Dreaming of A Free Amateur Market

In 1966, as Marvin Miller was touring the league making his case to become the Major League Baseball Players Association’s executive director, he faced a lot of pointed questions from the players he was wanting to lead. Among Miller’s suggestions was a modification of the reserve clause, the clause that in those days effectively bound players to one team for life.

One of those questions came from Jim Bouton, then with the New York Yankees. It’s a question that has in many ways defined the way we think about the economics of baseball. “I think there would be a problem if the players could move from one team to the other. Wouldn’t the wealthiest team get all the stars?”

Miller’s response was simple: “What would you say about a system which has produced one team that has won thirty pennants and twenty World Series in the past forty-five years?”

That team was, of course, the Yankees, who were even more dominant in the era before free agency than in the era since, during which money would supposedly rule over all. Despite this fact, common knowledge in baseball suggests free agency supports rich teams at the expense of poor teams.

Similar logic drives support for Major League Baseball’s first-year player draft. In a world in which amateurs could negotiate with every team, the richest squads inevitably would end up signing all the most talented players, resulting in a significant imbalance in talent and a baseball world ruled by dynastic squads like those early Yankees.

But as Miller pointed out, that logic was flawed in the first place, and since the institution of free agency, it has been exposed as entirely wrong. That leads me to ask: What if we abolished the draft and instituted true amateur free agency for all prospects? What would the baseball world look like then?

Parity concerns would be at the forefront, but that was never why the draft was created. The draft exists because, as Branch Rickey put it in his 1965 autobiography, “Ownership must eliminate the bonus.” Over the course of the late 1950s and early ’60s, the free-for-all nature of amateur signings–combined with the way the reserve clause put a hard ceiling on major league salaries–resulted in major league teams throwing the kitchen sink at top amateur talent, with top amateur signing bonuses rising over $100,000 by the 1960s.

This was particularly ludicrous when compared to the top major league salaries of the time. Even star players were rarely making over $50,000 in a season, and the minimum salary was just $6,000. In 1963, Willie Mays became the first player to make over $100,000, 13 years after Paul Pettit received that much as a signing bonus from the Pirates.

The draft fixed this problem by restricting players to only one negotiating partner upon their entry to the league. Without the bidding wars that characterized the early 1960s, bonuses for even the top picks swiftly started to deflate.

This phenomenon is readily apparent when you just compare 1964, the last days of the free-for-all competition among scouts for top prospects, to 1965, the first year of the amateur draft. Rick Reichardt, the top prospect of the 1964 class, earned a $205,000 signing bonus from the California Angels. The next year, the Kansas City Athletics had the number one pick and selected outfielder Rick Monday. His signing bonus was just $100,000, a mark reached by multiple amateur players in the 1950s, including Pettit, Ted Kazanski (1951), Marty Keough (1952) and John DeMerit (1957).

The raw deal for players is obvious; top player payments shrunk by over half in just one year. But also, by putting a ceiling on what top players could earn, rich teams could throw their muscle around even easier, and smaller-market teams had a tougher time leveraging what little relative cash they had.

For a concrete example of that phenomenon, look at what has happened in the amateur market since Major League Baseball implemented a cap on international spending. The Yankees immediately swooped in and signed top prospects by the boatload, blowing past the spending cap because the penalties weren’t enough to influence their bottom line. Given a $2.2 million spending limit, the Yankees instead spent nearly seven times that amount, an astounding $14.51 million. With penalties, the final tab came out to $26.82 million, far more than any other team (except maybe the Dodgers) could afford in this market.

It does seem likely that the Yankees, Dodgers, and other similarly rich teams would wind up signing much of the top-of-the-top tier talent in a free amateur market. But because of the competition among those rich squads, these signings would require a significant amount of resources. Every dollar spent locking up a top prospect is one that won’t be spent in the major league free agent market, a much more reliable producer of wins than the draft.

As risky as free agent deals can be, in most cases, top-tier free agents return solid value at the beginning of their contracts, with the risk coming as they age towards the end of their contracts. Meanwhile, the first overall pick is the only pick in the MLB draft to produce more than 15.0 WAR on average for their careers. Once you get to pick number seven, the average is already below 10.0 WAR, per Baseball-Reference.

And with the freedom to compete for every amateur player, and not just those who happen to fall to them due to draft orders and arcane free agent compensation rules, competitive advantages in scouting and development can be leveraged even harder. If a team’s scouts believe enough in a player, that team can get him.

Compare that to the current draft system, in which the institution of slot values and a capped bonus pool make it harder for teams to put extra investment into amateur talent. Teams like the early-2010s Rays that were built up by getting as many early draft picks as possible and maximizing their ability to invest in amateur talent have seen that strategy cut down by new draft and free agent compensation rules. These rules were touted as helping small-market teams, but in reality they have cut off alternative means of acquiring talent and ensured their competitive disadvantage in the major league free agent market will matter even more than before.

It’s also important to remember that the draft was as much about control as it was about bonus reduction. The elimination of the need for the “bonus baby” through the draft allowed the owners to more strictly enforce the minor league pipeline, making it easier to assign prospects to lower levels of the minors and keep them there throughout their early 20s. Thus, by removing the ability to negotiate for (among other things) a quicker promotion to the major leagues, the draft allowed major league teams to maximize their surplus value by hoarding prospects in the minors until they hit their prime age.

Every season, rules like the 172-day minimum for accruing a year of service time and the Super Two arbitration cutoff lead to teams keeping their best prospects in the minor leagues in order to maximize surplus value. The Super Two rule in particular serves to keep incredibly talented young players out of the major leagues until late May or early June most seasons.

