland Indians

Victor Wang is a prime example of exactly what I am talking about in this blog post. Long story short, he never played baseball past Little League and now just a year after graduating from college, he is the Assistant Director of Pro Scouting for the Cleveland Indians. Listed below are some of his writings which showcase his analysis on prospects which was good enough to catch the eye of the Indians front office while Wang was just a freshman.

Prospect Evaluation

Hidden Value of Prospects

Valuing the Draft

Prospects and Imperfect Information

Get People To Know You

Send your resume and sample work to everyone. You never know who is interested and who can get you a job. This may seem daunting because you will have to send (literally) hundreds of emails out, but it is actually not that difficult. Just a little time consuming.

Each team has a specific format for the emails of their front office employees. You just need to find out the format each team uses and then you have the email address for everyone in the front office. Here are some examples for the name Matt Smith:

Using the front-office information pages on each team’s website along with a little research on google, you should be able to find out the email-address format for every team in the league.

Some teams change the format just for the GMs, Presidents, and Owners but that is fine because you really have no business sending them emails anyways. So who should you email?

I found the most success emailing people with the title Director of Baseball Operations and anyone below them. Very rarely (almost never) is the Assistant GM the right person to email. Don’t be shy to email multiple people in the same front office. I would suggest going for the Director of Baseball Operations, Director of Player Personnel, Coordinator of Baseball Operations, and any Assistants of Baseball Operations. These are usually the people who are reviewing resumes.

Don’t just email. Using snail mail can definitely be a winner. Some front offices have old school folks who will actually open up your mail and read what you have to say. It’s too easy to delete one of hundreds of emails that these folks are receiving on a daily basis. I recommend emailing at least 2-3 people in each front office and sending mail to at least two people in every front office.

Don’t Fall For The “Sport Management” Nonsense

What I mean by this is: There is never a right reason to get an undergraduate degree in sports management or even worse (dare I say) graduate degree in sports management. No degree can teach you what it is like to work for a front office, you simply just have to do it to learn how to do it. If that makes sense. The sport management degree is a waste of time and isn’t even respected by front offices these days. The only team I know that specifically targets sports management majors is the San Francisco Giants. They hire interns specifically from sport management programs in the Bay Area. Trust me though, those internships are not quality ones that you want to get.

Also, please don’t go to law school just because Theo Epstein did. If you want to add a degree or add skills to your arsenal, the best thing to do is study computer science and engineering with a minor or double major in Spanish. Every team needs statistical analysts who have love for the game, a thorough understanding of the Collective Bargaining Agreement, mastery of sabermetric statistics, and programming knowledge to manage and manipulate data. Law school or sport management degrees won’t directly help you with that.


You do not come from a professional playing background: Typically players fresh off the field are able to jump right into a player development / scouting role with a front office.

The hiring team is in the 21st century and embraces advanced statistical analysis. This is the case with almost all teams with some exceptions being Philadelphia, Seattle, and Miami (I believe). Possibly Atlanta as well.

Feel free to contact me if you have any questions. Please send me a message if you currently work in baseball and feel that I left something significant out of this post.

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On the Road

Mar 19, 12 On the Road

Apologies for not posting over the last three days. I have been on the road from Sacramento to the Bay Area to Los Angeles to Arizona, where I will be for at least one week. I will be back with the analyses tomorrow but for now, here are some quick thoughts from the Diamondbacks – Athletics game today.

  • Gerardo Parra is making a strong case to start in LF, even with the Jason Kubel signing. Parra made two spectacular diving catches today while finishing 1-3 at the plate. His named has swirled in trade talks with the Nationals (as they search for a CF) but Kevin Towers is reportedly asking for a lot in return.
  • Both starters, Jarrod Parker and Josh Collmenter had rough outings. Collmenter left too many pitches up in the zone and subsequently, gave up two home runs in three innings of work. Parker allowed just one hit but struggled with his control, walking seven in three and two-thirds innings pitched.
  • Manny Ramirez launched a ball to deep center for his second home run on the spring. I am confident he will be a stud once he comes back from his 50-game suspension. Manny showed great patience at the plate (as usual) – his swing will come along.
  • Yoenis Cespedes is definitely a physical beast. Word is that he will be starting in CF opening day as he has a much better arm than Coco Crisp who will be pushed over to LF. I worry about Cespedes’ patience at the plate – he loves to swing and takes big hacks. I would like to see him learn some patience from ManRam.

That’s it for now – look forward to being back on the analytic grind tomorrow. Keep an eye out for posts on defensive metrics and Jose Reyes’ contract – coming soon.

