The Captain's Blog

MLB’s first Competitive Balance Lottery was held on July 17, 2012. (Photo: MLB.com)

There have been many wrinkles brought about by Major League Baseball’s new collective bargaining agreement, and one of the most significant unfolded yesterday afternoon.

Without much fanfare, MLB held its first supplemental draft pick lottery. Unlike its NBA cousin, which awards the top selections in the entire draft, baseball’s Competitive Balance Lottery doled out additional picks that will take place after the first and second rounds. Despite the lack of an immediate tangible impact (i.e., you can’t put a name on who will be selected after the first compensation round), the new system has the potential to not only alter the course of next year’s draft, but also influence trade activity leading up to the July 31 deadline.

Thirteen teams that ranked in the bottom third of the league in either revenue or market size (or both) were eligible for the first supplemental round lottery. Six of those clubs were awarded an additional pick based on a weighted probability tied to the number of losses in 2011. The other seven, along with teams that received revenue sharing last year (the Tigers), were then re-entered into a second drawing, from which an additional six picks, which will take place after the second round of the next year’s draft, were awarded.

2012 MLB Competitive Balance Lottery Results

Note: First round lottery selections will take place after the free agent compensation portion of the Rule IV draft. Second round lottery selections will take place after the second round of the Rule IV draft.
Source: MLB.com

The only two eligible teams that didn’t receive an additional pick in yesterday’s drawing were the St. Louis Cardinals and Tampa Rays, which, considering both teams made the playoffs last season, might leave you scratching your head as to why they were even eligible. The same could also be said for the Detroit Tigers, Milwaukee Brewers, and Arizona Diamondbacks, who also made the postseason in 2011, but because of finances and/or demographics, found themselves in line for draft day charity.

Ironically, because of the criteria used, baseball seems to be rewarding under-earning teams as much as those at a significant market-size disadvantage. For example, should the Marlins benefit because they earn the least amount of revenue of all major league teams, despite residing in the eighth largest metropolitan area, according to the U.S. Office of Management and Budget MSA data? Granted, the Miami market isn’t the most receptive to major league baseball, but then how should baseball account for St. Louis? Even though the city ranks as the country’s 19th largest MSA, Forbes estimates the Cardinals took in the fifth most revenue in 2011. Clearly, St. Louis is a baseball town, so shouldn’t the MLB lottery process take that into account?

Instead of using a simple ranking, baseball should devise a more equitable formula to determine which teams meet lottery eligibility. In addition to demographics and economics, on-field performance should also be weighted more heavily. For example, the Houston Astros may be a larger market team with a healthy top line, but, after years of losing, could use a little extra help. Even a team like the Mets, whose underlying fundamentals have been mitigated by extenuating circumstances, should at least be given a small chance at receiving a handout.

Mark Appel, who spurned the Pirates’ contract offer, could be in line to for a bigger payday in next year’s draft.

As the lottery process evolves, baseball will have the opportunity to close some of the loopholes. In the meantime, teams receiving the additional picks have been afforded many advantages. Several all star caliber players have been selected at slots likely to be occupied by the supplemental picks awarded, so each team has an extra chance to double down by parlaying their lottery success into more good fortune on draft day. However, teams receiving the additional picks don’t have to use them. In what could be a pilot for the exchange of all draft picks, baseball will allow teams to use lottery selections as a commodity.

With several contending teams among the awardees, allowing the lottery pick to be used as a trade chip could give them a big advantage when negotiating with clubs who are rebuilding for the future. This is particularly relevant considering the new CBA rule that requires a team to offer a top-125 salary (approximately $13 million) to a free agent in order to receive draft pick compensation. Because of that hefty obligation, teams may be hesitant to make such an offer. As an alternative, they could instead deal their pending free agent for one of the first round supplemental picks, which will take place right after the compensation selections. So, for example, instead of offering Ryan Dempster a $13 million salary for 2013, the Cubs could trade him to the Pirates or Reds for a prospect and the first round lottery selection. As a result, the Cubs would not only get a player for Dempster, but also approximate the draft compensation they would have received had the pitcher left as a free agent. For the smart team selling at the trade deadline, targeting contenders who benefitted in the lottery process could provide the best of both worlds.

Clubs that wanted to pick the players they wanted couldn’t. Because of the system, they could not spend what was needed to sign the best player. They had to make alternate choices. That’s not what the draft was designed to do.” – Agent Scott Boras, quoted by AP, July 18, 2012

Aside from the trade implications, the additional draft picks awarded by the lottery could have a more subtle impact. Because each selection will come with a corresponding increase in the receiving team’s bonus pool (or the team that acquires the pick in a trade), it will give them extra money to spend in next year’s draft. By extension, that luxury will give certain teams more leeway to sign a player over slot. Put more simply, teams could essentially forfeit the supplemental pick, or any other pick for that matter (by not signing the player chosen, among other methods), and allocate the additional money to another selection. If Scott Boras’ allegation that teams had their hands tied by budgetary constraints is true, this nuance could become a significant consideration.

The MLB lottery process will never have the excitement of waiting to see who will get the rights to the next Lebron James, but it is an important new development nonetheless. As that becomes more evident, it will be incumbent upon baseball to refine the procedures to ensure that the best interests of the sport are met. And, if all goes well, baseball just might expand elements of the program to the rest of the draft, and, perhaps, even institute a lottery for the top first round selections. For a sport that generally moves slowly, those changes could be years away, but maybe the first steps have been taken?