The Major League Baseball amateur draft takes place every summer and gives teams the opportunity to add top young talent to their organizations. While teams hope these new players will positively impact their future on-field success, the draft also involves making major financial investments in unproven talent. As the 2023 MLB Draft approaches, teams are crunching the numbers to determine who is worth the high price tag.
Large Signing Bonuses for Top Picks
The players selected earliest in the draft usually command the highest signing bonuses from teams. The recommended signing bonus slot values are determined by MLB based on the overall draft order. In 2023, the bonus slot for the first overall pick is $8,842,200 [1]. The player picked first will likely sign for a bonus close to that amount. Meanwhile, the bonus slot for the tenth pick is $4,980,100 and the 30th pick's value is $2,622,800. Bonuses usually decrease steadily for each subsequent pick. Teams must carefully budget to ensure they can afford to sign their top selections.
Penalties for Exceeding Bonus Pools
Each team is assigned an overall bonus pool to sign its drafted players based on the slot values for their picks. Teams that exceed their total bonus pool face penalties such as lost future draft picks or fines. This keeps teams from spending freely on bonuses. The Detroit Tigers have the largest bonus pool at $16,512,400 while the Houston Astros have the smallest at $4,228,100 [2]. Teams strive to effectively utilize their entire bonus pool without going over.
Weighing Long-Term Potential versus Cost
Drafting and developing talented players is vital for MLB teams to succeed. But they must weigh each draftee's talent against the signing bonus cost and make strategic decisions about allocating resources. A player with superstar potential but high bonus demands might not be worth the risk. Conversely, a player wanting reasonable bonus money could give great long-term returns on investment. Teams project future WAR values to evaluate draft prospects' upside compared to price [3]. Making the right financial choices is crucial to draft success.
Importance of High School versus College Draftees
The choice between drafting high school and college players is a crucial decision for teams. High school draftees usually require a larger investment as they often demand higher signing bonuses and take longer to develop due to their youth [4]. On the other hand, they possess a potentially higher upside and a longer career, which can yield more significant rewards. College players, conversely, are typically more polished, mature, and closer to making the major leagues, making them a less risky investment.
However, the question remains: which provides better value? Historical data suggests that top college picks generally provide more value in the short term, while high school players have a higher probability of becoming superstar talents, though this comes with an increased bust potential [5]. These factors significantly affect teams' strategies in terms of risk and reward in the draft, further emphasizing the critical role of thorough scouting and astute financial planning.
Though the MLB draft involves no on-field action, it sets the stage for each franchise's future. The investments made on draft day can pay dividends for years to come or set a team back if spent unwisely. This makes number-crunching just as vital as talent evaluation for teams seeking diamonds in the rough.
Sources
[1] "2023 MLB Draft: Recommended Signing Bonus Slot Values," Major League Baseball, Accessed July 17, 2023. https://www.mlb.com/news/2023-mlb-draft-bonus-slot-values
[2] "2023 MLB Draft: Team-by-Team Bonus Pool Amounts," Major League Baseball, Accessed July 17, 2023. https://www.mlb.com/news/2023-mlb-draft-team-bonus-pools
[3] "Using WAR to Evaluate Draft Prospects," Baseball-Reference, Accessed July 18, 2023. https://www.baseball-reference.com/about/war_explained.shtml
[4] "MLB Draft: High School vs College Players," The Baseball Cube, Accessed July 18, 2023. http://www.thebaseballcube.com/extra/draft/hs-college.asp
[5] "Value of MLB Draft Picks: High School or College?," The Hardball Times, Accessed July 18, 2023. https://tht.fangraphs.com/value-of-mlb-draft-picks-high-school-or-college/
Two of my previous posts regarding professional sports but with a focus on the finances:
How Revenue Projections Impact the NBA Salary Cap
The Evolving Landscape of MLB Salaries: A Balancing Act of Compensation