The New CBA

Baseball has a new labor deal. This is, at the most basic level, a good thing; if you're an NBA fan living the nightmare of the current lockout (or a baseball fan old enough to remember the last strike), then you probably realize that, no matter your stance on unions and competitive balance, it's horrible to not get to watch games. 

The new agreement was reached smoothly, but that doesn't mean it represents a continuation of the status quo. There are a number of major changes. Some of these, like modifications to drug testing and when players are allowed to chew tobacco, don't have any particular impact on a particular club versus another. However, each club will have to devise a strategy for at least two major system overhauls—the new free agency draft compensation structure and the revisions to the draft. John Perrotto nicely summarized a lot of the changes over at BP, and I'm going to pull the CBA text from his article. 

Starting in 2012, Type A and Type B free agents and the use of the Elias ranking system will be eliminated...

 

The current system of draft pick compensation will be replaced with the following system:

 Only players who have been with their clubs for the entire season will be subject to compensation.

A free agent will be subject to compensation if his former club offers him a guaranteed one-year contract with a salary equal to the average salary of the 125-highest paid players from the prior season. The offer must be made at the end of the five-day free agent "quiet period," and the player will have seven days to accept the offer.

A club that signs a player subject to compensation will forfeit its first round selection, unless it selects in the top 10, in which case it will forfeit its second highest selection in the draft.

The player’s former club will receive a selection at the end of the first round beginning after the last regularly scheduled selection in the round. The former clubs will select based on reverse order of winning percentage from the prior championship season.

The Indians have avoided the compensation pick system in recent years. In the 2000s, the full list of the Indians first and second round compensation picks:

• LHP Brian Tallet (2000, 55 overall—compensation for Michael Jackson)
• RHP Dan Denham (2001, 17 overall—compensation for Manny Ramirez)
• RHP Alan Horne (2001, 27 overall—compensation for Sandy Alomar, Jr)
• RHP JD Martin (2001, 35 overall—compensation for Manny Ramirez)
• OF Mike Conroy (2001, 43 overall—compensation for David Segui)
• RHP Jake Dittler (2001, 51 overall—compensation for David Segui)
• 3B Matt Whitney (2002, 33 overall—compensation for Juan Gonzalez)
• 2B Micah Schilling (2002, 41 overall—compensation for failing to sign Alan Horne)
• 3B Pat Osborn (2002, 72 overall—compensation for Marty Cordova)
• OF Brad Snyder (2003, 18 overall—compensation for Jim Thome)
• RHP Adam Miller (2003, 31 overall—compensation for Jim Thome)
• OF John Drennen (2005, 33 overall—compensation for Omar Vizquel)
• LHP David Huff (2006, 39 overall—compensation for Bob Howry)
• RHP Steven Wright (2006 56 overall—compensation for Kevin Millwood)
• 2B Josh Rodriguez (2006, 57 overall—compensation for Bob Howry)
• C Matt McBridge (2006, 75 overall—compensation for Scott Elarton)

After screwing the pooch on compensation picks for the stars they let walk in the first half of the decade, the Indians retrenched and started to flip Type A/Type B free agents before they reached free agency. The Tribe chose to trade CC Sabathia during the 2008 season, allowing the Brewers to collect two compensation picks when Sabathia went to the Yankees. In the 2011 draft, the Red Sox and Rangers made compensation selections after losing Victor Martinez and Cliff Lee, respectively. Kerry Wood was also a Type B that the Indians chose to deal, although the Yankees did not receive a compensation pick for him.

This trend, of avoiding making compensation picks, isn't very illustrative of an active choice by the Indians. Shapiro was clearly reacting to the markets in front of him, and it's very difficult to argue the compensation pick + additional games played packages held a candle to what Shapiro was able to extract from clubs for his superstars. More than anything, it speaks to the team's roster structure and how poor the Indians free agent signings have been. No compensation was received for nearly all the players that left the Tribe over the last five years, an unimpressive list that includes guys like Roberto Hernandez and David Dellucci. I'm sure there's still some disappointment over the performance of guys like that but, broadly, this team has been very youth-focused recently, meaning very few significant players have left via free agency. 

