In the first round of the 2002 Major League Baseball draft, most teams selected one player. The Oakland Athletics picked three. In the following round, they chose three more.
That haul, immortalized in Michael Lewis' bestseller Moneyball, was made possible because the low-budget A's had allowed their two best players, All Stars Johnny Damon and Jason Giambi, to leave via free agency after the 2001 season. The A's got extra draft picks in exchange. That allowed them to draft future All Star Nick Swisher and respectable pitcher Joe Blanton with first round picks acquired from the Red Sox (who'd signed Damon) and the Yankees (who'd signed Giambi.)
Yet had the free agency rules implemented this year under baseball's new collective bargaining agreement been in place in 2002, that Hollywood story may never have happened.
In the past, the Elias Sports Bureau ranked free agents by skill level, classifying them as Type A, Type B, or "unrestricted." Teams that failed to re-sign a Type A player after offering him arbitration received the top pick from whichever team ultimately signed that player, as well as one pick in a supplemental round before round two. Type B players netted their old clubs only the supplemental pick.
The new rules scrap the archaic ranking system altogether. Instead, teams can protect their free agents with a "qualifying offer," a one-year proposal equal to the average salary of the 125 highest-paid players from the previous year. This year, that amounts to $13.3 million.
Teams that sign players who received qualifying offers from their old clubs will continue to forfeit their top picks, but, importantly, those picks will no longer go to the players' former teams. Now, they'll simply vanish.
While teams that lose these free agents will still receive a supplemental round pick, the loss of that additional first rounder is huge. Sixty-six percent of first round picks make the big leagues at some point; for second round picks, that percentage drops to just under 50. The old rules provided a mechanism for small-market teams that lost players in free agency to big-spending franchises to rebuild their talent base with young players. That mechanism has been clearly weakened.
The logistics of the qualifying offer are also problematic. Teams will readily extend such offers to elite players who would command far more on the open market. However, teams may not value lesser-caliber players at that flat $13 million rate, especially when they'd likely cost far less through the old arbitration process. As a result, teams hoping to reap compensatory draft picks in this way must gamble more money to do so.
Already, teams have shown they're less willing to take that risk than they were in the past. In 2011, 37 players received arbitration offers. This year, just nine received qualifying offers.
Combined, these changes dramatically raise the incentive for teams to re-sign free agents. Yet in baseball's bidding wars, small-market teams are routinely trounced by their richer competition, making it difficult for them to retain top talent, even when they want to. It's no coincidence that three of the league's six highest-paid players wear pinstripes.
While the old system, though not without flaws, forced teams to weigh buying talent now versus hoarding for the future, the new rules make it easier for teams flush with cash to have it both ways, to win now and also win later.
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