First Round Compensation (Part Two)

For background information on the purpose and methodology please check out part one.

Between the 2000 and 2010 drafts, 171 players netted teams a collective 219 first round compensatory picks; or roughly 15 players per offseason. The average percentage of plate appearances or innings pitched spent with the benefiting teams comes in at 37.9%. Meaning, simply, that fewer than 50% of the playing time is coming with the teams collecting those draft picks.

Now, this data is skewed a bit. As mentioned in part one, this focused only on first round picks. Including second round picks might raise that number towards 50%, but maybe not. This look also makes no effort to separate first time free agents (in the truest sense) from those veterans who qualified for free agency compensation multiple times through the timeline. I do not believe the latter to be a fatal mistake because the entire point is to show how flawed the first round compensation system is, and those free agent lifers play a big part in the proceedings.

I wanted to get a feel for what establishing a playing time threshold on these compensation picks would do to the supply of the picks and the number of players who would qualify. Starting with the nearly impossible number of 95% or higher returns 33 players and 47 picks; note that the picks/players average rises because most of the elite players spend their time with one team before leaving. These are the cases like Jim Thome and Manny Ramirez with the Indians, Alex Rodriguez with the Mariners, and Troy Percival with the Angels amongst many, many others.

Moving the bar down to 75% yields 35 players and 49 picks or about an identical sum to the 95% rate; meaning only two players fell in between 75-95%. Drop it to 50% and you arrive at 49 players and 70 picks. Go further down to 30% and we’re at 70 players and 95 picks. That’s still less than half the original player and pick totals. Flip this to players who recorded 20% or less and the totals are 81 players and 100 picks. That’s right, you get more players and picks from the 20% and under crowd than the 30% and over group.

Go even lower, to 10% or less, and you’ll find 41 players and 51 picks. Less than 5%? 20 players and 25 picks. Remember, we only had 35 players and 49 picks from 75% or more, and here, on the very end of the scale, the numbers match up fairly. Here’s a chart that should convey some of these numbers in a more digestible and comparable form (Note: players are counted in each appropriate group so the total sum of the 95%+ , 75%+, etc. will exceed the actual sum):

If the league required that players had to spend at least 25% of their career playing time up through the previous season with a team to receive first round compensation, we would’ve essentially halved the actual player and pick pool. That is incredible and signals that the system fails miserably if the goal is to assist with homegrown losses.

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13 Responses to “First Round Compensation (Part Two)”

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  1. Heather says:

    The system gives the home grown team a choice: generous package by trading team or the draft picks. The generous package usually reflects the Type A status. The home grown team DOES get compensated for the Type A regardless. The question is just whether it is direct compensation through the draft or indirect compensation through the trade package.

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  2. studes says:

    That is incredible and signals that the system fails miserably if the goal is to assist with homegrown losses.

    Just curious: Is that the goal? It seems to me that teams already get a tremendous benefit from having homegrown talent through the six-year salary and arbitration schedule. If that weren’t true, then player development wouldn’t be the typical strategy of a small market team. Why add onto that economic advantage by creating a new type of goal?

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  3. MikeS says:

    It would be more interesting to look at the production of the players taken with those draft picks as compared to the production of the FA’s. In other words, does the compensation match what was lost. You can look at it a dozen different ways – WAR, value (WAR/$), service time, etc…

    Everybody always talks about the value of those draft picks but if none of those players ever amount to anything useful then the picks are worthless and the only value in not signing your own FA’s is payroll flexibility.

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  4. Someanalyst says:

    It does not necessarily imply that the system fails. You are not accounting for the fact that the value of compensation picks is considered by GMs when trading for rental players. The developer of the player still gets the value, it is just that they arbitrage it for something they want more ($, more mature prospects, whatever) through the trade market.

    I think the bigger issue is that the compensation for the second and third teams to get some of these players is the same as for the team that originally held the player to free agency. There is no development involved in signing Type A FAs. By allowing the team that signs the departing talent to recover the same value as the team that lost it you undo the positive effect of the original compensation. As you note: “those free agent lifers play a big part in the proceedings”. I add: and not a good one at that.

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    • The Ancient Mariner says:

      Agreed on your first point, Someanalyst; the only effect that a playing-time requirement would have would be to reduce the return teams could get in dealing imminent FAs, and thus to reduce their compensation for such players. Disagreed on your second, because it implicitly assumes that players who leave a team as a Type A FA came to that team as a Type A, which is not necessarily true.

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      • Someanalyst says:

        Very interesting point Ancient Mariner. Teams who accurately identify upside in players generate value by investing playing time in them. That value is seen in the player’s production per $ (assuming low salary if arriving not as a Type A).

        But it is open for debate whether MLB should want to subsidize this process. One could argue that the teams are getting their return already.

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  5. Rich says:

    This, like the previous article, is full of fail. You conclusion does not follow from the evidence, at all.

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  6. Jon S. says:

    RJ – Is the purpose of free agent compensation really to replenish lost “homegrown” talent? I always thought the system was set up to lessen the blow of seeing one of your stars bolt for greener pockets, homegrown or not. Another possible reason that entered my mind was that the system gives a star player’s current team an advantage in trying to retain his services. I never thought the system was meant to reward grooming your own stars.

    I feel like the system could stand to change. It doesn’t really do a good job of valuing relievers vs position players, and the top tier of players (a group that you might describe as the best of the type As, true superstars) doesn’t give enough compensation to their teams. But requiring a certain amount of service time for compensation would likely kill the trade market.

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  7. Anish says:

    I do not understand the underlying definition that compensation should be the team which the player has a certain amount of tenure. Should it not be the team’s right to trade a class A player before the trade deadline if they feel its worth more than the compensation. I dont understand the rationale of this article

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  8. Nathan says:

    What are the legal ramification involved with signing a contract with a minor? Harper is 17- can he walk away?

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  9. quincy0191 says:

    Like many others, I don’t agree with this whatsoever. But this:

    “I do not believe the latter to be a fatal mistake because the entire point is to show how flawed the first round compensation system is, and those free agent lifers play a big part in the proceedings.”

    is what really confuses me. This is backwards; instead of looking at the facts and establishing a conclusion, you’ve already decided that the compensation system is flawed and are eliminating arguments that might not support that conclusion for the simple reason that they don’t support the conclusion. Players who hit free agency multiple times would present a problem for your “tenure” system, as would players who are traded before they break out. If a guy spends four years languishing as a utility player before being traded and breaking out, why should the second team, which apparently did something, not be compensated for losing the player?

    The current compensation system makes sense to me. What doesn’t make sense is the fact that it’s based on the Elias rankings, which aren’t awful but frequently overvalue some players and undervalue others, to the point where Aubrey Huff has one bad year sandwiched in between two great ones and he can’t make Type B, but apparently Braden Looper can, even though he couldn’t get a deal this year.

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