MLB’s $440 Million Figure For Amateur Spending Won’t Be Spent This Year

Image credit: (Photo by Tom DiPace)

Editor’s Note (5/20): This story has been updated to include MLB’s response about how it got to its $440 million estimate. Additional details on bonus deferral plans have also been added.

Last weekend, the Associated Press reported Major League Baseball told the MLB Players Association the league would lose an average of $640,000 per game if it played an 82-game season with no fans in attendance.

That figure has already come under scrutiny, as have other numbers cited by MLB in its presentation to the union detailing how the coronavirus pandemic has impacted the league’s finances.

Among the projected expenses cited by the league, according to the AP, was $440 million to sign amateur players this year, with most of the money deferred to future years per a March agreement between MLB and the union.

While MLB spends hundreds of millions of dollars each year to sign amateur players through both the draft and the international market, that $440 million figure inflates what teams will likely spend on amateur signing bonuses.

MLB, in response to inquiries from Baseball America, said the estimated figure includes payroll taxes and money to fund college scholarships for drafted signees, in addition to signing bonuses.

Teams spent $237,345,700 on signing bonuses for players drafted in the first through fifth rounds last year. Bonus slot amounts remain the same this year for the shortened five-round draft. (About $221 million will be deferred to future years if all 160 players drafted sign for full slot amounts.)

International bonus slots, which are hard-capped and cannot be exceeded, totaled $166,232,200 last year. This year’s amounts are expected to be similar, although they have not been formally announced. The Braves will regain 50 percent of their bonus pool after being restricted to zero last year as punishment for international signing violations, but the total international pool amount does not increase significantly because the Braves’ forfeited international pool money was spread around to the other 29 teams. 

With that, the total between draft signing bonuses and international signing bonus pools comes out to $403,577,900.

Note, that total of just over $403.5 million will come this year only if teams maintain their spending practices from last year’s draft and spend their entire international bonus pools.

That is unlikely to happen.

Many players drafted in the fifth and final round this year are expected to sign for significantly under slot value, with teams expected to engage multiple players and take whichever one agrees to sign for the lowest amount.

Further, international spending is up in the air. The March agreement allowed the Commissioner to postpone the opening of this year’s international signing period to January 2021. No decision has been yet made whether the international signing period will be pushed back, per a league spokesperson. Teams traditionally spend most or all of their international bonus pools, but they are not required to do so and may choose to limit their spending given the current environment.

 

Even in the event teams match their 2019 spending on draft bonuses and spend their full international pool amounts, they would spend just over $403.5 million—$36.5 million shy of the league’s estimated $440 million on amateur spending. That $36.5 million is their estimated cost of payroll taxes and funding college scholarships for signees.

Most of that money will not be paid out this year. Per the March agreement, draftees will receive only $100,000 of their signing bonuses in 2020, half in 2021 and the remaining amount in 2022.

The total amount of deferred bonuses, as noted above, will be about $221 million if all 160 draftees sign for slot. Scholarship money will also be paid out in future years, and international signing bonuses may also be pushed to later years if the Commissioner opts to postpone the start of the international signing period to January 2021.

Teams are allowed to sign undrafted players this year for signing bonuses of up to $20,000. International players who sign for $10,000 or less do not count against a team’s international bonus pool. Both will also be added to clubs amateur spending expenses, albeit likely at minimal amounts.

If 150 undrafted free agents are signed—the equivalent of five more draft rounds—and sign for the maximum bonus of $20,000, that would add $3 million to the league’s spending on amateurs and bring the total from just over $403.5 million to just over $406.5 million.

That $440 million total figure is dependent on teams maintaining their spending habits from last year’s draft and international signing period. If they tighten their belts and seek to limit expenses as much as possible, as they have in all other areas of operations during the pandemic, the final number will be below that.

In any event, most of the money will actually be paid out in future years.