With the New CBA, Ownership Finally Eliminates the Bonus

Future international stars won't have the same negotiating power as Miguel Sano did. (via Keith Allison)

Future international stars won’t have the same negotiating power as Miguel Sano did. (via Keith Allison)

“Ownership must eliminate the bonus.” This declaration came from the one and only Branch Rickey in his 1965 autobiography, The American Diamond. The year before, the Angels had coughed up a record $205,000 to sign outfielder Rick Reichardt, the culmination of a spending blitz on amateur free agents by major league baseball teams. Reichardt was one of at least 11 bonus babies to earn at least $100,000 from 1950 on, a trend that had executives like Rickey worried baseball’s owners were going to spend their way into bankruptcy over a few talented teenagers.

Even accounting for inflation, Reichardt’s $205,000 bonus — roughly $1.6 million in today’s money — pales in comparison to what today’s No. 1 draft picks can hope to make. But the more valuable comparison is to the money contemporary major league veterans were making in the 1960s, in the time before collective bargaining agreements between ownership and the player’s union. In 1967, the final season without a CBA, Major League Baseball’s minimum salary was $6,000 and the average salary sat at $19,000. Nothing puts Reichardt’s massive bonus into perspective, though, like the fact that he got nearly twice as much as 1964’s top-paid player, Willie Mays, and his $105,000 salary.

Baseball’s response to Reichardt and the rest of the bonus babies was the institution of the MLB Draft, and while it did not “eliminate the bonus” as Rickey so desired, there was an immediate impact. Rick Monday, the first overall pick of the first draft in 1965, earned $100,000. By taking away amateur prospects’ ability to negotiate with multiple teams, baseball owners were able to slice top bonuses by more than half.

The draft has continued to serve this purpose well. Yes, Stephen Strasburg’s record setting $15.1 million guarantee was a boatload of money, but the growth in top amateur signing bonuses absolutely withers next to the growth in major league salaries. Three players will make $30 million or more in 2017 (Clayton Kershaw, Zack Greinke and David Price) and the average salary is up to roughly $4 million, a whopping 210 times more than it was 40 years ago. It also pales in comparison to the growth in MLB’s revenue in that span, as baseball has gone from a multi-million dollar industry to pulling in $10 billion in 2016.

Over the past decade in particular, major league ownership has taken Rickey’s old advice to heart. The draft did a great job of eliminating what Rickey would have called “self-destructive competition” among teams for amateur talent, but savvy teams looking for a competitive advantage still managed to find ways to leverage cash to acquire prospects. Whether it was by going above recommended slot for draft picks or shifting money into the international free agent market, big bonuses were still very much a part of the league’s reality.

The last few collective bargaining agreements have systematically closed off all these loopholes. The 2012 CBA instituted a bonus pool for the draft based on recommended slot values, limiting teams’ abilities to entice prospects away from college with over-slot offers. An international bonus pool was instituted, with heavy penalties for overages (which rich teams predictably flouted). Both of these policies made it much harder for small market teams to use what little money they had to acquire impact amateur talent — the penalties for investing in that talent were too prohibitive.

These changes left teams with one truly open market in which to invest in fresh talent: international free agents like Cuban defectors and Japanese and Korean imports. The new CBA finally closed that market as well. Although the owners didn’t get the international draft they were seeking, they got something just as good: a hard cap of “$5-6 million per season” to spend on international free agents.

The limited competition from an international draft would have had a similar effect — players like Miguel Sano receive their multi-million signing bonuses only because of frenzied bidding wars for their services, as was excellently displayed in the documentary Pelotero — and from a labor perspective, there’s hardly a difference in the two policies. At least with the cap, players can choose their employers, but the earning potential of young prospects, particularly those from Latin America, will be significantly hampered.

Who was going to fight for them? None of these groups — domestic amateurs or foreign players of any age or experience level — have any representation at the bargaining table. But while we could certainly scold the Major League Baseball Player’s Association for not fighting harder for their future members, the root of the problem is ownership’s conception of amateur baseball players as assets as humans. Rickey’s assessment of the bonus problem clearly shows his take on the issue, again from The American Diamond:

It is bad for the boy, say an eighteen-year-old youth, to come into possession of unheard-of sums of money, unearned to begin with, and probably ill-spent to end with… Something for nothing may be an objective among many slothful, unthrifty segments of our people, who seem to believe that the world or the nation or the community owes them a living, but it has no place in baseball because it tends to damn the player, wreck the club, and bankrupt the owner.”

