Major League Baseball draft

Before the draft

Major League Baseball has used a draft to assign minor league players to teams since 1921. In 1936, the National Football League held the first amateur draft in professional sports. A decade later, the National Basketball Association instituted a similar method of player distribution. However, the player draft was controversial. Congressman Emanuel Celler questioned the legality of drafts during a series of hearings on the business practice of professional sports leagues in the 1950s. Successful clubs saw the draft as anti-competitive. Yankees executive Johnny Johnson equated it with communism. At the same time, Pulitzer Prize-winning sports columnist Arthur Daley compared the system to a "slave market."

Prior to the implementation of the first-year player draft, amateurs were free to sign with any Major League team that offered them a contract. As a result, wealthier teams such as the New York Yankees and St. Louis Cardinals were able to stockpile young talent, while poorer clubs were left to sign less desirable prospects.

In 1947, Major League Baseball implemented the bonus rule, a restriction aimed at reducing player salaries, as well as keeping wealthier teams from monopolizing the player market. In its most restrictive form, it forbade any team which gave an amateur a signing bonus of more than $4,000 from assigning that player to a minor league affiliate for two seasons. If the player was removed from the major league roster, he became a free agent. The controversial legislation was repealed twice, only to be re-instituted.

The bonus rule was largely ineffective. There were accusations that teams were signing players to smaller bonuses, only to supplement them with under-the-table payments. In one famous incident, the Kansas City Athletics signed Clete Boyer, kept him on their roster for two years, then traded him to the Yankees just as he became eligible to be sent to the minor leagues. Other clubs accused the Yankees of using the Athletics as a de facto farm team, and the A's later admitted to signing Boyer on their behalf. Finally, it was the bidding war for Rick Reichardt, who signed with the Los Angeles Angels for the then outrageous bonus of $200,000 that led to the implementation of the draft.

Major League clubs voted on the draft during the 1964 Winter Meetings. Four teams—the New York Yankees, St. Louis Cardinals, Los Angeles Dodgers, and New York Mets—attempted to defeat the proposal, but they failed to convince a majority of teams, and in the end only the Cardinals voted against it.

The draft

Major League Baseball's first amateur draft was held in June 1965. Teams chose players in reverse order of the previous season's standings, with picks alternating between the National and American Leagues. With the first pick, the Kansas City Athletics took Rick Monday, an outfielder from Arizona State University.

Originally, three separate drafts were held each year. The June draft, which was by far the largest, involved new high school graduates, as well as college seniors who had just finished their seasons. Another draft was held in January, which typically involved high school players who graduated in the winter, junior college players, and players who have dropped out of four-year colleges. Junior college players were required to wait until their current season was completed before they could sign. Finally, there was a draft in August for players who participated in amateur summer leagues. The August draft was eliminated after only two years, while the January draft lasted until 1986.

Influence of the draftee's age

Early on, the majority of players drafted came directly from high school. Between 1967 and 1971, only seven college players were chosen in the first round of the June draft. However, the college players who were drafted outperformed their high school counterparts by what statistician Bill James called "a laughably huge margin." By 1978, a majority of draftees had played college baseball, and by 2002, the number rose above sixty percent. While the number of high school players drafted has dropped, those picked have been more successful than their predecessors. In a study of drafts from 1984 to 1999, Baseball Prospectus writer Rany Jazayerli concluded that, by the 1990s, the gap in production between the two groups had nearly disappeared. In October 2011, Dr. Jazayerli presented another research study which included an analysis of those players drafted since 1965, but instead of breaking them into college or high school draftees, he segregated them by their age on draft day. In the study published in Baseball Prospectus, which included a follow up article of the financial benefits, Jazayerli concluded that the very young players return more value than expected by their draft slots. In Jazayerli’s study he looked at the statistics and broke draftees into 5 distinctive groups based on their age and being drafted in the early rounds. Dr. Jazayerli’s defined a “very young” player as those who are younger than 17 years and 296 days on draft day. Since the inception of the draft, the youngest player ever drafted in an early round is Alfredo Escalera. Escalera was drafted by the Kansas City Royals in the 8th round of the 2012 First Year Players Draft at 17 years and 114 days. Dr. Jazayerli’s study does not clearly demonstrate the influence of the player's age when drafted in a late round.

