Cuban 19-year-old Yoan Moncada completed a celebrated courtship last week when he signed with the Boston Red Sox, receiving $31.5 million in up-front bonus money. This bonus easily marks the largest bonus in professional baseball history, and it has sparked debate over amateur signing reform in MLB. With Rob Manfred taking over as commissioner, the responsibility of creating a more equitable system may be the most underappreciated need of his regime, as it speaks to baseball and ethical issues around the globe.
Baseball has three very distinct systems for acquiring players that are first-time eligible for major league contracts. First is the Rule 4 draft, also known as the amateur draft or first-year player draft. This is for American and Canadian amateurs, typically 18-22 years old, and goes by round in reverse order of regular season standings from the year before. There have been a myriad of wrinkles added to the draft, which can all be read about here. A second method is for players who have signed professional contracts in foreign leagues, such as Jose Abreu (Cuba), Yu Darvish (Japan) and Jung-ho Kang (Korea), a posting fee may be required to negotiate a buyout of the player’s other professional contract. Posting fees are blind-auction, all up-front to the current team that holds the player’s contract. When the Rangers posted $51.7 million for Darvish prior to the 2012 season, baseball created a hard cap for these posting fees to attempt to maintain competitive balance in the signing of these players.
Yu Darvish commanded so much on the open market in 2012 that MLB changed the way they do business surrounding foreign professionals.
The last method is for international amateurs, primarily in Latin America and the Carribean. Players who turn 16 on or before June 1st of the calendar year are eligible for bonus offers from MLB teams to sign minor league contracts. Teams have a soft cap of $3 million for signing bonuses of these players, and every dollar over $3 million gets taxed at 100%. In addition to the tax, penalties for following years are enforced, and get more stringent the more a team exceeds the cap.
Since Moncada still had his amateur status, he was eligible for the international amateur free agent signing policies. The Red Sox did not need to pay a posting fee, but could only be signed by teams using their $3 million for international draft pool money. With Moncada receiving $31.5 million, the cost to the Red Sox with tax was $63 million, all up front.
Let’s put this number into perspective: Only 23 free agents have signed contracts with total values greater than this figure of the entirety of the past 5 seasons. The second highest bonus to an amateur was earlier this offseason, when 17-year-old Cuban SP Yoan Lopez received $8.25 million from the Diamondbacks (costing the team $13.5 million). Stephen Strasburg received $7.5 million in his bonus in 2009, and the bonus coupled with his $15.1 million deal for four years marks the most lucrative amateur signing for an American citizen. (Since 2009, the MLB has put in place even more stringent bonus pools for the North American amateur draft). Moncada’s figure is the largest number ever shelled out for an amateur player, and may stay that way if rule changes come into play. It is also the largest cost paid out for any player in one calendar year.
Strasburg was the last of a draft era – where signing bonuses were larger than what they are today.
This deal represents a perfect storm of issues all coming to a head, some of which are not baseball related. First, Moncada is a tremendous talent, a potential all-star prospect, and is 19 years old. He is by far the oldest of the amateur signees from the Caribbean who have made multi-million bonuses. This means he is more physically developed, and it is easier to see his awesome tools. He is more of a sure thing. So, why is he so much older? In case you haven’t heard, foreign policy between the US and Cuba has drastically changed in the past months. With recent changes to those politics, it is no longer a defection and abandonment of your culture to pursue the MLB dream (some defection stories can be incredible). He hit the market at the perfect age for money, where he has shown top-prospect promise, all while still being younger than many U.S. prospects.
For high success, high revenue teams, it can be very difficult to acquire good young talent. You draft late in the first round, missing out on can’t miss prospects through the draft. Baseball’s revenue sharing and luxury tax makes every dollar spent on MLB talent even more costly for teams like the Dodgers and Yankees. Teams are trying to find ways to get young price controlled players. The Dodgers did it by paying Dan Haren’s contract for the Marlins. The Yankees seemed to realize this, and signed every amateur they could this offseason. The Red Sox don’t need Moncada, in a personnel sense: they have all their infield locked up for several years. They are just acquiring young talent in a cost effective way, like any good organization should do. The Yankees did something similar this offseason.
