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Breaking Down Bonus Money for the 2012 MLB Draft PDF Print E-mail
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Written by Maury Brown   
Monday, 04 June 2012 20:08

Major League Baseball is holding their 2012 First-Year Player Draft Monday evening. As Commissioner Selig is presiding over the event, the playing field this year is unlike any other.

As part of the latest labor deal between the league and the union for the players, MLB negotiated a system by which each club gets an assigned amount that they can spend on bonuses. It isn’t a hard-cap where the amounts are fixed rather, there is a total pool of signing bonus money that clubs can work within across their picks. That amount fluctuates depending on win-loss record in the previous season, etc. Here’s a high-level view of how it works:

  • The signing bonus pools range from $1.7 million (Angels) to $12.4 million (Twins), which is unique to this year because the new system was layered on top of the old free agent draft pick compensation system for this year.
  • The pools are based on the number of picks, including compensation picks, and last season's record.
  • The more picks a club has, the larger the pool becomes that the club will have to work with.
  • The size of the pools will standardize more from club to club after next year’s class of free agents.
  • The size of the pools will be dependent on the number of picks a club has in a given year and where those picks fall within each round. A club with the first pick of the Draft will have the largest pool.

Clubs can choose to ignore the total amount and go over their allotted amount, but there’s a catch—a “Luxury Tax” that clubs get hit with if they do so. Here’s how that works:

Clubs that exceed their Signing Bonus Pool in the 2012-2013 signing period and/or 2013-2014 signing period will be subject to the following penalties:

a. 0-5% in excess of Pool—75% tax on all of the Pool overage.

b. 5-10% in excess of Pool—75% tax on all of the Pool overage and loss of right to provide more than one player in the next succeeding signing period with a bonus in excess of $500,000.

c. 10-15% in excess of Pool—100% tax on all of the Pool overage and loss of right to provide any player in the next succeeding signing period with a bonus in excess of $500,000.

d. 15% or greater in excess of Pool—100% tax on all of the Pool overage and loss of right to provide any player in the next succeeding signing period with a bonus in excess of $250,000.

Note: If a Club exceeds its Signing Bonus Pool, and it does not possess the draft picks subject to forfeiture as a result of being penalized in a prior year under the agreement, it will forfeit the designated draft picks in the next draft in which it possesses the relevant picks.

So, who has what to spend? According to Jonathan Mayo of MLB.com, the following is how much each club has to work with:

Team

Total

Picks

Avg.

Twins

$12.4m

13

$951k

Astros

$11.2m

11

$1.0m

Padres

$9.9m

14

$707k

Cardinals

$9.1m

14

$652k

Blue Jays

$8.8m

14

$631k

Athletics

$8.5m

13

$651k

Mariners

$8.2m

11

$748k

Cubs

$7.9m

12

$661k

Mets

$7.2m

12

$596k

Red Sox

$6.9m

12

$574k

Orioles

$6.8m

10

$683k

Brewers

$6.8m

12

$564k

Reds

$6.7m

12

$554k

Rockies

$6.6m

12

$552k

Rangers

$6.6m

13

$505k

Pirates

$6.6m

11

$597k

Royals

$6.1m

10

$610k

White Sox

$5.9m

11

$538k

Dodgers

$5.2m

11

$473k

Marlins

$4.9m

10

$494k

Phillies

$4.9m

12

$410k

Indians

$4.6m

10

$458k

Nationals

$4.4m

10

$444k

Yankees

$4.2m

11

$381k

Giants

$4.1m

10

$408k

Braves

$4.0m

10

$403k

Rays

$3.9m

10

$387k

Diamondbacks

$3.8m

10

$382k

Tigers

$2.1m

9

$233k

Angels

$1.7m

8

$206k

Source: MLB.com

There’s a lot more to take in.Take in a summary of MLB’s new labor agreement. Better yet, read MLB’s 2012-16 CBA in full. But, the idea is simple: allow for more economic parity by tamping down on the amount clubs pay out in bonuses while not putting in a hard-cap. Already there has been talk that maybe the system isn't without its flaws. Stanford's Mark Appel, who most analysts thought would go #1 to the Astros dropped all the way to #8 where the Pirates picked him. Who represents Appel? Super-agent Scott Boras.


Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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