TOWER GROVE • The concept of draft-pick compensation is nothing new for baseball and its free-agent season. Just last year the St. Louis Cardinals received four picks in the top 60 as compensation for losing free agents Albert Pujols, Edwin Jackson, and Octavio Dotel. The 19th overall pick, the one the Cardinals used to snag pitcher Michael Wacha, was gifted to them from the Los Angeles Angels because they signed Pujols.
The drag created by draft-pick compensation on the market for some free agents is not unique to this winter. It's happened before.
But for a free agent like former Cardinals starter Kyle Lohse, who has been lassoed to draft-pick compensation, this offseason has developed an unexpected hitch on the way to the usual free-agent riches. It's not losing the pick that's the problem. Not this time.
Follow the money.
Only not in the way you think.
This is the money that teams want to spend.
Stick with me here. A prong of the new Collective Bargaining Agreement that has its first run this winter is a change to the draft-pick compensation rules. Instead of the old Type A and Type B way of classifying players for compensation -- Pujols was a Type A, and thus brought two picks -- baseball has streamlined the rule. A qualifying offer is still necessary. The player's current team must still extend a contract offer for the next season to have the right to receive a draft pick.
But this year that offer is the trigger that classifies the player.
A pending free agent must have spent the entire season with the team to offer that team a draft pick. The Cardinals had two such players this past season: Kyle Lohse and Lance Berkman. With the Type A and Type B classifications mothballed, the decision to rank the players as worthy of compensation was up to the Cardinals. All they had to do was extend a qualifying offer for 2013, one that was set by a CBA-defined salary: the average salary of the top 125 free agents from the previous winter. This year, that's price tag was $13.3 million.
The Cardinals decided to offer Lohse a qualifying offer and banked on the righty passing it up to find a multi-year deal elsewhere. (There were corners of the Cardinals' organization that wondered if Lohse might take the sure-thing if he knew the chill the draft-pick compensation might have on his market.) The Cardinals decided not to offer Berkman the $13.3-million contract for 2013 because he would take it.
When Lohse passed on the qualifying offer, the Cardinals assured that they would get a draft pick, one sandwiched between the first and second round.
That pick is increasingly valuable.
Regardless of the player the Cardinals -- or any other team, for that matter -- select, that pick brings immediate and obvious cash value.
It's all about the purse.
Another new element of the current CBA is the bonus cap that is in place for the June amateur draft. All 30 teams are assigned a purse before the draft, and each faces a penalty for spending over that purse. Last year, the Cardinals had to pay a tax because they spent more on bonuses than their assigned $9.1-million cap.
Here is where the new compensation rules and the new draft-cap rule merge: It is doubly costly to lose a draft pick.
A team's bonus cap is calculated on where a team picks in the draft and how many picks that team has. The Astros, who picked No. 1 last season, had a $11.2-million draft bonus purse. A chunk of that, $7.2 million, was based on the fact that they had the No. 1 pick and its "slotted" (or suggested) bonus was $7.2 million. Minnesota had league-high $12.4-million bonus purse, and the Angels had the lowest bonus cap, at $1.7 million for eight picks.
If a team loses a pick through the draft-pick compensation rule, they also lose the projected bonus of that pick from their purse.
This is the real cost of signing Kyle Lohse.
I'll offer two examples to help illustrate how this happens.
Example A. The Oakland Athletics had the 11th overall pick in the 2012 draft, the first pick that would not be protected by the new rules. That pick had a suggested "slot" of $2.625 million. The A's overall bonus purse was set at $8,469,500, according to Baseball America. Under the current compensation rules, if the A's signed a free agent, say Michael Bourn, they would lose their pick (11th overall) and have their whole bonus purse recalculated. They would lose 31 percent of their purse.
Example B. The Cardinals had 14 picks going into the 2012 draft and the $9.1 million purse. With fewer picks, their bonus budget will also be lower in 2013. They are set to have the 20th overall pick, and that was slotted at $1.85 million. Let's say they sign Bourn in a sudden spending spree next week. That could take at least 25 percent from their purse.
What does that mean?
Well, consider that not all draft picks get their suggested slot. The suggested slot for the 86th overall pick in the 2012 draft was $574,500. The Cardinals used that pick to take prep third baseman Carson Kelly, and to sign him they had to offer a $1.6-million bonus, the largest for any player in the second round. The Cardinals were able to do that by a) saving space from their bonuses elsewhere in the top 10 rounds and b) going over their purse.
Signing a free agent like Lohse means losing the budget for that bonus.
Losing that slotted bonus means having less flexibility and means altering a draft strategy. The average suggested slot for picks Nos. 11 through 30 in 2012 was $1.7 million. That's big chunk to slice from an assigned purse of $9 million or less. It ties hands.
This is money teams are eager to spend.
There are two pitchers with Cardinals' ties who will be used to personify this conflict. By any measure, Lohse had a better season than Jackson in 2012. And while Jackson is younger, the speculation entering the winter was that Lohse was likely to get a richer contract. It's the first week of January and Jackson finalized a four-year, $52-million contract with the Chicago Cubs today. Lohse is unsigned.
Half of the players who received qualifying offers are unsigned.
CBS Sports baseball writer Dayn Perry has a much more-detailed primer on the new draft-pick compensation rules. ESPN's Buster Olney was one of the first to identify the ripple-effect of those rules, and a few weeks ago he suggested a way agents and teams might find a way around the cash cost. And this morning Dave Cameron, at Fangraphs.com, explores how to modify the new rule and why it hasn't had the intended effect. This is a brilliant observation:
The main issue, as I see it, is the imbalance of incentives on the two sides of the compensation ledger. In tweaking the system, the new agreement simultaneously raised the penalty for signing a player — only the first 10 picks are now protected, and the slotted values means that a team cannot make up for the loss of a high pick by paying more for players drafted with later selections — while reducing the reward of letting a player walk ...
This past season, Lohse privately got a kick out of the wonks who suggested that he had a skill for timing a career year on the eve of free agency. Lohse won 15 games for the Cardinals in 2008 and never hit the open market as the Cardinals signed him for more than $40 million for the next four seasons. This past season, he went 16-3 with a 2.86 ERA and received votes on several Cy Young Award ballots, including (full disclosure alert), mine. It appeared that unlike the last time he was a free agent he wouldn't be waiting and waiting and waiting on a market that, in 2007-08, didn't put him with a team until mid-March. His timing was applauded.
Not so fast.