The 2012 MLB player draft will mark the beginning of a new era in the business of professional sports.
Prior to the new rules on compensation for drafted players, player agents manipulated the system to inflate bonuses each year. This was easy to do, baseball doesn't really have a meaningful salary cap, and players have the leverage of going to college, returning to college or playing in an independent league until the next draft.
What the new rules agreed to in the CBA have done is give teams the backbone to stand up to the demands of the player agent. Mark Appel and his agent/advisor tried to ignore the new system and demand a salary similar to what players got in previous years. Every team knew this was going to happen, which is part of the reason why a top-pick caliber pitcher slid down to the eighth pick. Appel did not accept the offer Pittsburgh made and has chosen to go back to college for his senior season.
Baseball America has posted a study on the spending in the 2012 draft .2012 MLB Draft
Teams still spent money as the new rules allowed, but they approached the draft differently. Leverage is shifting from players to teams. Teams are making financial decisions that are more thought out - what you offer one drafted player affects what you offer the other drafted players.
Good for baseball. Good for sports.
Of course I can't leave it there. What's the natural progression, the lesson going forward?
The key point to the new draft rules is that the player's union negotiated and accepted this idea of a pool of money for each team based on their draft slots.
That is the agent of change.
If the amount of money each team will spend can be agreed upon prior to the draft, why should a team care how the money is divided among the players? Why should a team have to spend time and resources negotiating with each draft pick?
If you can eliminate negotiations with draft picks, then why not develop a system where you don't have to negotiate with players on your 40-man roster, arbitration eligible players and free agents.
In the next CBA, negotiate a 40-man roster salary that each team pays - same amount regardless of market size. The player's union and players would then develop an internal system that divides the money among the players as the players see fit.
In the off-season, the player's union would use the system to assign each player a salary number for the next season. Teams would then adjust their 40-man roster to be under the salary cap by releasing some players and adding new players to build a roster they believe can win (because you play to win the game.)
Teams get cost certainty - they pay a fixed amount each year - and a level playing field - there would be salary room for only a couple of stars, spreading the best players roughly equally across the league.
The CBA would state something like the following for 2013:
40-man roster salary: $100 million
Minor League salary: $20 million
Draft bonus: approximately $7 million (based on the slotting system)
Each team has to pay that amount into the player's union salary pool. The player's union internal system assigns a 2013 salary to each of the 1,200+ pro players and 5,000+ minor leaguers. The salary figures are then released on December 1st. Teams adjust their 40-man roster by releasing some players and acquiring some players throughout December. On January 1st, teams freeze their roster at a salary amount under the $100 million cap.
Since teams have already paid the $100 million amount, they would want to acquire the best group of 40 players they can up to that amount. There would be no reason or logic in having a $60 million group of players, because you paid for a $100 million group.
Teams can still trade, release and sign players as they do today. The only difference is having to stay under the salary cap. In the case of an injured player, a team can release and replace the player if they want. The injured player would continue to receive his full salary through the union.
There are pros and cons for players in this new system.
They receive a salary that is adjusted each year based on performance and relevant factors as judged by their peers. They would be guaranteed a minimum salary even when they are not on an active roster, or are injured.
When a team wants to acquire a player, the team and player would discuss the offer and opportunity. If the situation works for both sides, they would agree on a number of years for the contract. The team would be able to trade and/or release the player at any time, and the player could exercise a buyout clause in the off-season for a fixed percent of his next year's salary.
There would be a period of time required for teams to adjust to this system. Having cost certainty is a good thing, but being able to pay that amount is another thing.
Currently there are nine teams with a payroll over the $100 million salary figure. The 21 teams with lower salaries might not generate enough revenue to pay their share, so revenue sharing will be essential. Over time, paying player salaries will transition to a system where salary becomes a league expense instead of a team expense.
Table 1. 2012 Team Salaries (source: ESPN.COM)
The salary cap will flatten player salaries over time for two reasons - peers deciding fair salary and teams trying to build a competitive roster.
The first factor is that players, as a group, would want a fair distribution of money. While top athletes should be paid the most, a salary decided by peers would be far less than what some will make in 2012.
- CC Sabathia, $24 million, about 240 innings, $100,000 per inning pitched.
- Alex Rodriguez, $30 million, about 160 games, $187,500 per game, $20,800 per inning played.
Would the 1,200+ other players agree that they should be paid that amount of money?
The second factor that would flatten salaries is the need for a team to acquire a group of 40 players to fit under the salary cap. A team would probably not have both CC and ARod with their 2012 salary numbers ($54 million for two players), the remaining 38 players would average $1.2 million.
Fans want a level playing field, teams want cost certainty, players want a fair salary. This system delivers all three.