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Jeffrey Loria and the Marlins Offseason Splurge

Mar 13, 12 Jeffrey Loria and the Marlins Offseason Splurge

In Baseball Prospectus’ Baseball Between the Numbers, Jonah Keri considers whether former Florida Marlins owner, Wayne Huizenga is a genius. Huizenga bought the Marlins as an expansion club in1993 and later oversaw the club’s first world series championship in 1997, just five years after its expansion. The story of what unfolded after the 1997 season is a fascinating one – one that is hard to swallow for Marlins fans in South Beach.

Throughout the first four years of the Marlins existence, Huizenga ran the club with a low payroll. The 1996 season was a promising one for Florida. While the club finished just under .500, it consisted of promising young stars Edgar Renteria, Garry Sheffield, Charles Johnson, and Greg Colbrunn. The Marlins also boasted a stellar pitching staff headed by Kevin Brown and Al Leiter to compliment star close Robb Nen.

Huizenga realized the slim window of opportunity for his club and decided to splurge in the offseason following the 1996 year, spending $90MM and raising payroll by 68%. The key factor in these signings is Huizenga’s unwillingness to include no-trade clauses in contracts.

The Marlins went on to win the 1997 World Series with this epic hit by Renteria in the bottom of the 9th.

Following the World Series, Wayne Huizenga completely dismantled the club, trading all valuable assets. He understood that the team already capitalized from the World Series victory through season ticket sales, merchandise sales, media contracts, etc., and that it he would be able to capitalize even more by shrinking payroll to a minimal level.

Why do I bring this up?
Current Miami Marlins owner, Jeffrey Loria is known for implementing the same policy of not including no-trade clauses in contracts greater than one-year in length. Ok, so the Jed Hoyer and Theo Epstein don’t like no-trade clauses either. Also significant in the Marlins recent offseason spending-spree: The contracts signed by Jose Reyes, Mark Buehrle, and Heath Bell are heavily back-loaded and include bonuses that are deferred with no interest ($3MM for Bell and $4MM for Buehrle).

2012 2013 2014 2015 2016 2017 2018
Jose Reyes $10MM $10MM $16MM $22MM $22MM $22MM $22MM club/$4MM buyout
Mark Buehrle $6MM $11MM $18MM $19MM
Heath Bell $6MM $9MM $9MM


To put this in perspective, in 2014, the Marlins have $59MM guaranteed to just four players (Reyes, Buehrle, Bell, and Hanley Ramirez). This is just $1.4MM shy of the clubs largest opening day payroll in franchise history. Something doesn’t seem right… and I’m not buying the fact that Loria (the man who kept a $14.9MM team payroll in 2006 and claimed team operating losses in order to get the city of Miami to pay the majority of the Marlins new ballpark) is all of a sudden ready to turn his club into the Yankees.

It can be argued that the heavy back-loaded contracts make trading the players more difficult as they age but that may not be the case if Reyes, Buehrle, and Bell each stay close to their 2011 numbers in 2012.

What to expect? If the Marlins win the World Series next year, I would not be surprised if Reyes and/or Buehrle are moved. Sounds crazy right? But so was the epic dismantling of the 1997 Marlins.

This is actually a savvy business and baseball move by Loria (as it was for Huizenga) if he is able to pull it off. To understand why, you must understand the theory of The Success Cycle. The theory, which has been much debated, essentially states that each team resides on a certain place within the success cycle (broadly: rebuilding, building, and competing) and must act accordingly to its position in the cycle in order to reach ultimate success – a World Series Championship. This sounds fair considering that not many teams can really compete for a championship every year for a decade or more (the Braves and Yankees are two notable exceptions).

If you buy into this theory, then, as Jonah Keri claims in Baseball Between the Numbers, Wayne Huizenga is a genius and Jeffrey Loria may be following those footsteps.

After all, you may criticize the Marlins ownership, but they have brought two World Series Championships to South Beach in just 19 years of existence.

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Should the Giants Trade Matt Cain or Tim Lincecum?

Mar 09, 12 Should the Giants Trade Matt Cain or Tim Lincecum?

Matt Cain‘s contract situation has been a hot topic in Scottsdale, AZ this past week. MLB Trade Rumors highlighted the latest news on a potential Matt Cain extension earlier today. The question I beg is if the Giants brass would be better off shopping either Tim Lincecum or Cain, rather than signing both to $100+ million contracts (which is what the starting point of negotiations would be.

Lincecum just signed a two-year $40.5 million deal buying out his remaining arbitration years and is reportedly seeking a 7-8 year $175MM extension while Cain is in the last year of his three-year $27.35 million deal.