This new system is clearly better than the old one—Type A and Type B free agency designations often didn't make sense, and the strategy of richer teams trading for pending free agents and subsequently receiving compensation always struck me as backwards. I don't know how the Indians will manage this new system, but it will be interesting to watch. We likely won't get to see the front office's approach this season, as the team has no significant free agents save Grady Sizemore, who is apparently returning and likely wouldn't have qualified anyway. 

The Rule 4 Draft, also known as the first-year player draft or amateur draft, will continue to be conducted in June, but the signing deadline will be moved to a date between July 12 and July 18 depending on the date of the All-Star Game.

Drafted players may only sign minor-league contracts.

Each club will be assigned an aggregate signing bonus pool prior to each draft. For the purpose of calculating the signing bonus pools, each pick in the first 10 rounds of the draft has been assigned a value. (These values will grow each year with the rate of growth of industry revenue). A club’s signing bonus pool equals the sum of the values of that Club’s selections in the first 10 rounds of the draft.

Players selected after the 10th round do not count against a club’s signing bonus pool if they receive bonuses up to $100,000. Any amounts paid in excess of $100,000 will count against the pool.

Clubs that exceed their signing bonus pools will be subject to penalties as follows:

Excess of Pool Penalty	(tax on overage/draft picks)
• 0-5%	75% tax on overage
• 5-10%	75% tax on overage and loss of 1st round pick
• 10-15%	100% tax on overage and loss of 1st and 2nd round picks
• 15%+	100% tax on overage and loss of 1st round picks in next two drafts

Proceeds generated by the tax will be distributed to payee clubs under the revenue sharing plan that do not exceed their signing bonus pools. Draft picks that are forfeited by clubs will be awarded to other Clubs through a lottery in which a club’s odds of winning will be based on its prior season’s winning percentage and its prior season’s revenue. Only clubs that do not exceed their signing bonus pools are eligible for the lottery.

Competitive Balance Lottery

For the first time, clubs with the lowest revenues and in the smallest markets will have an opportunity to obtain additional draft picks through a lottery.

The 10 clubs with the lowest revenues and the 10 clubs in the smallest markets will be entered into a lottery for the six draft selections immediately following the completion of the first round of the draft. A club’s odds of winning the lottery will be based on its prior season’s winning percentage.

The eligible clubs that did not receive one of the six selections after the first round and all other payee clubs under the revenue sharing plan will be entered into a second lottery for the six picks immediately following the completion of the second round of the draft. A club’s odds of winning the lottery will be based on its prior season’s winning percentage.

Picks awarded in the Competitive Balance Lottery may be assigned by a club, subject to certain restrictions.

The new draft system doesn't look any better for the Indians, and may end up being considerably worse. Going considerably over slot for players has been a competitive advantage for small market teams, one that the Indians have begun to use more and more. From 2007-2011, the Indians paid out the 12th highest aggregate amount in draft bonuses

If the 'bonus pool' is not large enough to allow teams to continue to lure later round draft picks into baseball, the overall effect will be a decrease of the talent pool available (as kids choose to go to school to play other sports) and a decrease in the ability of teams like the Indians to make up for their payroll deficiencies by making relatively large strategic bets in the draft. There may be some sliver of hope that the bonus pool will be substantial, but examining the paltry amounts assigned via MLB's absurd "slotting system" in recent years would indicate that hope is likely misplaced.

The addition of more picks is nice enough, but feels more silly than anything else. More picks aren't useful if you aren't allowed to spend enough cash to exploit them; being able to trade the picks is interesting, and I'll be curious to see how they're valued. 

As a final note, there will also apparently be a second Wild Card added to each league, as soon as next season. This is not something that would've affected the Indians much lately, but one can hope. The Indians would've made the playoffs in 2005 if such a system were in place. 

I'm hardly the "systems" expert in these parts, so I hope others will chime in with their thoughts on what this means for the expert. Minimally, I hope Jay will explain the big things I'm missing. 

UPDATE: On the BP podcast, Goldstein points out that international amateur spending is also capped, at a starting figure at $2.9M/team, and then going to a scale based on team success (the 2012 WS winner will only be able to spend $1.8M internationally without incurring penalties). That's low, and hurts teams that scout well internationally. It's also likely to funnel money back to mediocre free agents. The overseas markets are being squeezed out as a significant competitive advantage, it appears.