Economic impact

Initially, the draft succeeded in reducing the value of signing bonuses. In 1964, a year before the first draft, University of Wisconsin outfielder Rick Reichardt was given a record bonus of $205,000 ($1,583,031 today) by the Los Angeles Angels. Without competition from other clubs, the Athletics were able to sign Rick Monday for a bonus of only $104,000. It would take until 1979 for a drafted player to receive a bonus higher than Reichardt's.

Player salaries continued to escalate through the 1980s. In 1986, Bo Jackson became the first draftee to sign a total contract (signing bonus and salary) worth over $1 million ($2,184,882 today). Jackson, a Heisman Trophy-winning football player for Auburn University, was also the first overall choice in the National Football League draft, and was offered a $7 million ($15,294,171 today) contract to play football for the Tampa Bay Buccaneers.

High school players possessed additional leverage, as they had the option of attending college and re-entering the draft the next year. Agent Scott Boras routinely exploited this advantage to increase the contracts of his clients. In 1990, Boras client Todd Van Poppel signed a $1.2 million ($2,199,796 today) contract with Oakland Athletics, after committing to play for the University of Texas. The following year, Boras negotiated a $1.55 million ($2,725,470 today) contract for Yankees first round pick Brien Taylor, who had said he would attend junior college if he did not receive a contract equal to Van Poppel's. By June 2009, a figure as high as $15 million was floated for collegian pitcher Stephen Strasburg.

Increasingly, teams drafted based on whether or not a player was likely to sign for a particular amount of money, rather than on his talent. This became known as a "signability pick." Before the 1992 draft, team owners unilaterally decided to extend the period of time a team retained negotiating rights to a player from one year to five. In effect, the rule prohibited a high school draftee from attending college and re-entering the draft after his junior or senior seasons. The Major League Baseball Players Association filed a legal challenge, but Major League Baseball argued that, since the Players Association did not represent amateur players, it was not necessary for the union to agree to the change. An arbitrator ultimately decided that any change to draft articles must be negotiated with the Players Association.

Media exposure

The first-year player draft has historically had far less media exposure than its counterparts in the other leagues for three primary reasons:

The 2007 draft was televised live for the first time in the draft's history on June 7, 2007, from 2:00pm until 6:00pm EDT (1800–2200 hrs UTC). The draft coverage took place at Disney's Wide World of Sports Complex at Walt Disney World near Orlando, Florida. Since the 2009 draft, the first round of the draft is broadcast on MLB Network live and in prime time from its studios in Secaucus, New Jersey.

Eligibility

To be drafted, a player must fit the following criteria:

Draft order

The general draft order is the reverse order of the previous year's standings. If two teams finish with identical records, the previous year's standings of the two teams is the tiebreaker, with the team having a worse record receiving the higher pick.

Negotiating rights

Prior to 2007, a team retained the rights to sign a selected player until one week prior to the next draft, or until the player enters, or returns to, a four-year college on a full-time basis. This was known as the "draft-and-follow" procedure.

Starting in 2012, the deadline for signing a drafted player is July 15. A selected player who enters a junior college cannot be signed until the conclusion of the school's baseball season. A player who is drafted and does not sign with the club that selected him may be drafted again at a future year's draft, so long as the player is eligible for that year's draft. A club may not select a player again in a subsequent year, unless the player has consented to the re-selection.

A player who is eligible to be selected and is passed over by every club becomes a free agent and may sign with any club, up until one week before the next draft, or until the player enters, or returns to, a four-year college full-time or enters, or returns to, a junior college. In the one-week period before any draft, which is called the "closed period", the general rule is that no club may sign a new player.

Compensatory picks

Currently, teams can earn compensatory picks in the draft based on departing free agents who reject a Qualifying Offer from their respective team. A qualifying offer being defined as a one-year contract worth the average value of the top 120 player contracts for that year (In 2015, the value of the qualifying offer was $15.8 million). The 2013 draft saw major changes to the compensation rules. This was implemented as part of the most recent collective bargaining agreement (CBA) between MLB and its players' union, which took effect with the 2012 season.

