MLB Teams Expect Decision On Shortened 2020 Draft Soon

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When Major League Baseball and the Major League Baseball Players Association agreed on a deal to reduce the 2020 draft to five or 10 rounds and to place the date of the draft between June 10 and July 20, MLB told teams that they could expect to hear official word on the draft and most of its details a month before draft day.

MLB front office officials and agents are consistently saying that they expect the draft to begin on June 10, which also leads most everyone to expect to hear official word either Friday (May 8) or early next week on the official draft date, and more importantly, its number of rounds.

Nothing is finalized yet, as no official word has been relayed, but there is plenty of expectation in scouting circles and among GMs that the draft will be limited to five rounds. Such a decision will be greeted with near universal unpopularity in scouting departments and front offices, which, almost to a person prefer a 10-round draft.

But if owners want cost-containment, they have final say. And in a sport where every lost day of the season costs millions of dollars, reducing costs has become paramount in many MLB decisions.

MLB recently sent a proposal to the Major League Baseball Players Association that would have halved the slot allotments for sixth to 10th round picks and limited teams to spending $20,000 on only five nondrafted free agents. All other nondrafted free agents would have been limited to a $5,000 bonus. The MLBPA turned down the offer, leaving MLB with the choice of either adopting a 10-round draft with normal bonus slots or cutting the draft to five rounds.

A five-round draft would have 160 picks, which would be an 87-percent reduction in the number of picks from the 2019 draft, where 1,217 players were selected. The draft was reduced from 50 rounds to 40 rounds in 2012. The draft had been limited to 50 rounds in 1998. Before that, teams had an unlimited number of picks–the Yankees selected for 100 rounds in 1996.

A five-round draft would save teams $29.58 million in bonuses when compared to a 10-round draft (assuming every team spent the entirety of their bonus pool). Those savings will not really accrue until 2021 and 2022, as the new draft rules include universal bonus deferments for all but $100,000 of signing bonuses for all draftees. The maximum a team would spend in 2020 for taking the draft from six to 10 rounds would be $500,000.

The remainder of all 2020 draft signing bonuses will be paid in two equal installments, half in 2021 and half in 2022. The agreement between MLB and the MLBPA means this is non-negotiable and cannot be circumvented.

Those deferments mean that MLB teams have garnered more in immediate 2020 draft bonus savings than they are currently committed to paying MLB players in 2020. As part of the late-March deal between the MLBPA and MLB, MLB is paying MLB players $170 million for April and May. If no games are played this year, that is the totality of MLB player salaries for 2020. The draft deferments will save MLB teams $219.9 million in spending in 2020 if every team spends their full bonus allotment in a five-round draft. The teams will have to pay those remainders of the signing bonuses in 2021 and 2022.

Front office officials expect that a five round draft will be even more college heavy than normal. It will mean that a significant number of high school players who were expected to sign will now head to college. Also a significant number of college players expected to sign will now return to school as well.

And it will likely affect more than just the players who would have traditionally been picked from the sixth round on. The structure of a five round draft will likely mean that many fifth round picks will end up having to decide if they will sign for well below slot. Traditionally, the difference between a 10th-round slot ($142,500 at the end of the 10th round) and what a 11th-round or later pick can receive without counting in the bonus pool ($125,000) was modest enough that teams had only modest bargaining pressure.

In a five-round draft, the gap from the bonus slot for the last pick of the draft ($324,100) and the strict $20,000 limit for any nondrafted player is cavernous. Teams generally have little separation in their evaluations between the players they take in the fourth, fifth and sixth rounds. With a massive surplus of draftable players (who normally would be picked in the fifth to seventh round), many teams will likely check in with five or 10 potential draft targets for their final pick to find who will take a well under slot offers. For players hoping to be picked, the economic risk of saying no to a well under slot deal will be significant, as a $150,000-200,000 bonus will still be dramatically more than any player can receive if they go undrafted.

While determining the number of rounds is the pressing issue to ensure the draft date can be officially set, another issue that MLB will have to deal with before the draft is establishing guidelines on bonus circumvention—especially for nondrafted free agents.

That very low limit on nondrafted players bonuses (as well as the massive glut of talented undrafted players) will create incentives for teams to try to figure out ways to find the gray areas in the rules. The $20,000 limit is far below the $125,000 teams could spend on any late-round (11th round and on) or nondrafted players in recent drafts without dipping into their bonus pool. And this year, no savings from drafted players can be shifted to spending on nondrafted players.

 

In a normal year, teams have shown plenty of willingness to spend beyond $20,000 on players with any level of promise. Last year, the Phillies spent above the new $20,000 limit on 22 late-round draftees and nondrafted free agents. The Dodgers and Braves each did so 19 times.

Even with 1,217 players being drafted last year, there were still 13 nondrafted free agents who signed for a bonus exceeding $20,000. This year’s draft class would be 150 players if it’s held to five rounds, which will mean significant numbers of draftable seniors will not be drafted.

If a team offered to boost an individual nondrafted player’s minor league salary as an inducement to sign, that would almost assuredly be seen as a circumvention of bonus rules—additional promises to any individual player have long been viewed as attempts to illegally circumvent draft rules.

But if a team decided to boost the salaries of its minor leaguers across the board (something the Blue Jays did in 2019 and the Giants and Cubs had announced plans to do for 2020) it is much harder to argue that a team is circumventing bonus rules. MLB has stated that teams are allowed to raise salaries for minor leaguers beyond the minimum rates it has established. In the Giants’ case, they announced housing stipends as part of their salary increases.

MLB has already announced raises for minor leaguers in 2021. Players in rookie ball will go from making $290 a week to $400 a week. Class A players will go from making $290 a week to $500 a week.

For a team still willing to spend, modest efforts could bring big benefits. Adding a $750 a month housing stipend for all of its full-season minor leaguers for 2021 and beyond, for example, would cost MLB teams roughly $450,000-500,000 a year (a little more than the amount teams usually spend to sign their sixth- and seventh-round picks in a normal draft), but could be the differentiator that would allow a team to have its pick of the best nondrafted free agents.

And if that $500,000 landed one additional Austin Pruitt, Austin Wynns, Daniel Ponce de Leon, Steve Wilkerson, Kendall Graveman or Dylan Moore (all of whom signed for $25,000 or less), it would have paid for itself. If the extra spending landed a Joey Wendle, Josh James, Jacob Stallings, Ramon Laureano or Tony Gonsolin (all of whom also signed for $25,000 or less), then it would prove to be an investment that garnered much more for a team in long-term returns than it cost on the front end.