Rickey’s contempt is barely concealed. By describing these bonuses as “something for nothing,” he does not ascribe any value to the skill of amateur players or the hard work they put in to become a talent worthy of huge bonuses. This was the same philosophy behind his creation of the minor league farm system, first with the St. Louis Browns in the 1910s and later with the St. Louis Cardinals.

As Kevin Kerrane writes in Dollar Sign on the Muscle, Rickey had a fundamental principle: quality out of quantity. “The competition among so many young players in the system operated as a kind of natural selection, and it kept constant pressure on the veterans at the top,” Kerrane wrote of Rickey’s farm system, which was so expansive as to contain more than 30 teams, including entire minor leagues, in Rickey’s tenure in St. Louis. “He was able to bully and bluff major-leaguers, bound by the reserve clause, into absurd salaries. The minor-leaguers could be left on the farms until, as Rickey liked to say, they ‘ripened into money.'” By eliminating the bonus, the last semblance of risk for teams operating under the model Rickey pioneered with the Cardinals — which is to say, every team since the mid-20th century — disappears.

The consequences for the game go beyond the royal screwing of the young labor pool. The cap on earnings potential for young athletes created by the major league draft was a huge influence in the shift of players, particularly black players, from baseball to football and basketball. Due to the lack of minor league systems in those sports and the wide availablity of college scholarships and under-the-table payments at the amateur level, there is much more money available much more quickly in other sports, making the decision to eschew baseball an easy one for many elite athletes.

The competitive implications of removing risk from the amateur talent acquisition process are unfortunate as well. By taking away the ability to press a competitive advantage in scouting through the draft or international free agency, teams now have fewer ways of finding the kind of impact talent that can take a franchise from a cellar dweller to a contender. The only way to ensure access to top-level talent will be to tank for one of the league’s worst records and get an early pick in the draft, resulting in lost years that threaten to force fans to disengage from their teams.

A Hardball Times Update
Goodbye for now.

But perhaps what I worry about most with the changes brought about in the latest Collective Bargaining Agreement is a dilution of the game’s culture. The infusion of talent from across the world into major league baseball over the past three decades, whether from the Dominican Republic and Venezuela, Japan and Korea, or from the newly opened territory of Cuba, has brought the kind of baseball played and celebrated in their countries and cultures. It has been crucial in keeping baseball fresh.

I fear that a CBA that puts a hard ceiling on the incomes of foreign players will deter top-level talents from leaving their domestic leagues to come play in the United States or from picking up baseball altogether. I fear it will stifle the growth of baseball in countries new to the game, like Brazil, which showed promise in the World Baseball Classic but may not have the financial incentives to draw athletes away from sports like soccer or basketball.

Ownership never will eliminate the bonus, but owners have done their best to cap and restrict it. That’s all well and good for profit margins, but who else wins? Major league players won minor concessions like a shorter disabled list, more off days, and a higher minimum salary. The cost? Players at every lower level across the globe lost significant bargaining power, dynamic foreign stars like Shohei Otani may be dissuaded from bringing their talents to major league baseball and teams have fewer ways to upend the competitive balance through shrewd or innovative spending on amateur talent.

We’re all happy there won’t be a lockout or a work stoppage, but it’s otherwise hard to find the positives in the changes in the newest agreement. To protect the owners from their own thriftless ways, the agreement threatens to dilute baseball’s talent pool and divert money from the pockets of a largely poor work force into the well-lined coffers of the teams. That may be business as usual for MLB dating all the way back to Branch Rickey’s heyday, but it’s disheartening all the same.

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7 years ago

royal screwing of the young labor pool.

dilution of the game’s culture.

Well written comrade.

7 years ago

Parity. All I care about is having some level of parity. Yeah, the dilution could be a fear. Perhaps there could be issues with the best players not having as much of an incentive to play in the USA. However, I won’t be watching baseball in my city anymore if it is just the Yankees, Red Sox and Cubs winning every year because they have all the talent. Acquiring talent needs to be done in a fair way or the Kansas Cities or Pittsburgh, or teams like that will always suck and never really be able to do anything. I think there are ways to attract the best and also get more African Americans involved, but baseball needs to be innovative and think that through.

