Draft Pick Value in Baseball at an All-Time High

You have a topflight centerfielder on the market who has led the NL in stolen bases three times and plays excellent defense. Who wouldn’t want him at the right price? You have a starting pitcher coming off a season where he went 16-3 with a 2.86 ERA and a strikeout to walk ratio of nearly 4-to-1. Considering all the pitching-starved teams in baseball, there has to be a lot of interest in him, right? And then there’s a closer coming off a season where he managed an ERA under 2.30 ERA, over 40 saves, and a strikeout to walk ratio of nearly 3-to-1, and it was his second such campaign in the last three seasons. How many teams could use a guy like that at the back of their bullpen? However, all three of those players, Michael Bourn, Kyle Lohse, and Rafael Soriano still remain on the market as the calendar shifts to 2013, and you never know how long they’ll stay there. Why? Because they’re tied to draft pick compensation, and except for the very best players in the game, teams are extremely reluctant to surrender their first round draft pick to sign free agents.

Buster Olney talked about the other other day (Insider-only) how teams and agents were looking into a possible sign-and-trade arrangement where a team like the Cleveland Indians, whose first round pick at 5th overall is protected, meaning they can’t surrender it by signing a free agent, and whose second round pick has already been forfeited after they signed Nick Swisher, would sign a player like Bourn, Lohse, or Soriano, losing their third round pick, and then trade the player they signed to another team, receiving compensation for their lost draft pick in return. Olney clarified on Twitter that such a sign-and-trade could not be a situation where the Indians say signed Bourn and then traded him to the team that gave them the best offer- Tim Dierkes of MLB Trade Rumors tweeted that such a deal would be regarded by Major League Baseball as collusion and would not be allowed. Instead, Bourn would agree to the terms of a contract with another team and that other team would come to terms with the Indians on a pre-arraigned deal. Reading Olney’s piece and the discussion surrounding it, it’s pretty amazing how many hoops teams are willing to jump through in order to keep their first round picks. But that may not have been the craziest part. A talent evaluator Olney quoted in his article had this to say.

"“If the Indians were willing to consent to the type of arrangement suggested above I would imagine they would receive pretty solid prospects in return — at least a B group type guy.”"

Wait a second- we’re talking about the Indians losing a third round pick here. How in the world would they receive a good prospect in return for that? According to Baseball-Reference, you have to go back to 2004 for the last time the third round of any MLB Draft had more than three players that were each worth a total of 2.0 WAR for their MLB careers. That’s a pretty modest standard- that’s what an average big league starter should manage per season and we’re talking their entire careers here- but the players have still failed to reach it. Obviously the Indians shouldn’t receive nothing in a sign-and-trade, but wouldn’t you think they would be getting more of a low minors lottery pick or utility type than a real prospect? The issue here is not just the draft pick itself but also its slot value within the draft system under the new Collective Bargaining Agreement that was signed last year. Losing that third round pick would mean that the Indians would not only lose a potential big league contributor but also around $450,000 to work with as they try to sign their picks in the first 10 rounds of the draft, and that could wind up being quite significant.

For all the Indians know, they could be drafting a low-upside college player in the third who might only sign for $300,000 and use the $150,000 in savings to sign their first round pick. Losing their third round pick in addition to the second round pick they already forfeited would mean that the Indians would lose a lot of flexibility to get all their players signed, and if they have a high school player at the top of the board that may be a tough sign, it could force them to draft conservatively the rest of their draft and select players they knew would sign for below-slot. We’re not just talking about a difference of one prospect here. Losing their third round pick could cost the Indians the ability to take chances on players from rounds 4 to 10 as well. In 2012, the Indians drafted high school players with their 2nd, 3rd, 4th, 7th, and 8th round picks. If they executed a sign-and-trade, they might be able to draft only one or two high school players if they go for one with their first round pick. Back in 1998, the Indians drafted a 6’7″ high school lefty named CC Sabathia with their first round pick. Three years later he was a 17-game winner in the big leagues. Imagine if the Indians had instead drafted a college player who would sign for less money in an attempt to get more values across their entire to draft and missed out on a player who was a critical part of their team for eight years?

What is a Grade B prospect? Every evaluator you asked would likely give you a different answer, but John Sickels of Minor League Ball called the Rays’ Alex Colome a Grade B prospect entering 2012. In Colome, we’re talking about pitcher who certainly has risk involved with him as he missed an opportunity for a big league call-up at the end of 2012 with some shoulder fatigue, but he has electric stuff and the ability to be a solid big league starting pitcher or fireballing late-inning reliever at some point in 2012. That’s not an insignificant player, and a player like Colome could very well be better than whoever the Indians would have drafted in the third round of next year’s draft. The other side of the coin is, as Olney pointed out, that Wil Myers was a third round in 2009 before becoming a super-prospect. Nevertheless, would you really trade a solid prospect like Colome for a complete unknown commodity? The answer has to be no- but that’s not the question we’re asking. The Indians’ third round draft pick that’s potentially on the table in a sign-and-trade is not just a potential prospect but financial flexibility that could determine the course of the Indians’ entire draft.

If a sign-and-trade scenario for a player like Michael Bourn is feasible and demand for Bourn is high enough that the only thing standing in the way from a team signing him is the potential loss of a first round pick, the Indians will certainly field offers for a sign-and-trade and will make it happen if they’re offered the right prospect in return. But at the same time, unless desperation to sign Bourn causes a team to offer the Indians a much better prospect than they should, their third round draft pick and the flexibility it gives them may be too valuable to trade.