Pre-2013 rules

Before the 2013 draft, free agents were ranked by the Elias Sports Bureau based on their previous two years of playing, and against players of similar positions. Players were categorized as either Type A or Type B, or fell into the category of all other players. Below is a description of each free agent class and the compensation the free agent's former team received when the player signed with a different team.

• A Type A free agent was ranked in the top 20 percent of players at his position. A team that signed a Type A player gave its top draft pick to the club that the player left; that club also received a supplemental pick in the "sandwich" round between the first and second rounds.

• A Type B free agent was ranked below the top 20 percent but in the top 40 percent of players at his position. A team that lost a Type B player received a supplemental pick, but the signing team did not lose a pick.

• All other players carried no compensation at all. There had previously been a third class of "Type C" players, but that was eliminated in the 2007 CBA.

To earn a compensatory pick, a free agent must have been either signed before the arbitration deadline in early December, or offered arbitration by their former team but still signed with another team.

Compensatory picks that one team gave another via this method were the highest available pick that team had, with the exception of picks in the top half of the first round. These picks were protected from being used as compensation. If a team that picked in the top half of the first draft signed a Type A free agent, they would give up their second-round pick. If a team owed two other teams draft picks via Type A free agents, the team whose departing player had a higher score got the higher-ranked pick. A team could not lose picks it earned via compensation. The post-2012 rules for this aspect of the draft are similar, except that the "Type A" and "Type B" designations no longer exist (see below).

The order of the supplemental round between the first and second rounds, a feature that will remain in place in 2013 and beyond, is determined by inverse order of the previous year's standings. Under pre-2013 rules, Type A picks were made first, and then the order reset for all the Type B compensation picks.

In a feature that did not change with the most recent CBA in 2012, teams can also earn compensation for unsigned picks from the previous year's draft. If a team doesn't sign a first or second round pick, they will get to pick at the same slot plus one the following year. For example, if the team with the #5 pick does not sign that player, they would have the #6 pick the following year. The regular draft order would continue around those picks. For compensation for not signing a third round pick, teams would get a pick in a supplemental round between the third and fourth rounds. If a team fails to sign a player with one of these compensated picks, there is no compensation the following year.

Current rules

For the 2012 draft, the previous "Type A" and "Type B" designations remained in place, but the CBA included special provisions that modified the statuses of 11 players who were Type A free agents under the 2007 CBA. Six of these were "Modified Type A"—meaning that the signing team did not forfeit a draft pick, but the player's former team received a compensatory pick in the same position it would have earned under regular Type A rules. The remaining five were "Modified Type B", with compensation identical to that for other Type B free agents.

Starting with the 2013 draft, free agents are no longer classified by "type". Instead, a team is only able to receive compensation if it makes its former player an offer at least equal to the average of the 125 richest contracts. However, if a player is traded during the final season of his contract, his new team will be ineligible to receive any compensation.

Other changes from 2012

The new CBA introduced other significant changes to the draft.

Bonus pool

From the 2012 draft on, each team is allocated a "bonus pool" from which it can offer initial contracts to its drafted players. Each team's pool is based on its draft position and number of picks, plus the amount spent in the previous year's draft. For the 2012 draft, these pools ranged from $4.5 million to $11.5 million. If a team goes over its threshold by 5 percent or less, it must pay a "luxury tax" of 75% on the amount over the threshold. Teams that go 5 to 10 percent over must pay a 100% tax on the excess, and will lose their next first-round pick. A team that goes 15 percent over can lose its next two first-round picks, in addition to the "luxury tax". These excess picks will go to smaller-revenue teams via a yet-to-be-reported formula. Uniquely, these compensatory picks can be traded—marking the first time MLB has allowed trading of draft picks. However, all previous rules against trading of regular picks, or picks awarded as free agent compensation, remain in force.

New signing rules

Teams can no longer offer major league contracts to their draft choices—only minor league contracts are available. The only exception is for drafted players who have scholarships in other sports. Also, the date for signing new picks has moved from mid-August to mid-July.