7 years ago

I can understand the concern, but I’d suggest that for a lot of players, particularly from Latin America, some portion of “$5-6 million” (from where does that quotation come, by the way? I would have to imagine that the actual CBA is far more specific) would still be enticing. Even salaries in the Korean leagues don’t compare to their American counterparts. Realistically, right now only NPB earnings are sufficient that the diminished offers might serve to disincline players from jumping ship, if money is the players’ only concern, and even then, the top end is much higher in MLB.

Still, I suppose it remains that such a rule just keeps more money in the pockets of ownership, for as ludicrous as professional athletes’ salaries have become, one must not forget how much more is taken in by the people that sign the checks. The money is there, and a lot of folks would rather see more of it go the fellows of rare talent and tremendous physical exertion than to those who can do their jobs sitting down. It’d be nice if the massive broadcasting contracts meant tickets were $20 and drinks were a buck, but I think we’re long past the point of no return on that.

In the end, as others have pointed out, owners’ freedom to spend as much as they are willing to throw down continues to be a giant benefit to those with more cash on hand, so maybe this does help improve competitive balance a little bit. Let us not ignore that this labor force includes plenty of actors willing to take the $15M contract over the $10M one and migrate toward the wealthier end of the scale, and is one in which the least compensated participant at the top level is still very well off, so there is a rather broad distribution of culpability in the system, even if you forgive the individual. Heck, a crummy minor league income plus any kind of signing bonus is still more than a lot of people are paid. I’m all for examining these deals from every side, but the realm of professional sports is a unqiue animal, and not all the normal rules apply.

Paul G.
7 years ago

You would think it would be understandable that owners want want to minimize the amount of money that they pay for potential but typically high risk future assets. I’m pretty sure that we all would prefer as sure a thing as possible. No one wants to pay out large sums of cash for something that proves to be of little value.

Of course, how much good faith is involved here depends on what they do with the money. If the money that was going to bonuses for unproven prospects is instead invested in the contracts of major league talent – the proven value, if not always what it seems – then this seems like a generally fair arrangement. If it goes to increase the salaries of minor leaguers, that seems fine, too. If it is going in their pockets, then they just look cheap. Perhaps it will have unintended consequences as you mention, in which case I hope the owners come to another arrangement, but I don’t see all the doom and gloom from where I am standing.

7 years ago
Reply to  Paul G.

The problem is there just isn’t a way for the teams to spend the money being saved on these bonuses. The taxes levied on teams who go over the so-called soft cap has become such an impediment that going over just isn’t worth it. The Red Sox, for instance, rather than sign Edwin Encarnacion or Jose Bautista decided to give 5 million to Mitch Moreland so that they could reset their cap penalties by staying under the salary cap threshold. There are just very few ways to reinvest the savings onto the field of play.

Unfortunately, the most recent iteration of the Player’s Union has been all too happy to sell the rights of amateur ballplayers who aren’t yet members of the union in order to further their own interests but have done an awful job of leveraging these concessions to increase their overall earning power. They’re rich and they’re comfortable and have become shortsighted in a way that Miller, Fehr and Weiner never would’ve allowed. Tony Clark, a non lawyer, representing the players is a huge problem for the union and has been great for the owners. My fear is that this will impact future negotiations and could eventually lead to a work stoppage which nobody wants to see happen again. We all love baseball and we’re willing to pay the prices we do to enjoy it because of the on field product, not the billionaires in their luxury suites who continue to extort local municipalities and lowball poor ballplayers from 3rd world countries just to further enrich themselves.

7 years ago

So the author wants to make sure that all top level foreign imports go to rich teams? No, thanks.

7 years ago

Its the worst labor deal ever negotiated by the MLBPA even for the union members.

Its a defacto hard cap. If this deal had been proposed in the mid 80s it would have led to an immediate strike.

A truly putrid deal. For a 7 game dl and a few extra days off the players agreed to a hard cap and an increase in the luxury tax threshold that doesn’t even keep up with inflation from ours inception and comes nowhere near actual salary inflation.

I was shocked.