The Value of Draft Picks

Cruz
Since the new CBA was signed prior to the offseason preceding the 2013 season, the free agent market in Major League Baseball has been greatly affected by the new rules concerning qualifying offers and compensatory draft picks.
The way the system works is quite simple. If a player who finished the year on your club is eligible for free agency, your club has the opportunity to tender that player a qualifying offer. The amount of this offer is determined by the league office every year (this year it was a 1 year, $14 million deal). If the player agrees to this offer (this has never happened), or if the team and player otherwise work out a contract – its business as usual.

However, if the player decides to bolt for another team, the club losing the player is awarded a “compensatory draft pick,” which is a draft pick in the “sandwich round” between the first and second rounds of the draft. The team that signs the player is then forced to forfeit their first round draft pick (unless that pick is a top 10 pick, in which case the team forfeits their 2nd round selection).

Due to the attachment of the draft pick, players who have been offered qualifying offers by their former teams become somewhat less attractive in comparison to those who were not.  But how much is that draft pick truly worth?

This year, for example, the Rangers are slated to pick 22nd in the 2014 MLB draft. They would also be due the 38th overall pick in the case that Nelson Cruz signs with another team.

By using a similar method to that used by Beyond the Boxscore’s Andrew Ball, I attempted to use data from the 2000-2006 MLB drafts to determine the value of a pick between picks 22-37. As Andrew points out in his piece, Baseball Prospectus’ Nate Silver (you may have heard of him) has determined that the majority of a player’s value is derived in his first 6 big league seasons.

Upon reviewing the 160 players picked 22-37 in each of the drafts between 1996-2005, I came up with some interesting results (I show all of my work here). While this is a somewhat small sample, I felt this would best exemplify the way players are currently being evaluated by teams, while also giving the players the appropriate time to reach the major league level. The players drafted in 1997 would be at least 35 years of age, and likely older today, while those drafted in 2005 would be a minimum of 26 years of age.

What I found was that these players have accumulated approximately 344 fWAR over the first six years of their major league careers, or roughly an average of 2.15 per player (just over .3 wins per year). And if that seems like little value, remember that is the average – over 85% of that value was created by 32 of 160 players (an 20% hit rate)! These 32 players represent the only players to accumulate a minimum of 6 fWAR over their first 6 MLB seasons. Only 20 of these players averaged over 2 fWAR per season (or accumulated over 12 fWAR) during that period (12.5% of the sample)

So, let’s take this Rangers offseason, for example, and ask the question – what are the Rangers losing in the case they decided to sign Shin-Soo Choo or Kendrys Morales rather than Nelson Cruz? Well, according to this sample, about a 12.5% chance of landing a future contributor in the 2014 draft.

If a win costs $7 million, and you only have a 12.5% chance of selecting a player who will average over 2 fWAR per season in their first six seasons – does that mean that the discount for giving up a draft pick would be $10.5 million ($7 million per win x 12 wins x 12.5%)?

It comes down to how much you trust your scouts and evaluators. Jacoby Ellsbury, Matt Garza, Colby Rasmus, Adam Jones, Matt Cain, Adam Wainwright and Jayson Werth were all chosen between the two picks the Rangers currently hold in the 2014 draft.

Can the Rangers find one of those? Just since 2009, the Rangers have selected Luke Jackson, Mike Olt, Tanner Scheppers, and Joey Gallo in the compensatory round of the draft. Despite never contributing in Texas, Olt did allow for the team to deal for Matt Garza. How much of the value of a draft pick is actually rooted in a prospects potential to be used as currency later on?

Is it worth it?

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Assuming that the draft pick doesn’t much figure into the pursuing of Choo, who represents far and away the best bat remaining on the market, would you rather pay Shin-Soo Choo $18 million+ while he is 37 years old in the final year of his deal, or sacrifice a draft pick for Cruz or Morales (whose market seems to have cratered a bit), who will likely only command 2 year deals? What is the value of the flexibility gained by shorter-term, less-risky contract?

That’s a bit tougher to quantify. But consider that 5 years from now Shin-Soo Choo will be 36, and Prince Fielder will be 35. Combined they will likely cost slightly less than the cost of the entire 2014 pitching staff as it stands today.

Is the value of that draft pick such that Morales and Cruz should not be considered, or does the short-term nature of their demands, combined with the lack of offense on the market tempt the club into considering forfeiting that 22nd or 38th pick?

Robert Pike

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