New Deal Saves 2020 MLB Draft, But Hurts Incoming Talent

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Update: The story has been updated to reflect that there is disagreement about whether the current agreement between MLB and the MLBPA allowing the international signing period to as late as January would alter the contract date (and therefore eligibility date) for future Rule 5 and 40-man roster protection purposes.

Facing cash flow issues because of the delayed 2020 season, Major League Baseball entered its negotiations with the Major League Baseball Players Association looking for ways to cut its spending this season. Facing the uncertainty of potentially long lawsuits to fight for service time and MLB players’ salaries if a 2020 season was not played, the MLBPA was looking to ensure service time and some portion of MLB salaries were guaranteed for 2020.

Both MLB and the MLBPA got a lot of what they wanted in a new deal that is expected to be ratified today. The MLBPA received service-time guarantees for MLB players, even if the 2020 season is canceled. MLB dramatically cut the amount of money it has to spend in 2020 on amateur talent acquisition.

That agreement came at a significant cost to MLB draftees, who in many cases will find the door to playing pro baseball closed in 2020 unless they are willing to accept signing bonuses that are well below market value. The deal also potentially pushes back the date of the 2020-2021 and 2021-2022 international signing periods by six months apiece. MLB has the flexibility to move back the start dates of those signing periods for each of those years to as late as Jan. 15.

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Under the terms of the deal hammered out between MLB and the MLBPA, the 2020 draft will be cut to no fewer than five rounds (MLB can expand it if it so chooses and several scouting departments hold out hope that it could be expanded to 10 rounds). The draft will be held as early as the current June 10 start date and as late as July 20. The dates for both periods are fluid because of the evolving novel coronavirus situation. If the international signing period is pushed back, the current signing period, set to expire on June 15, will also be extended, but no rising 16-year-olds will be eligible to sign until the next period begins.

The draft’s signing deadline will be Aug. 1 at the latest, though it could move up based on the draft date. The expectation is that MLB will set a draft date roughly one month before the draft takes place to give teams time to prepare. While no details have been formalized, it is expected that the current draft date will be used to set the cutoff date for draft-eligible 21-year-olds even if the draft date itself is pushed back.

For both the 2020 and 2021 drafts, there are provisions for voluntary showcases before the draft (dependent on prevailing conditions around the country) to attempt to help MLB teams see players whose seasons have been cut short by the coronavirus.

A reduction to five rounds would be a dramatic change for what has always been major U.S. sports’ largest draft. For nearly four decades the MLB draft ran until the last team decided to stop selecting. In 1996, the Yankees picked for 100 rounds, setting the all-time record that will likely never be broken. The draft was cut to 50 rounds in 1998, then slashed to 40 rounds in 2012.

Cutting the draft to five rounds would be reducing the draft in one year by 86 percent. Last year there were 167 players taken in the top five rounds. There were 1,217 players drafted overall and 960 players who signed.

Potentially even more important, teams will be limited to spending no more than $20,000 to sign any undrafted player. Previously teams could spend up to $125,000 on any late-round pick or undrafted player without reaching into their bonus pool. Such a provision ensures cost containment for owners at the expense of limiting opportunities for prospective pro players. Of the 960 players who signed last year, 680 signed for more than $20,000.

And for the next two years, teams will have no flexibility when it comes to spending on nondrafted free agents. In past years, teams could use money left over from their bonus pool allotment to exceed the $125,000 limit for a player who went undrafted. Most famously, the Reds spent $700,000 to sign Nevada outfielder TJ Friedl, who was undrafted and then impressed scouts while playing for Team USA. The Reds could do so because they had leftover money they were allowed to spend as part of their total bonus pool.

For the next two years, draft spending will be “use it or lose it.” It can only be spent on players who are drafted. Anyone undrafted will be limited to a maximum $20,000 bonus.