Over the past five years, players who have been held back from promotion to eliminate a fourth year of arbitration include Dallas Keuchel, Chris Archer, Derek Norris, and Trevor Bauer (2012); Michael Wacha, Gerrit Cole, Zack Wheeler, and Wil Myers (2013); Oscar Taveras, Gregory Polanco, Aaron Altherr, and Joe Panik (2014); Carlos Correa, Vince Velasquez, Jarrett Parker, and Francisco Lindor (2015); and last season, Julio Urias, Albert Almora, Willson Contreras, Jameson Taillon and Tim Anderson.

A good example of this strategy this season can be seen in my Milwaukee Brewers, which earlier in June called up top prospects Lewis Brinson, Josh Hader and Brett Phillips in the course of just one week. Even though the Brewers shockingly are in first place this season, the necessity of playing for the future and maximizing surplus value in a small market take supremacy, and as a result, some of their most talented players have been playing in meaningless games even as the team has been one of the league’s biggest surprises thus far.

But we see these kinds of moves happen no matter what stage of contention a team is in, or is supposed to be in. Many of the Super Two-delayed players listed above were playing on contending squads, including Archer, Cole, Taveras, Polanco, Urias, Almora and Contreras. The larger point is that these kinds of rules are designed to keep young talent in the minors for as long as possible.

While you can debate how much these rules help small-market or large-market teams, I don’t think there can be any debate that they are bad for fans, who crave to see the best players possible in every game. This year’s Brewers, though, trotted out such has beens as Kirk Nieuwenhuis and Jhan Marinez for a month plus while much more talented players were stuck at Triple-A Colorado Springs.

There’s no guarantee there wouldn’t be similar rules teams could game in a post-draft world. But I believe the sums of money top prospects could earn in unrestricted negotiations with all 30 clubs would create a significant incentive to get players to the majors quickly, especially since it wouldn’t be out of the question for many top players to negotiate for a major league contract right out of the gates.

In fact, a select few players have gotten major league contracts through the draft, including Milwaukee’s Rickie Weeks in 2002. The increased ability to negotiate such contracts would guarantee these players get placed on the 40-man roster right away, which would force teams to get them to the majors quickly or risk losing them through the Rule 5 draft (or some other such mechanism).

So let me summarize what I see in my hypothetical world, where baseball’s talent market is truly free. I believe, much like in the days of the bonus babies, we would see rabid competition for baseball’s top talent, with fierce negotiations for top prospects.

Scott Boras infamously opened negotiations for Stephen Strasburg’s first deal by asking for a $50 million contract. Strasburg would wind up settling for $15.1 million, still a record amount. But in a world in which other teams could have negotiated with Strasburg besides the Nationals, $50 million would have been a real possibility. The market likely would have operated in similar fashion to the international free agent market, where a select few prospects earn a majority of the bonus money, and rates swiftly fall off after the elite group is snapped up.

But still, even if only a couple dozen prospects break the bank on a yearly basis, the abolition of the draft very well could threaten the entire structure of the minor leagues. I see this as nothing but a point in favor of amateur free agency. The minor leagues are an exploitative labor system that not only fails to pay many of its workers the minimum wage, it also creates a scenario in which the majority of professional baseball players are stuck playing games in which the outcomes don’t matter.

The minors as they currently exist are closer to glorified instructional leagues than anything competitive, and that’s unfortunate for fans who live in areas without major league squads. Sure, they can go watch a minor league contest, but the energy at those games pales in comparison without the kind of stakes you see even in independent leagues, where a championship is as important (or more so) than player development. The documentary Battered Bastards of Baseball illustrates this well, as it shows how the energy surrounding the Portland Mavericks independent squad was far more intense than that of the major league affiliates it played with in the Northwest League.

So I think the result would be that major league teams would have much, much smaller farm systems—perhaps just one or two teams rather than the five to seven we see now—if they would have farm systems at all. We would see more young, raw talent in the major leagues, and the fact that these young players would take roster spots would mean veterans would have a tougher time hanging on past their primes.

This isn’t to say the minor leagues would die. I think the success of the various minor leagues and independent leagues over the years has proven there is a viable market for baseball even in areas that aren’t populous enough to support a major league team. And because there is a massive pool of professional-level (if not MLB-level) players, these teams shouldn’t have a problem filling their ranks. Perhaps a loan system would develop such that major league franchises could send their prospects to smaller leagues to get playing time at younger ages, much like in professional World Football.

As for the parity issue, I don’t think a free amateur market would be a magic salve by any means. I still think teams like the Dodgers and the Yankees would have the best access to talent. But if they want to rule the amateur market like they rule the free agent market, they will have to take significant risks. They will have to deal with investments worth tens of millions of dollars failing to make the major leagues.

Small-market teams still would have a mountain to climb, of course. But they would be free to take more creative approaches to amateur talent acquisition and development. And many of those parity problems could be solved by a more robust revenue sharing program, something studies have shown are better at improving parity than any other sort of anti-competitive device like a salary cap.

Most importantly, though, I think it would create a more interesting baseball world, a world in which the levels below the major leagues still have something to play for, a world in which players have freedom of choice in where they ply their trades from the beginning of their careers, and a world in which teams would be free to pursue whomever they have their hearts set upon signing.

Free agency scared so many in the baseball world, but it has improved the game for everybody—players have more freedom, owners have been making money hand over fist, and fans have more access to the game than ever before. Maybe I’m just optimistic, but I see no reason why expanding the same rights to the amateur class won’t have a similar effect.