Let’s look at Cain first: Cain came out and said he will not be giving the Giants a hometown discount and many MLB executives say Cain would garner close to $150 million in the open market. Consensus is that there is no way the Giants lock-up Cain for less than $100 million (probably over 5 or 6 years).

Does Cain deserve that much? No question he has earned it. He has been a workhorse year-in-year-out posting five straight 200+ inning seasons on a career 3.69 FIP. And while he isn’t overpowering with strike outs and he definitely isn’t a groundball pitcher, Matt Cain consistently gets hitters off-balance, resulting in fly-outs. This does put him at risk to giving up home runs but Cain gave up just .37 HR/9 in 2011. Overall, Cain’s 24 career WAR makes him a 4 WAR/year player which is nothing to overlook.

The issue with giving a Giants pitcher a monster contract is that half of their starts are in one of the most pitcher-friendly stadiums in the league. This is especially important for a guy like Cain who is a fly-ball pitcher in what is by far THE toughest park to hit a home run at. Furthermore, it’s not as simple to say – well if Cain re-signs, he will continue to pitch half his games at AT&T park, so what’s the big deal? Problem is, you can’t expect his metrics to hold up throughout his career (e.g. Cain won’t always have a commanding 92+ mph fastball that overpowers hitters up in the zone). Therefore, as his career progresses, pitching in SF may not be as big as an advantage as it is currently. Cain has a career 3.12 ERA at home and 3.62 on the road – not a huge difference but still a notable one.

Lincecum is a different beast and will command a contract similar to the one of CC Sabathia. Fortunately the Giants still have two full years of control before Lincy hits the market, which makes him a much greater commodity than Cain. Lincy’s numbers are phenomenal – career 27.9 WAR, sub-3 FIP, and 9.87 K/9. The biggest question on him is whether his freakishness will eventually come back to haunt him and his shoulder. He has regressed over the last two years and may be showing his true future as a 5-WAR starter (still all-star quality).

I see reasonable arguments for signing either Lincecum or Cain but locking up both pitchers to $100+ million 6+ year contracts is not only a great risk but a constraint on the payroll. Also, players are far more valuable before they hit free-agency when they are often overpaid and locked into contract far past their prime.

I have compiled a list of the largest contracts given to pitchers and have compared their WAR from the three seasons prior to their contract being signed to their WAR after the contract was signed. Note: the ages listed are not necessarily from the date of the contract being signed, but the age of the player during the first season of the contract.


Player Age  Years Amount Date WAR Before WAR After Diff
CC Sabathia 28-34 7 161MM Dec-08 6.73 6.23 -0.50
Johan Santana 29-34 6 137.5MM Feb-08 6.50 2.73 -3.78
Barry Zito 29-35 7 126MM Dec-06 2.77 1.32 -1.45
Mike Hampton 28-35 8 121MM Dec-00 3.97 1.34 -2.63
Kevin Brown 33-39 7 105MM Dec-98 7.50 3.74 -3.76
Cliff Lee 32-36 5 120MM Dec-10 7.00 6.70 -0.30
Carlos Zambrano 26-30 5 91.5MM Aug-07 3.73 2.43 -1.31
Jered Weaver 29-33 5 85MM Aug-11 5.07 N/A N/A
John Lackey 31-35 5 82.5MM Dec-09 3.80 2.80 -1.00
A.J. Burnett 32-36 5 82.5MM Dec-08 3.77 2.13 -1.63
Justin Verlander 27-31 5 80MM Feb-10 5.27 6.70 1.43
Felix Hernandez 24-29 5 78MM Jan-10 4.87 3.90 -0.97
C.J. Wilson 31-35 5 77.5MM Dec-11 4.17 N/A N/A
Roy Oswalt 29-33 5 73MM Aug-06 6.07 3.66 -2.41
Josh Beckett 30-33 4 68MM Apr-10 5.70 2.90 -2.80
John Danks 27-31 5 65MM Dec-11 3.47 N/A N/A
Chris Carpenter 32-36 5 63.5MM Dec-06 5.07 2.98 -2.09
Derek Lowe 35-39 4 60MM Jan-09 4.27 2.6 -1.67
Roy Halladay 33-36 3 60MM Dec-09 6.83 7.4 0.57
Tim Lincecum 27- 5.77
Matt Cain 27- 4.07

This data shows some very interesting stories. 1) Only 4 of the 19 pitchers listed have actually lived up to their contract so far. The best contract on here is probably CC surprisingly, along with Verlander and Halladay 2) The average WAR differential after a contract is signed = -1.52/year 3) 4/6 $100MM contracts have been atrocious and only one can be confirmed as a success (CC) 4) 4/5 contracts of 6 years in length or more have been atrocious (again the one exception is CC)

This speaks loudly. It shows that pitchers are far more valuable prior to hitting free agency. More importantly we can see that players are often over-rated and overpaid for their historical success rather than being paid for their future potential.