At first glance, this move seems anything but cost effective. With all the tax and penalties, how can you justify $63 million to a minor league shortstop? A glaring truth for the big-spenders in MLB is the lack of fear of the penalties. A new collective bargaining agreement (CBA) is coming up in December of 2016. Sure, the Sox can’t spend on international players for 2 seasons. Within 1 year, the system probably will be overhauled anyway. Changes could come to the format as early as next year, rendering punishments for over-spenders moot.
The big debate comes with what should be changed to the system. Most people agree that spending 4 times more on Moncada is not equitable, but there is no easy or just fix. The most popular choice in the MLB front office – met with severe resistance from MLB’s player’s association – is an international amateur draft, which Manfred wants to implement as soon as 2016. There are huge concerns in the transfer here. What to do about all the Cuban-born players who are older, wanting a shot at the majors? Or, what about the next Yu Darvish? Exceptions will still need to be made for foreign-born, already-professional players. Where do those exceptions end?
Another concern with the international draft is having two separate amateur drafts. This would heavily reward poor teams, far past a level of reasonable competitive balance. The worst team would hypothetically get first pick at two different elite talent pools. Some then vote for one universal player draft, which has many of its own concerns. The age difference between 16 (minimum age in international pool) and 18 (minimum in American pool) creates immense physical discrepancies – far greater than the difference between high school and college players- and some questionable ethics regarding foreign- born talent. Do you change the age to a universal 18? And it is easy to forecast modern economic imperialism when it comes to this player draft; if the CBA is not explicit, this system could result in teams trying to get cheap foreign born talent, because they know they could lure a impoverished 16-year from Latin America far easier with less bonus money. The ethics of the universal player draft could get very questionable in a matter of a few years.
Ultimately, the largest concern is how inequitable the draft pool money is in comparison to the value of the drafted players. As Moncada showed, amateurs on the free market are worth way more than the draft bonus slot would indicate. The #1 pick in the US would make tons more if he were a free agent. So, that brings us to abolishing the draft altogether, and adapting a system similar to European soccer leagues. That has the possibility of killing competitive balance, practically ensuring higher revenue teams get all the best young talent.
To ameliorate this, Jeff Cameron of Fangraphs proposes an inverse cap on player spending, with the teams that spend more at the big league level having less to spend at the amateur level. While I love this principle, in actuality it would run into the problem of bad contracts: the Phillies would never be able to get out of their current hole, because of the terrible contracts they have signed. It would be a revolving door of aging players getting paid too much, since you would never be able to spend on young talent. In addition, drafts seem to be an essential part of the American sports experience, and resistance to a pseudo-open market would be severe.
Lastly, there is an idea of making the minor leagues independent, but still heavily subsidized by MLB. If we gave a couple years for player development, say until 20 years old or so, the good prospects would float to the top more reliably, and then they could hit an open market (or be drafted), making the bonus money go to the more deserving player. This is similar to the hockey/NHL minor league system. This runs into the competitive balance issue, as well as getting into trouble with young players who advance through the minors quickly, such as Bryce Harper.
Moncada – along with his 6’1″ frame, monster athletic ability and potent switch-hitting bat – may forever change the way business is done in Latin American baseball.
Ultimately, this issue needs to be about paying the players fair market value, while keeping competitive balance as a priority. I don’t think the universal first year draft is necessarily a bad thing, I am just concerned that the bonus pools will not be expanded enough to represent market price for players. A drafted player has so much less bargaining power than a player on the open market; MLB knows this, and wants to keep the cost of these players low for business. If we can set a priority of higher bonuses for drafted players, and be quick to adapt some of the nuances of the draft, a more equitable draft can maintain balance in the game, all while supporting a global economy, rather than colonizing it.