Two years ago, no one had heard of Michael Wacha. Now he’s steadily gaining recognition as one of baseball’s top young pitchers.
After a breakout season in the St. Louis Cardinals’ starting rotation, the 22-year-old right-hander continued to succeed in the playoffs and was named the MVP of the National League Championship Series.
The Cardinals obtained Wacha with a compensatory draft pick they obtained last year when Albert Pujols signed with the Los Angeles Angels as a free agent. Today, the Cardinals are doing just fine without Pujols—but young pitchers such as Wacha presently top the Angels’ wish list.
Not only can top draft picks such as Wacha contribute on the field, they cost far less than established players. So there’s reason for teams to shy away from signing free agents linked to draft pick compensation, even if one draft pick and $1-2 million in signing money doesn’t seem like too much to surrender.
This means the Toronto Blue Jays will watch with interest as MLB teams extend qualifying offers to free agents following the World Series. Introduced last off-season under baseball’s new collective bargaining agreement, the offers could play a role in shaping the Jays’ interest in free agents.
The Blue Jays aren’t at risk of losing a first round draft pick no matter what free agents they sign – a benefit of having finished with one of the worst 10 records in MLB in 2013. But qualifying offers link players to draft pick compensation, so teams such as the Jays with protected first round picks are still affected. They must instead surrender second round selections to sign free agents who declined qualifying offers from their former teams.
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There’s a lot of talent available in the second round of the draft. Jason Kipnis, Andrelton Simmons and Drew Smyly are all former second rounders who contributed to 2013 playoff teams.
Just as importantly, losing the second round pick means losing the recommended bonus money associated with the selection. In 2013, MLB valued second round picks in the $820,000–$1.4 million range, and that money can be used on any pick, before, in or after the second round.
Under the current collective bargaining agreement, teams face strict penalties for over-spending their allotted pool, so every dollar counts for more than face value. In this instance, $1.4 million is a significant portion of the $3-12 million teams are allowed to spend in baseball’s most efficient market—amateur talent.
At a time that teams such as the Cardinals and Boston Red Sox are relying heavily on homegrown talent, the value of young players is undeniable. Young pitchers generally throw harder, young position players are at their most athletic and, best of all, they earn the MLB minimum salary for the first three years of their careers.
Giving up a high draft pick and a significant portion of your amateur signing pool is unappealing if other options are available. As a result, players who don’t obtain qualifying offers will be more attractive than players who turn the offers down—even to teams such as the Blue Jays with protected first round selections.
The qualifying offer appeared to hurt the market for free agents such as Kyle Lohse last winter. The right-hander said at the time that players who didn’t obtain qualifying offers got what amounted to a get-out-of-jail-free card.
“Losing the pick, it’s obviously kind of a big deal for teams, but they also lose about 30 percent of the money they can spend on the draft, so that definitely handcuffs them when it comes to signing other people,” Lohse said.
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This means that the value of players such as Ervin Santana of the Kansas City Royals and Jarrod Saltalamacchia of the Boston Red Sox has yet to be determined in full. If these players obtain and reject qualifying offers, they’ll be less appealing than if their teams simply let them walk.
A year ago, nine free agents obtained qualifying offers: Lohse, Josh Hamilton, B.J. Upton, Nick Swisher, Rafael Soriano, David Ortiz, Adam LaRoche, Hiroki Kuroda and Michael Bourn. With the exception of Kuroda, who signed a one-year deal worth $15 million, each player obtained a multi-year contract worth at least $24 million.
Of course, teams intent on winning in 2014 will determine their interest level based primarily on what players can do on the field. Talent comes first for organizations aiming to contend. But it’s not the only factor. Don’t dismiss the value of a second round draft pick…even if the payoff will come years from now.