Too much hubbub over Type-A free agents

Over the last couple years, and mitigated by the recent press over the issue, draft pick compensation has become a major, major part of the free agent market — to the point where it is being overvalued.

As a brief refresher, free agents are assigned one of three categories: Type A, Type B and unranked. Type A free agents are those free agents that were in the top 20 percent of baseball players, determined by a statistical engine run by the Elias Sports Bureau. Type B holds the next 20 percent bracket. If players lose a Type A free agent to another team (assuming arbitration was offered) then they get that team’s first round pick in the next amateur draft — assuming the signing team has a pick from 16-30. If it’s one of the first 15 picks, which are protected, the former team instead receives the second round pick. No team can lose multiple first-round picks, so in the signing of multiple Type A free agents, teams would instead lose following round draft choices. As an example, the Yankees signed CC Sabathia, A.J. Burnett and Mark Teixeira last year, losing their picks in the first three rounds.

Type B free agents only net the former team a compensatory pick between the first and second round (Type A also nets a pick in this round as well). No team loses anything specifically, so those free agents aren’t hampered by their classification. It’s Type A that is hampered, with the system designed to compensate for these teams — usually small market — losing their player to a big-market team via free agency. The draft pick gives them something to show for losing the player.

As you can imagine, sometimes Type A free agents find a cold market awaiting them. Take Juan Cruz last year, who was offered arbitration by the Diamondbacks and was frozen out of the market. No team was willing to surrender it’s first round pick for Cruz — and some didn’t even want to surrender their second round pick. Thus, Cruz was limited immediately to 15 teams — the bottom 15 in the league — and of those, had to find a match with a team willing to surrender its second round pick. The Royals ended up surrendering their second round pick to net Cruz.

And so the beat goes on. This year, people are speculating about which players will be most harmed by their Type A classification. The popular name bandied about is Billy Wagner, but other names that could factor in are Bengie Molina, Orlando Hudson, Placido Polanco, Marco Scutaro, Miguel Tejada, Johnny Damon, Kevin Gregg, Mike Gonzalez, Rafael Soriano, Rafael Betancourt, Octavio Dotel, LaTroy Hawkins, John Grabow and Darren Oliver.

While there’s no question the Type A designation will harm some free agents, I think too much is being made of this. Take Buster Olney and his contention that Billy Wagner will be harmed by the Type A designation. While I’m certain that Wagner will be frozen out of the picks 16-30 market, I don’t think he’ll be left wanting for a job.

Is Wagner worth a second round draft pick? There can be arguments made either way. For example, I didn’t feel Juan Cruz was worth the Royals’ second round pick. It didn’t stop the Royals from taking advantage of the Cruz freeze-out and inking him to a deal. Similarly, I think teams in the 1-15 draft bracket view Wagner as a tremendous option in the bullpen and will be more than willing to surrender a second round pick for someone who displayed absolutely filthy stuff in the tail-end of the 2009 season, especially in the hot cauldron that is the American League East. This guy could rack up 40 saves for a team hopeful of contending.

Like, say, the Astros. The Astros are long notorious for not playing a lot of emphasis on the draft, and has an owner that likes to accede to the overwrought and failing slotting system commissioner Bud Selig is so desperate to implement. Is Wagner worth losing a second round pick that they wouldn’t invest significant dollars in?

Why wouldn’t they be? This is a guy who can close games for them. This is a team that has a vacancy in the closer’s job with Jose Valverde also a free agent (and a Type A to boot). This is a team that has a high payroll and wants to contend.

Look at a different Type A free agent: Bengie Molina. The New York Mets need a catcher and are hot to trot over Molina, who could be considered the best catcher on the free agent market. They want to compete, they need a high-level catcher and are in no danger of losing their first-round pick. What exactly is the hangup here?

If anything, the fact that Wagner is a Type A free agent would only make Wagner more coveted for a team like the Astros. He’ll come at a lesser salary than if the market was open to all teams with no compensation, and his options will be limited as a result. Even if it’s not Houston he ends up with, there will be plenty of other teams interested — and perhaps even some in the 16-30 pick range. As an example, let’s assume that the Los Angeles Angels sign Matt Holliday. They’ve now lost their first round pick. What’s to stop them from pursuing Wagner to be their closer and losing their second round pick?

Anecdotally, I recall a comment made by Indians GM Mark Shapiro a while ago, commenting on how the valuation of young, cost-controlled players has swung from being undervalued to the point where Shapiro felt they were being overvalued and actually harming the teams that had said players. I think this is happening right before our eyes with draft pick compensation, especially given that half the league will not lose their first-round pick to sign a Type A free agent regardless.

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Comments

  1. Jim G. said...

    Here in Milwaukee, the silver lining to losing C.C. Sabathia to the Yankees was that at least we’d pick up another 1st round draft pick. Unfortunately, when the Yankees signed Teixiera, who was ranked slightly higher in the Elias rankings, the Brewers were pushed to the second round as compensation for losing a Cy Young caliber lefty. Brewers fans certainly feel ripped off by the situation.

  2. Chris said...

    Anecdotally, I recall a comment made by Indians GM Mark Shapiro a while ago, commenting on how the valuation of young, cost-controlled players has swung from being undervalued to the point where Shapiro felt they were being overvalued and actually harming the teams that had said players.

    This is, of course, ludicrous.

    It could be true that young players or draft picks are overvalued. But there is simply no way that teams are somehow harmed by having these “overvalued” young players.

    If young players are overvalued, you trade them away while demand is high. Or you sign a free agent because draft picks aren’t worth as much as everyone else seems to think. That’s not “harmful” – you want to have overvalued commodities so you can trade or spend them for more than they’re worth!

    Of course, if there is a market inefficiency with FAs because teams are overvaluing draft picks, then it means that teams are <em>under<em>valuing guys like Wagner, and that being a Type A is likely to hit him in the wallet by driving down demand even if he does find a job.

    Which is the whole point of the Type A designation, after all…

  3. Evan Brunell said...

    Not sure I’m following. If prospects are being overvalued, they are NOT being turned into valued commodities.

    If I overvalue my prospect because he is MINE, I need a good farm system, and he’s among the BEST I GOT, then I will overvalue him, where other teams undervalue him and don’t make moves for them.

    Shapiro is saying as if he made a trade offer he thought was fair and the other team said no, overvaluing their prospects. Which he’s saying is hurting the other team by not getting whoever Shapiro was peddling as value.

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