WASHINGTON, November 29, 2011 – With all the hullabaloo surrounding the NBA labor negotiations, it went almost unnoticed that representatives of the Major League Baseball owners and players agreed to a new collective bargaining agreement of their own. It was fairly painless, fairly quick, and fairly acceptable, the polar opposite of the NBA talks that reached a tentative agreement Saturday morning.
The flashy moves have already been covered to death: a second wild-card team in each league will be added no later than 2013, and the Houston Astros are heading to the AL West that same year, creating year-long interleague play. But in the financial sector of the deal lies a pair of moves aimed at leveling the field of play—one reforming the draft and the other the international signing market. Unfortunately, one of these moves will have the opposite of its intended effect, while the other goes too far.
At first issue here is the new cap on signing bonuses for international players. The new signing rules flip competitive-balance on its head. Instead of a straight cap, or straight tax threshold, the deal will allow teams to spend money on international free agents at a rate inversely proportional to winning percentage. Essentially, it’s a performance tax on rich teams: win now, and your ability to build for the future is severely limited.
Proponents of the system will point to the luxury tax portion of the deal, namely the penalty that teams that go over their limit will be subject to. But what the system as a whole does is sabotage the scouting investments made in Latin America by small-market teams as ways of building futures in an affordable player pool. This new tax won’t help small-market teams because there is no small-market, big-market divide when it comes to signing international free agents. Instead, it’s a reward for all the teams, rich and poor, that have failed or neglected to make inroads into international scouting.
Where the draft is concerned, there are positive aspects. First, there’s the long-time-coming move that prohibits—actually flatly prohibits—signing draft selections to Major League contracts. This truly helps level the field, by eliminating the power of prospective draft picks to demand such a deal, one that not only is a great financial burden for a team, but also counter-productively accelerates the path to the major leagues by using up roster options. Second, slot signing bonus recommendations are now designated signing bonuses. Now, if a team exceeds a bonus, they are…surprise, taxed.
But the draft reform goes too far by allowing small-market and low-revenue teams to obtain additional draft picks through a lottery system. Providing incentives to underprivileged teams is like giving awards to teams to stay non-competitive. The necessary solution is to set a limit for all teams to abide by, not to throw carrots to the bottom of the barrel. Teams still need to make themselves competitive; they shouldn’t be unduly aided for having less financial capital.
The new CBA is a step forward plus a step back. It seems that the powers that be are aware of the problems in an imbalanced system. But the ways in which these issues are addressed is counterproductive. This new agreements gets a perfect score for spirit, but a deduction for approaching problems from entirely wrong angles.
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