I looked at the players WAR from the previous three seasons before signing a large deal. This is because I feel the most recent three years are most valuable to projecting future success. If you look at Barry Zito, his WAR was just 2.77/year in the three seasons prior to becoming the highest paid pitcher in the MLB (at the time). Obviously the Giants overvalued Zito’s Cy Young year in 2002.

Now let’s bring this back to Lincy and Cain. Lincy will get a monstrous contract but that is mostly because of his back-to-back Cy Young years in which he posted WAR of 7.5 and 8.0. But is he a 7 WAR/year pitcher? It doesn’t look like it after posting back-to-back sub-5 WAR seasons – also having his velocity dip among other factors. Still, he is a consistent all-star type of pitcher.

The Giants are in a great situation with Lincecum because he decided to go the year-by-year / short-term route in arbitration and therefore is locked up at a reasonable $20.25MM per year during his “prime” ages of 27 and 28. IF he stays productive at his current pace, Lincy should get a contract somewhere in the range of CC’s 7-year $161MM – keeping him under contract until he is 35 years old.

Cain on the other hand is coming off his career best 5.2 WAR season and is actually younger than Lincy by four months, however; he hits free agency a year sooner at the age of 28. Cain will receive a far more reasonable offer – in the $100MM-125MM range.

What should the Giants do? Given the historical data on large contracts for pitchers post 28/29 years old, it is far too risky for the Giants to lock up BOTH Cain and Lincecum. I would sign Cain to a 5-6 year deal (ideally 5 years with a 6th year option) and then trade Lincecum after this season. Sounds crazy right? Well actually it sounds more like an intelligent baseball and business move to me. The reason is: More likely than not, the Giants have milked all the Cy Youngs out of Tim Lincecum and it is not worth making him one of the highest paid pitchers of all time based off of two outstanding seasons, (in what would be) 4-5 years prior to his new contract. Furthermore Lincy has started to show that he may actually be a 4-5 WAR/year pitcher rather than a 6-7 WAR/year. Far too risky. Instead the Giants can sell high and guarantee themselves either a top ML-ready prospect and then spend the Lincy money on building the club’s offense and reinvesting in the draft.

The Giants can also afford to trade Lincy because of the rapid growth of Madison Bumgarner (who will be relatively cost-controlled throughout arbitration).

Finally, considering that the Giants play in a pitcher-friendly park, it is easier to bring aboard pitchers who can succeed in SF without having to pay such a premium via free agency.

Signing Cain and trading Lincecum may be the best move for the Giants but I am almost sure that Sabean would never do such a thing because signing Cain and Lincecum both to long-term deals will bring job security for at least a couple more years.

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New Collective Bargaining Agreement

Here is a basic overview of the major changes in the new Collective Bargaining Agreement and a brief analysis of how the changes will affect front office activity.

Super-Two Status

Beginning in 2012, more players than ever will be able to qualify as a Super-Two player which enables them to reach arbitration earlier. Of players with between 2 and 2.171 years of service time, the top 22% (in respect to service time) will be eligible for arbitration as Super-Two players – this represents a 37.5% increase from the previous 16% figure which often times resulted in a cutoff around 2.130-2.135 years of service time.

How does this affect my team? From now on, for clubs to avoid players with super-two status, they will have to wait even longer than the usual June 5th time frame to bring prospects to the major leagues. This further complicates the dilemma of competitive clubs keeping highly-touted prospects in the minors even though they are big-league ready.

A prime example of an early call-up resulting in millions of dollars of extra expense  is Tim Lincecum’s situation in 2007. If Lincy was brought up just one week later, he would not have qualified as a super-two and thus would have his contract be under team control for an additional year rather than him hitting arbitration early as a super-two. Lincy received $9M in his first year of arbitration – he would have earned less than $1M if he was not a super-two.

Cap on draft spending

This is arguably the most debilitating new rule for small-to-mid market clubs. Teams will now be capped on the amount they can spend on the amateur draft. Each team will be allotted a draft pool for the first 10 rounds. The pools will be determined by the slot value of the club’s draft picks: i.e. teams drafting at the top will have a larger pool than teams with later picks.

