The Latest CBA (2016)

Part 25 of our series on Important Moments in Team Building.  See introduction, and up-to-date list.

 

TroutTeam building today has become depressingly homogenized. Front offices seem to share much the same philosophies of player valuation, and their approach to team building, coupled with the terms of the current CBA, agreed to in December 2016, continued the pattern from the previous one of closing off many of the avenues used by teams to differentiate themselves. Four CBA items in particular have led to this state of affairs.

  1. Teams are now capped at what they can spend on international amateur players at a surprisingly low amount. Prior to this latest CBA a rebuilding club could emphasize international signings in a particular year, though they would then be limited in the next signing periods. In the 2016 signing period, for example, the Padres paid $35 million in bonuses to roughly 40 international amateur prospects. This ended up costing over $70 million because of the 100% tax for going so far over the spending guidelines and limited their bonuses during next two signing periods to just $300,000. Nevertheless, the Padres found a way concentrate all their resources into one year and land much more talent than they would have otherwise been able to secure. The current CBA closed this “loophole,” instituting a hard cap at $5.75 million (less for larger market teams).
  2. The hard cap covering the amateur draft of American, Canadian, and Puerto Rican players remained in place in this CBA. Teams are allocated a pool of money based on where their picks fall in the draft, and they are prohibited from exceeding this amount. Teams can still creatively try to sign a high pick at below his “slot value” so as to spend more to try and sign a later pick, but this is generally at the margins. The days of teams aggressively going after higher-risk signings with larger bonuses are effectively over—such as the Pirates outspending everyone else from 2007 to 2011 as they tried to rebuild their talent level.
  3. The luxury tax (technically termed the “competitive balance tax”) has also become more onerous. The penalties for exceeding the payroll threshold, particularly by large amounts over multiple consecutive years, are now more punitive, though the potential exposure has occasionally been overstressed this offseason. The luxury tax threshold for 2018 is $197 million. As the maximum exposure, if a team exceeds the threshold for three consecutive years and is at least $40 million over, their tax will be 95% on that portion above $40 million over (50% on the portion $0 – $20 million over and 62% for that portion $20 to $40 million over). A new penalty comes on line this year: any team that is $40 million over the threshold also sees its highest draft choice drop 10 positions (with the first six overall slots protected). Though these are not necessarily cost prohibitive amounts for the top revenue teams, much has been made of the Yankees and Dodgers, typically the two highest payroll teams, showing renewed concern this offseason about getting below the threshold so as to reset their consecutive year count. Neither team was as active in the free agency market as it often is.
  4. Revenue sharing has apparently begun to reach a point where it affects teams’ internal calculus on how competitive they need to be. With essentially the same overall revenue sharing percentage from the previous CBA, plus increasing revenues from national sources such as MLBAM and merchandizing, smaller market teams are receiving significant additional revenues in addition to their local sources.

CorreaWith the recent World Series championships of the Cubs and Astros, fans are also more tolerant of losing seasons if they believe in the front office. Both teams essentially tore themselves down to the studs and then rebuilt from scratch with young players acquired in trades or as high draft picks. That said, this is extremely difficult to execute on command.   And it is even harder today as more teams are apparently trying to execute this strategy simultaneously and the prospects available in return for veterans may be diminishing. The higher revenue sharing simply reduces the penalty for failure.

One of the maxims commonly heard today is that teams do not want to be in the middle of the pack; they are either competing to win championships or they are willing to sacrifice the present while hoping to rebuild with high draft picks. This binary approach may not be particularly valid right now, especially with the hard caps on the draft and international signings. Obviously, it is nice to be really good, but the idea that rebuilding from scratch is better than from a middle position is not convincing. Baseball is not like the NBA where a high draft pick can make a material difference quickly, and there is much less certainty over the ultimate value of a pick as well. Moreover, the amount of talent a 65-win team needs to add is enormous and fraught with risk as counted on players never develop as anticipated.

Moreover, there is a huge range of possible outcomes for any team in any given year. A team that looks like an 83-win team at the beginning of the year could win anywhere between 75 and 90 games just by the vagaries of fate: injuries, slumps, unforeseen player development, etc. Every year it seems we are surprised by how different the final standings are from the preseason predictions. Giving up on a middle of the pack team and accepting a number of losing seasons in the hope that it can be rebuilt into a contender with some slightly higher draft picks seems both unlikely and unnecessary. Instead, there seems to be a real opportunity to move in the opposite direction—witness the Brewers for 2018–make a few positive moves and give the team a legitimate shot at the postseason.

 

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