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Mark Appel and a New Kind of Leverage

You’re going to see a lot of college seniors taken in the middle rounds of the draft today, as teams look to save bonus pool money in order to take a shot on an over-slot pick that they either drafted yesterday or might look to take at a certain spot today. College seniors often sign for a relative pittance since they don’t have any real alternatives other than to sign for what they’re offered. While college juniors can always threaten to go back to school, seniors don’t have a stick with which to negotiate, so their price falls accordingly.

That is the kind of leverage — the pressure created by having an alternative option — that most people are familiar with, at least in terms of how things work in MLB. The secondary path forces teams to negotiate a fair price, and players without a valid alternative sign for a deep discount. That theory holds in some cases, but Mark Appel is about to demonstrate that leverage can come in other forms as well.

The Astros used the #1 overall pick yesterday to select Appel, a college senior. He already used his go-back-to-school stick last year, and his college eligibility is now exhausted. However, the Astros did not take Appel because they thought that his lack of alternative options might get them a discount, and because of the new bonus pool rules, Appel’s selection means that no college senior has ever had as much leverage in negotiations as Appel has now.

Here’s why. The signing deadline for drafted players is July 12th at 5 pm eastern, giving teams essentially a month to negotiate with their drafted players. However, that deadline does not apply to college seniors who have no remaining college eligibility. They are excepted from the July 12th deadline, and are still able to negotiate a contract until the night before the 2014 draft. While the Astros will have about 35 days to get the rest of their draft picks signed and in the system, Appel does not need to rush to put his name on a contract if he — or his agent, Scott Boras, who has been known to drag out negotiations — doesn’t want to.

So, now, Appel can basically hold the Astros bonus pool hostage. The bonus recommendation for the #1 pick this year was $7.79 million, which means that Appel’s slot makes up almost exactly 2/3 of Houston’s $11.7 million pool for signing picks. However, the Astros can’t confidently go forward with signing the rest of their selections until they have some idea of how much of that pool it is going to take to get Appel signed.

Say, for instance, that Boras floats a $9 million figure as the target. I just made that number up, so don’t take it as any kind of rumored price tag. Because a team can go up to five percent over their allotted bonus pool without suffering the loss of a draft pick, the Astros could pay Appel up to $8.18 million without having to borrow money from any of their other draft picks. To get to $9 million, they’d have to reallocate $822,000 from their other picks. However, you can’t retroactively reallocate funds, and the picks that the money would have to be borrowed from will have to sign before Appel has to.

Basically, by holding out past the July 12th deadline, Boras and Appel can put the Astros in a bit of a pickle by holding the majority of their draft bonus pool hostage. Signing the rest of their selections without knowing exactly how much it will cost to get him signed is a risk, as it will leave the Astros with no flexibility to negotiate once they’ve already allocated the rest of their pool to picks 2-10. Sure, the caps are theoretically soft, but the Astros are not going to sacrifice their first round pick in 2014 to get Appel signed. As good as he might be, he’s not worth the loss of a pick at the top of the 2014 draft too.

So, $8.18 million is basically the Astros ceiling for Appel unless they free up money for him by getting discounts on later selections. But, if they draft a couple of cheap college seniors today and don’t take any hard-sign guys who fell due to bonus concerns, they’ll also be telegraphing that they’ve earmarked some extra money for Appel, and Boras have no reason to negotiate against the slot recommendation anymore.

The college senior signing deadline exception makes this a pretty fun test of game theory. If the Astros pick an easy sign cheap guy or two, then Boras will just push for the remainder of their bonus pool to end up in Appel’s account. If the Astros don’t pick an easy sign cheap guy, then Boras can simply refuse to seriously negotiate until after July 12th, forcing the Astros to guess how much they’ll need to save on other picks in order to leave enough room to get Appel signed without forfeiting their 2014 first round pick.

Or, they could just play it straight, draft players in line with the bonus recommendations, and spend all of the rest of their bonus pool money before the deadline, leaving themselves with exactly $7.79 million left and telling Appel that’s their best offer. Because, at the end of the day, he is still a college senior, and he doesn’t have the go-back-to-school stick. This is probably the most likely outcome, especially since Boras hasn’t dropped any hints that Appel is looking to break the bank and he’s more likely to want to sign with his hometown Astros than spend a year playing independent ball and hoping to get drafted for a third time next year.

Because of the Houston connection and Appel’s status as a good-not-great 1-1 selection, he’s probably just going to sign for something close to the slot bonus, and this will end up being a non-story. However, whenever Scott Boras is involved, you can’t ignore the possibility of gamesmanship, and Appel’s status as a college senior gives him a new kind of leverage that no draft pick has ever really had before.

While most seniors just have to take whatever is on the table, Appel’s situation gives him the ability to actually negotiate. While the bonus recommendations have generally reduced the bargaining power of agents for drafted players, in this special situation, the rules have probably given Appel more leverage than he would have had under the old system. Ah, the beauty of unintended consequences.