Last year 20 teams went over slot recommendations to sign draft picks. There is a reason this happens – small-market teams know they can not acquire top talent in free-agency because they will be out bid by the Yankees, Red Sox, Angels, Dodgers, etc. So instead of spending on free-agents, small market clubs pour money into the draft where they are able to get premium talent at a low price – a more efficient way of spending money. This will no longer be possible, without facing severe penalties (listed below)

Clubs that exceed their Signing Bonus Pools will be subject to penalties as follows:
Excess of Pool Penalty (Tax on Overage/Draft Picks)
• 0-5% (75% tax on overage)
• 5-10% (75% tax on overage and loss of 1st round pick)
• 10-15% (100% tax on overage and loss of 1st and 2nd round picks)
• 15%+ (100% tax on overage and loss of 1st round picks in next two drafts)

Last year the Pirates spent a record $17M on the draft to snag both Gerrit Cole and Josh Bell, convincing the latter to bypass college. They won’t be able to that again.

This system can still be exploited, but by rich teams that consistently win and draft towards the end of the first round. Example: The Yankees can notify agents that they will be going over slot on the draft and thus snag top talent while being able to afford the tax and the loss of first round picks (that probably will be at the end of the first round anyways). The A’s or the Pirates could never afford such maneuver.

Cap on international free agent spending

Capping international bonuses will ultimately have a similar affect on clubs as the cap on draft spending. Teams will now be limited to about $2.9M in bonus money per year for international signings. Clubs with worse records from the previous season will be allotted a larger pool.

This is the first step of the MLB ultimately heading towards an international draft but as of now it again severely limits small-market teams that spend internationally to compensate for not being able to compete in the free agent market.

Increase to major league minimum salary

The major league minimum will increase progressively from $414,000 in 2011 to: $480,000 in 2012; $490,000 in 2013; and $500,000 in to 2014.

Elimination of Type A and B status for draft-pick compensation

Right off the bat, this change hurts some of the more strategic front offices in the game. Here is a little background on how the Type A and B compensation system worked in the past. Players would be ranked by Elias based upon recent-years stats and the top free agents in each position would be Type A and the next tier would be Type B. If a team were to lose a Type A player during free agency, the club would receive the signing team’s protected 1st round pick plus a supplemental draft pick. For type B players, clubs would receive the signing team’s 2nd round pick as compensation. This was notoriously taken advantage of by GMs such as Theo Epstein who would trade for projected Type A and B players in order to rack up compensation picks.

This will no longer be possible. New rules eliminate the Elias ranking system and instead, draft pick compensation for free agents will only be available if the player played the entire season for the club, the club offers the player a one-year guaranteed contract with a salary equal to the average salary of the top 125-paid players from the previous season, and the player rejects the offer to sign with another team. To put this in perspective, the average salary of the top 125 paid players last season was about $12 million. This significantly reduces draft pick compensation only to teams losing premium talent and thus eliminates the ability of teams to rack up compensation draft picks.

Competitive balance lottery

The ten teams in the smallest markets and the ten teams with the lowest revenue will be eligible to take part in a draft lottery for the six picks following the completion of the first round of the MLB Amateur Draft. The chances of winning the lottery will be determined by the clubs’ winning percentage in the previous season. The eligible clubs not receiving the first six lottery picks, as well as other clubs that receive revenue share money, will be eligible for another six picks immediately following the second round.

The intriguing part to this is that the competitive balance lottery picks can be traded but cannot be sold for cash. This is the first time that MLB teams will be allowed to trade draft picks – how will the picks be valued? I’ll check in on that later.

Additional Playoff Team

Beginning in 2012 an additional wild card team will make the playoffs in each league. The two wild-card teams in each league will face-off in a one-game playoff.

With the addition of a playoff team in each league, the mid-season trade market will include more buyers and less sellers. Expect to see the value of premier players increase given the fact of increased demand.

For example: On the day of the trade deadline (7/31/2011) last season, the Tampa Bay Rays and Toronto Blue Jays were all but out of the playoff race being 8.5 and 10 games behind the Yankees for the wild card spot respectively. If the new rules were in place, the Rays would have only been 2 games back from the Angels for the second wild card spot while Toronto would have been just 3.5 games out.

This should also affect signings for players at the end of their careers or those with injury concerns. Small-market teams have more of an incentive to take a chance on “washed-up” players with a one-year deal. Here is the intuition: if the player does well and you are not in contention by mid-season, the club will be able to deal him off to contenders at a premium price given the increased demand from added playoff spots. Pittsburgh and Cleveland are two teams that already embrace this strategy – i.e. Erik Bedard and a slew of minor league contracts to veterans by Cleveland.

Click here for the MLB’s press release regarding the changes in the new five-year CBA. 

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