December 1, 2016

International Caps

Dave Cameron offers an outstanding analysis of the new caps on international signings:

First, here’s what we know. Jayson Stark (and others) have reported that the new international signing system is going to be significantly reduced in terms of complexity. Instead of various-sized bonus pools based on your previous year’s record, every team is now going to get roughly the same amount to spend internationally — apparently around $5 million — and there will apparently be no mechanism for going over that amount. It is a hard cap of $5 million per team per year, effectively limiting the league’s annual expenditure on international acquisitions to about $150 million.

In the past, of course, teams strategically chose to blow past their bonus pool amounts, paying a 100% tax on the overage, in order to scoop up as much talent as possible in one fell swoop. For instance, last year the Padres reportedly gave Adrian Morejon $11 million, plus another $4 million to Luis Almanzar, $1.9 million to Gabriel Arias, $1.85 million to Jeisson Rosario, $1.5 million to Tirso Ornelas, $1.2 million to Justin Lopez, and $1 million to Jordy Barley. Despite having been assigned a bonus pool of just $3.3 million, the Padres spent $22.5 million on just those seven players, not even counting the rest of their class. The penalties associated with going over the bonus pools just weren’t strong enough to keep teams from blowing the system up, so now, MLB apparently has a new system in which teams simply aren’t allowed to do that anymore.

But here’s the rub; price controls generally don’t work. And this is nothing more than a price control, while doing nothing to change the value teams place on international free agents. We’ve already seen what the best young international players will command when teams are allowed to bid whatever they want; the Red Sox spent $63 million to acquire Yoan Moncada, plus took on restrictions related to signing international prospects for two years after that, putting his value to their franchise at something like $65 million. Under a new system, no team could pay him more than $5 million, so this price control sets the upper price limit at something less than 10% of the true market value of the best players on the international market.

What is likely to happen is that teams will find a way around the cap. In my youth, college football booster would buy a recruited player a new car, or maybe even a new house for his mother. I wouldn’t be surprised to see a major league team make a charitable donation to a prospect’s town, with the money magically benefiting the player’s family.

The other thing that might happen is that the players are signed to actual long-term, guaranteed contracts rather than getting a bonus. I’m not sure, but if this really does just apply to bonus money, why not just take that bonus money and put it into a contract? I have a feeling I’m missing something.

There’s also this:

On the more up-and-up side of things, I’d bet that some teams will now look at the international market as an opportunity to act like a broker.

MLB should look at their own history. The bonus baby rules were designed to keep the rich teams from signing all the good amateur players. So the Yankees made deals with other teams (the KC A’s, for example) to park players until they were ready to play for New York. That’s why the Yankees got Roger Maris. So we could be seeing something similar in this case.

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