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The MLB Draft: The history of it and how it works

The MLB Draft: The history of it and how it works
May 10, 2014
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The Major League Baseball draft is the biggest and most complicated in all of sports. It has a long and very interesting history, most of which has been based on the idea of keeping player salaries lower. It has gone through so many changes over the years that I find most people’s knowledge on the draft is actually a mish-mash of all the different ways the draft has been run over the years.

Here is a rundown of the history of the MLB Draft and a FAQ with how it works...

Pre-Draft History

Baseball was the last of the big three sports to institute a draft. It had a minor league draft used to assign minor league players to teams which started in 1921, but an actually draft did not start until 1965.

MLB first tried to deal with the rising cost of players by implementing a rule in 1947 that any player signed for more than $4,000 had to stay on the major league roster for two years or become a free agent.  This rule was famously broken by the Kansas Athletics who signed Clete Boyer, then traded him to the Yankees right as he became eligible to be sent down. In other words, the Royals acted as the Yankees minor league team, and the Athletics later admitted that they had colluded.

The system never really worked as teams had under the table deals left and right, but the final nail in the coffin was when the Angels signed Rick Reichardt to a $205,000 dollar deal in 1964 - no draft pick would get a bigger bonus until 1979. This lead to a vote to add the MLB Draft - a vote that only four teams voted against: the Yankees, Mets, Cardinals, and Dodgers, not surprisingly the teams who had the deepest pockets.

Draft Beginnings

In the beginning there were three drafts every year. The June phase was the largest, and it was for all college and high school graduates who had just finished their seasons. The next draft occurred in August and was for all players who had played in amateur summer leagues. The third draft was held in January and for all high school and college players who had graduated in the winter.  The August phase was disbanded after just two years. The winter phase lasted all the way until 1986.

The first draft began in 1965 and the first player selected was Rick Monday from Arizona State. Monday, though, was in the minority as the majority of players selected in the draft where from high school. At first the college players out performed the high school players, which lead to college players becoming en vogue. This has changed again over the last decade and it has been found that the younger the player the better value teams tend to get.

In the beginning the AL and the NL would alternate which team got the first pick, but this was stopped in 2005. This change has helped out teams like the Nationals and Astros who would never have been able to have back to back top picks. This especially helped the Nationals who got two premium players in Bryce Harper and Steven Strasburg.

Current rules and changes in 2012

The 2012 draft saw some major changes, and added a ton of confusion for the casual fan. The three big changes were the new bonus pool system, changes to compensation, and the addition of competitive balance picks.

The bonus pool system is personally my least favorite change. Before the bonus pools were added the Indians were one of the top five spending teams in the draft. Some teams who spent the most were actually Pittsburgh, Kansas City, and Cleveland. Owners who were afraid of the rising cost set up the pool system to replace the slot system. 

The old slot system was a recommendation by MLB on what dollar amount should be tied to each pick. There was no recourse if a team went over slot so teams often did since there is no better return on your money than a successful draft pick.

In the new bonus pool system, teams have a set amount they can spend.  If they go over the pool, but end up less than 5% over then the team must pay a 75% tax on the amount over the pool. If they go 5-10% over than it’s a 100% tax on all money over the pool. A team that goes over 10% must pay the tax and loses their first round pick the next year. If a team goes over 15% then they must pay the tax and they lose two future first round picks.

The compensation rules are the ones which I find are the most often confused. In the new system teams can offer their own free agents a qualifying offer which is a one year deal equal to the average of the 125 richest contracts in baseball. If the player declines the offer and later signs with another team then that team loses its first round pick. If that team has a top ten pick it is protected, so instead they lose their second round pick. If a team signs multiple players they will lose their picks in order of round. The pick is simply forfeited and erased as if it never existed and is taken out of the round. The team who lost the player does not get that pick; they instead get a pick at the end of the first round but before the competitive balance selections.

The competitive balance selections are the last of the new changes. These are the only picks that can be traded, and are viewed by some as a test study for the idea of trading picks in the future. The ten smallest markets and the teams with the ten lowest revenues are placed in a lottery.  Since there is a lot of crossover there are never 20 teams in the lottery - last year there were 14 teams in the lottery.  The lottery is weighted to give advantage to the teams which had the worst seasons the year before. There are twelve picks in total that are given out, six after round one and six after round two. This year all but two eligible teams gained an extra pick, and is a system should help the Indians since they should get an extra pick most seasons.

Hopefully this has helped to better explain the history of the draft and how it works.  The draft itself has only been on TV since 2007, and its popularity is growing exponentially with every passing year. So bookmark this page to help clear up any confusion you may have in the future.

Follow Jeff on Twitter @jeffmlbdraft, or email him at jellis121@yahoo.com

User Comments

Yourtribe
May 11, 2014 - 9:36 AM EDT
Like the nba all players should be in the draft. As long as foreign players go to the highest bidder the draft is a joke
GSon
May 11, 2014 - 9:02 AM EDT
To be even clearer, the team that is first round protected, would lose their second pick, regardless of where it falls, such as:

Compensation for one of their own free agents..
A competitive balance lottery selection..

When ever their second pick comes, that would be the pick the team signing Jimenez would lose..
Jeff
October 30, 2013 - 6:14 PM EDT
If a team like the Phillies signed him they would lose their second rounder, but the Indians will still get a pick at the end of round 1, no matter who signs him the pick will be after round one. Glad you enjoyed
Walter
October 30, 2013 - 4:48 PM EDT
Thanks Jeff for the information. Make it a lot easier to understand. To make sure I have it right. If a team signs Jimenez and they are 1 round protected they would lose there 2nd round pick. That would mean the Indians would make that extra pick at the end of round 2? Reason I say there are few large market teams that could make offer to him and not lose there 1st pick. Example the Phillies, Mets, Cubs and White Sox.

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