Such a decision will make a major impact. Some teams have aggressively spent in later rounds, while other teams are much more conservative in spending later in the draft. Last year, 14 teams spent more than $1 million after the 15th round. Four teams spent less than $700,000. The Braves were the most aggressive, spending $2.83 million after the 15th round. The Dodgers spent $2.28 million, including five undrafted free agent signings, three of whom signed for $100,000 or more. Others teams were less aggressive. The Cubs spent $672,000 after the 15th round, while the Athletics spent just $345,000—the lowest of any team.

This will likely force a significant number of high school prospects to go to college. Some will opt to head to junior colleges to re-enter next year’s draft, while others will keep to their NCAA Division I commitments to enter the 2023 draft (and in some cases 2022 if they are old enough to qualify). But those incoming freshmen will face crowded rosters. Many draftable juniors will also likely be left out of the draft in this arrangement. This agreement will make the NCAA’s decision whether to extend eligibility even more important.

The NCAA has yet to decide whether it will extend an extra year of eligibility for all D-I spring-sport athletes, just seniors or none at all. If the NCAA decides to extend eligibility for no D-I spring-sport athletes or only seniors, it would leave undrafted juniors with a pair of poor choices. In a normal year, a college junior picked between the sixth and 15th rounds could expect to normally sign for between $125,000 and $250,000.

Assuming the draft is five rounds In 2020, if a college junior goes undrafted, he can either sign for a maximum of $20,000 or return to school, knowing his negotiating leverage will be limited the following year as a senior sign. Depending on the NCAA’s decision on eligibility, college juniors would also have to risk returning and competing for bonuses next year with a much larger pool of senior players on top of competing for playing time with an extremely talented incoming freshman class.

Bonus slots will be identical to what they were in 2019 and will remain fixed at that amount in 2021 as well. Previously, they were set to rise by 3 percent.

The negotiations between MLB and the MLBPA began with some contingent of MLB owners pushing for the flexibility to push the draft back to 2021. While they did not get that, they did get significantly reduced draft spending ($61 million was spent on draft signing bonuses after the fifth round last year) and deferral of draft bonuses. Under the agreement, draftees will receive up to $100,000 of their signing bonus within 30 days of their signed contract. Then 50 percent of the remaining bonus will be paid on July 1, 2021, and the other 50 percent of the remainder on July 1, 2022. Those timetables for bonus payments are fixed and are not subject to negotiation.

The 2021 draft will be a minimum of 20 rounds. If the 2020 MLB season has fewer than 81 games, the draft order for the 2021 draft can be determined by the commissioner’s office with consultation with the MLBPA. Competitive balance picks after the first and second rounds of the 2021 draft cannot be traded, which is a change from the current rules.

The changes to the international amateur market are also somewhat up in the air. MLB has the flexibility to move the start of the signing period to any point from its current July 2 opening to as far back as Jan. 15, 2021. Similarly, MLB has flexibility to move the following signing period’s start date and end date as well. In the case of international signees, their bonus payment timetable remains as it has been in past years, without the set deferment dates as have been set for the draft.

Perhaps just as important, MLB teams will not be allowed to trade bonus pool allotments in either of the next two international signing periods. In past years, teams could acquire up to 50 percent on top of their pool allotment through trades with other teams. That could create headaches for some teams who were planning on exceeding their pool allotment and will likely reduce overall spending to some modest extent, since teams who decide not to spend all of their international bonus pool cannot trade that money to other teams.

If the international signing period is pushed back, it is not yet clear whether player signings will still be treated as if they occurred during the 2020 season, which will be important for Rule 5 draft exemption in future years.

The agreement between MLB and the MLBPA does not cover the myriad decisions that still have to be made in relation to compensation and other issues for minor league players who are not on the 40-man rosters, because those players are not represented by the MLBPA.

MLB will unilaterally decide compensation for them during the soon-to-be suspended minor league season (which was slated to begin on April 9). MLB will also determine whether players will receive credit for a year in 2020 if no games are played, which is important to determining minor league players’ salaries in future years and eligibility for minor league free agency.