Almost 50 years later, draft battles runaway bonus inflation

by on May 7, 2011

mlbdraft

Subscribe to our newsletter

*The annual amateur draft of collegians and high schoolers goes June 6-8 and good news for players: bonus amounts are not decreasing. The uncertain news is whether the new Collective Bargaining Agreement will but a cap on a bonus which can be given to first-year players./Logo IBAF.


Letters of Intent

2011 Canadians in College

2011 Canadians in the Minors

2011 Projected Canadian Draft list

 

By Allan Simpson

When the baseball draft was implemented in 1964, effective with the 1965 season, its overriding purpose was twofold: to reverse the upward-spending spiral on bonus payments to untested amateur prospects, and to more equitably distribute talent among Major League Baseball’s then-20 clubs.

It was an overt reactionary measure to the record $205,000 signing bonus that the Los Angeles Angels had bestowed on University of Wisconsin outfielder Rick Reichardt in 1964, when clubs were free to bid for and sign college and high-school players on the open market. Reichardt’s bonus was so noteworthy that it was larger than the annual salary of the highest-paid big-league player at the time.

The draft had an immediate impact on reigning in signing bonuses. While five players, including Reichardt, signed bonuses of $100,000 or more in 1964, only Arizona State outfielder Rick Monday, the No. 1 overall pick in baseball’s first draft, signed a contract in six figures in 1965. The average first-round bonus that year was only $42,516.

No one would top Monday’s $104,000 bonus–$100,000 plus an additional $4,000 as part of baseball’s college scholarship plan—for another 10 years, when the Angels signed Southern University catcher Danny Goodwin, who was drafted No. 1 overall in both 1971 and 1975, for a bonus of $125,000.

The advent of a draft also appeared to have its other desired effect of restoring competitive balance to the game. In the previous 10 years before the draft was introduced, the New York Yankees had appeared in the World Series nine times. Coincidental with the draft’s adoption, it would be another 11 years before the Yankees appeared in another Fall Classic.

For almost two decades prior to Reichardt’s windfall deal in 1964, major-league officials wrestled with problems stemming from reckless spending and the competition for new recruits. Various solutions were proposed. None worked. Almost all were revised annually or simply thrown out.

“Traditionally, baseball has had three ways to combat bonuses,” said Houston Astros president Tal Smith, whose involvement in the game at the executive level pre-dates the draft era. “We’ve had the bonus rule, the first-year player draft and the Rule IV draft. None has been completely effective.”

The bonus rule was in effect from 1946 to 1950, and again from 1953 to 1957. In its simplest form, it required a major-league club to carry a player on its roster, often with no chance of being farmed to the minor leagues, if the player signed a bonus in excess of a fixed amount, usually from $4,000 to $6,000. The first-year draft rule, which was in effect from 1959 until the draft was enacted in 1965, mandated that an organization protect its top first-year pro prospects on its 40-man roster, or risk losing them to waivers or the annual Rule V winter draft.

Baseball was reluctant to adopt a draft for years, mainly because of a fear it would lose its sacred anti-trust exemption because it was signing mostly high-school talent, or players of minor age. It became the last of the four major team sports in North America to resort to a conventional player-procurement system.

The draft was hailed as an overnight success, mainly because of its ability to constrict bonus payments, and it wasn’t until the Yankees signed Oklahoma prep first baseman Todd Demeter in 1979, for a bonus of $208,000, that a player topped (in real dollars) the bonus that Reichardt received 15 years earlier. By then, inflation had reduced that figure to a fraction of Reichardt’s deal.

In 1986, the Kansas City Royals drafted Heisman Trophy winner Bo Jackson and signed him for $1.066 million–$100,000 as a bonus and the balance in guaranteed major league salary. Jackson’s deal took baseball into unchartered waters, but the industry actually applauded the historic signing as it lured Jackson away from the Tampa Bay Buccanneers, who had make him the No. 1 pick in that year’s NFL draft.

As late as 1987, the draft was largely accomplishing everything it was supposed to. Seattle paid a mere $160,000 to sign Ken Griffey Jr., the first overall pick. And when the Twins won the World Series that year, it marked the 10th different champion in the last 10 years.

“It’s an unqualified success,” boasted baseball executive Lee MacPhail, one of the architects of the draft. “Certainly, it’s evened competition. It’s given teams that have a difficult time competing for free-agent talent a fair share, or even more than a fair share. Close races in all divisions today goes back to the free agent draft. If you didn’t have it today, it would be a disaster.”

By 1989, though, the tone of the draft began to change. The Baltimore Orioles had the No. 1 pick that year and engaged in a contentious, often-nasty negotiation with Louisiana State righthander Ben McDonald that carried on through most of the summer. McDonald eventually agreed to an $824,300 three-year major-league contract that provided for a record $350,000 bonus. Little more than a week later, the Toronto Blue Jays gave Washington State first baseman John Olerud a $575,000 bonus as part of an $800,000 three-year deal.

With the financial well-being of the game on much stronger footing in 1989 than it had been 25 years earlier, when the draft was adopted, bonus payments soon took a pronounced, and even reckless upward turn in the early to mid-1990s, and beyond. Record annual bonuses became almost a matter of routine.

In 1990, the Atlanta Braves refused to select Texas high-school pitcher Todd Van Poppel, the player they most coveted, with the first selection because of his insistence on attending the University of Texas — or at least using the threat of attending college as leverage to extract a better deal. The Braves settled instead for Florida prep shortstop Chipper Jones. Undeterred by Van Poppel’s stance, Oakland swooped in and drafted him with its first-round pick (14th overall) and signed him to a record $1.2 million, three-year major-league contract that provided for a $500,000 bonus.

