Scott Boras’ Critique of Free Agency

So Matt and I realized that there was more going on in the baseball world that isn’t necessarily conducive to our normal fastball/changeup style. So in an effort to get some more posts out, we decided to create the “Extra Innings” portion of the blog to give us an opportunity to comment on other aspects of the league. We hope you enjoy!

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Scott Boras’ last major high profile client, Kyle Lohse, signed with the Milwaukee Brewers earlier this week, giving the notorious agent the ability to finally sound off over the new free agency rules.

Venting to FoxSports.com, Boras claimed, “When you have a system that does not reward performance, you know we have something corrupt in the major league process. You cannot have that in the major league system, because it’s not rewarding performance.” Boras later goes on to claim that the new process hurt Kyle Lohse and Adam LaRoche from locking down larger contracts.

But is it fair to call the new process corrupt?

During the offseason, MLB updated free agency procedures in yet another attempt to improve the competitive levels of small market teams. Previously, players were allocated a ranking by the Elias Sports Bureau. Players who had an A or B ranking and denied arbitration forced their new teams to give up a draft pick. While the new team had to forfeit the draft pick, they did not have to forfeit over the signing bonuses associated with those picks.

Under the new system, only players who are offered qualifying offers of $13.3 million are tied to draft picks. This pool of players is substantially lower than before, but when teams sign other free agents, they must also forfeit over the draft pick signing bonus, which ranges from $100,000 to $2.6 million (the first 10 picks are protected from being poached). This money reduces the total pool of dollars, which is regulated by the MLB based on draft pick slot values, and reduces the overall amount teams can offer to players as signing bonuses.

This changes how teams need to approach their draft picks, since they now will have to balance between building the current team and replenishing their farm system. The new system also creates different interpretations of draft pick value depending on when the team wants to be competitive and helps small market teams compete against the deeper-pocketed teams.

Under the old system, big market teams were able to poach big stars, and while they lost a draft pick, they could just roll over the bonus money associated with that pick to a larger signing bonus for a later pick. With money finally being sacrificed, small market teams are compensated for losing out on their players that they just can’t afford to keep anymore, and can still offer appropriate signing bonuses to their additional draftees. The additional draft picks coupled with the additional draft pool money will help stack small market farm teams with top prospects. While there is risk associated with prospect development, a deep farm system reduces this risk, as seen with the 2012 A’s. Strong seasons can then boost ticket sales, creating the additional revenue needed to keep homegrown talent.

Any system created to help increase the competitive level of the game can’t be considered corrupt, but the “corrupt” claim implies that the system is broken with a certain party not receiving their fair share.

Boras is correct in claiming that it reduces the value of players who received qualifying offers. But, he doesn’t seem to see that these players contracts are becoming more in line with their actual market value. Kyle Lohse couldn’t find a home with teams looking to win now, and the contract Boras was after was too pricey for those looking to rebuild. As a result, Boras had to lower his normally-astronomically-high asking price to compensate for a lost draft pick. This resulted in less money for a pitcher who is on the backend of a career with one good season.

As one NL exec said, “If we really want the player and feel he can make the difference for us in having a championship club – or building toward a championship club – it’s not a significant factor.  Look, we all like picks and prospects, but even among the top 50 prospects in the game more than half of them never make it.” Top free agents Josh Hamilton, who signed with the Angels, Nick Swisher, who signed with the Indians, and BJ Upton, who signed with the Rays, all signed huge contracts despite draft pick compensation, showing that the tradeoff is, in some situations, worth it.

Thus it becomes clear that the only people losing out on this new system are the agents pushing the value up for all MLB players. To quote MLB’s top labor executive, “The fact that one Scott Boras client has not signed does not convince me that the system is broken.” I can’t help but agree.