A year later, the Yankees stunned the baseball world by signing North Carolina prep lefthander Brien Taylor to a whopping $1.55 million bonus—more than double the previous record. Average bonus payments to first-round picks began to escalate uncontrollably, rising from $252,577 in 1990, to $365,396 in 1991, to $481,893 in 1992, to $613,037 in 1993.

In 1994, with a major-league players’ strike looming, the average first-round bonus reached $790,357, with five players receiving bonuses of $1 million or more. No. 1 pick Paul Wilson tied Taylor’s record bonus by signing with the New York Mets for $1.55 million. Within weeks, that record was broken when the Florida Marlins coughed up $1.6 million to entice away shortstop Josh Booty from a promising football career at Louisiana State University.

Booty’s record bonus held up until 1996, when all hell broke loose.

Prior to 1996, major-league teams rarely followed some of the draft’s more insignificant rules to the letter of the law, as outlined in the Professional Baseball Agreement, specifically as they pertained to Rule IV (e). That provision required teams to tender formal, uniform contract offers to draft picks within 15 days of their selection.

At the behest of agents, seven players—six first-round picks and a third-rounder—challenged that rule in 1996. Three elected not to follow through with grievance procedures, but four did and subsequently were declared free agents by Major League Baseball.

Free to offer their services to all 30 major-league clubs, the four were wined and dined extensively. In the end, they signed the four-largest bonuses ever awarded amateur prospects.

San Diego State first baseman Travis Lee, who had been drafted second overall by the Twins, signed a stunning $10-million package with the expansion Arizona Diamondbacks. Soon thereafter, righthander John Patterson (5th, Expos) signed with the Diamondbacks for $6.075 million, and lefthander Bobby Seay (12th, White Sox) signed with the expansion Tampa Bay Devil Rays for $3 million.

The fourth player, Pennsylvania high-school righthander Matt White (7th, Giants), completed the once-in-a-lifetime windfall by agreeing to terms with the Devil Rays for $10.2 million. Stung by those record deals, Major League Baseball was quick to close that loophole in the future.

Meanwhile, righthander Kris Benson became a mere footnote in draft history. The Pittsburgh Pirates selected the Clemson righthander with the first overall pick in the 1996 draft and while he signed with the Pirates for a record bonus of $2 million, his figure became almost pocket change compared to some of the deals signed by his fellow members of the Draft Class of ’96 later that summer.

Fearful of more fallout from a system that ran amok in 1996, teams took a cautious, more-tempered approach to the selection of talent, beginning in 1997. In many cases, players were chosen on the basis of signability, not ability. The commissioner’s office even attempted to enact measures of its own, notably a de-facto slotting system it quietly introduced in 2000.

But unlike the cap on signing bonuses that existed at the time in the drafts of other professional sports, such a perceived restraint of trade was legally unenforceable in baseball, and bonus records continued to fall at a steady clip through the years as big-league clubs willfully spent millions in their thirst to acquire amateur talent.

In 2000, the Chicago White Sox signed Stanford outfielder Joe Borchard, their first-round pick, for $5.3 million, the largest amount ever given to a player that signed with the team that drafted him. A year later, Minnesota prep catcher Joe Mauer signed with his hometown team, the Twins, for $5.15 million as the No. 1 overall pick, but he was subsequently upstaged by both Southern California righthander Mark Prior (No. 2 overall) and Georgia Tech first baseman Mark Teixeira (No. 5 overall), who agreed to major-league deals with the Chicago Cubs and Texas Rangers, respectively, that guaranteed them $10.5 million and $9.5 million. Prior’s overall deal was a record, though he received only $4 million up front in the form of a bonus.

By 2008, when No. 1 pick Tim Beckham was given a record signing bonus of $6.15 million by the Devil Rays, only for the San Francisco Giants to trump that amount by spending $6.2 million on Florida State catcher Buster Posey, the average first-round bonus peaked at more than $2.3 million.

A year later, the Washington Nationals paid out the whopping sum of a guaranteed $15.1 million (including $7.5 million that was earmarked as a bonus) to sign San Diego State’s once-in-a-generation righthander Stephen Strasburg. A year ago, the Nationals had the fortune of picking first again, and chose 17-year-old College of Southern Nevada catcher Bryce Harper, who had coyly manipulated the draft process by leaving high school two years early and enrolling in a junior college to making himself eligible for the draft a year ahead of schedule. His reward was a $9.9 contract (including a $6.25 million bonus), or roughly 50 times more than what Reichardt received nearly a half-century ago.

With potentially one of the strongest classes in draft history this year, it’s entirely possible that the game might see more record-shattering deals before the signing period is all said and done on Aug. 15.

Beyond that, who knows?

The Collective Bargaining Agreement between MLB and the Players Association, which governs rules as they apply to the draft, is up for renewal after this season, and there are significant rumblings in the industry that we will see more sweeping changes in the draft than at any point since its very induction in 1964—all designed, of course, to circumvent unchecked bonus payments to amateur prospects.

In that sense, the more the game changes, the more it stays the same.

Perfect Game’s Allan Simpson is one of the foremost authorities on the history of the baseball draft. As the founding editor of Baseball America, he pioneered the widespread coverage of the draft that it enjoys today. Simpson (Kelowna, BC) will be inducted into the Canadian Baseball Hall of Fame at St. Marys June 18.

Allan Simpson
Allan Simpson was one of three 2011 inductees into the Canadian Baseball Hall of Fame. He was formally enshrined June 18, 2011 in St. Marys, Ont., and joined by former Blue Jays all-star closer Tom Henke and the late George "Dandy" Wood, a Prince Edward Island native who played in almost 1,300 major-league games in the 19th century. Allan, a native of Kelowna, B.C., is the founder of Baseball America, the most influential baseball publication in the business.

Read full bio

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>