Friday, March 8, 2013

Don't Expect Indians to Welcome Lohse to the Tribe

As of today, only one player tied to draft compensation remains on the market, Kyle Lohse. Numerous websites have tried to link Lohse to the Indians, based on their already signing two players and adding Lohse would "only" cost them a fourth round selection. However, the potential cost under the new draft rules makes it potentially much more than just a fourth round pick and is the reason the Indians will not purse Lohse while he is tied to compensation.

First off, I understand why fans, writers, and experts want to put Lohse with the Indians. The Indians have improved their offense, but their current starting pitching is not very impressive. Lohse would be a welcome addition to the rotation, perhaps even as high as their number two pitcher. With a new manager and revamped offense, many consider Lohse to be a final piece to make the Indians legitimate contenders for a wild card spot this season. Unfortunately, the hopes of fans and the reality of the business make this union an impossibility.

In reviewing other articles, it appears everyone understands draft pick sacrificing under the new collective bargaining agreement. To recap: if a team wishes to sign a protected free agent they must sacrifice their top overall pick (top 10 protected). If they sign a second player, they lose their next draft pick, and on and on. However, the CBA also modified draft spending rules and this is why the Indians cannot afford signing Lohse.

Under the new model teams are given a pool tailored to their draft order to use as they will during the first 10 rounds. All picks 2-238 (to use 2012 numbers) are based as percentages of the number one slot bonus ($7.2 million in 2012). Team pools are set based upon the slot position for their picks, including compensation picks. Teams that go more than 5% above this total face harsh penalties including losing future draft picks. Players must be signed in order for that slot money to be used, so if the first overall pick for a team does not sign that money cannot be used to help sign. Last year the Pittsburgh Pirates failed to sign Mark Appel last year and were unable to use the $2.7 million to help sign other players in the draft. To see an excellent and brief team specific break down on this, click here.

With this in mind let us examine how this would play out for the Indians this draft. A few things to keep in mind: 1) I am using 2012 numbers since I have yet to see 2013 numbers and 2) I am using the current draft order from mlb.com.

This year the Indians have the 5th overall pick in the draft. This pick is protected so the first pick they gave up was their second round pick for signing Nick Swisher. They gave up their third round pick for signing Michael Bourn. They did not collect any compensation picks, nor did they receive competitive balance picks. They had 10 picks over the first 10 rounds. Currently they have 8 picks and could go as low as 7. Last season the Kansas City Royals drafted 5th overall and likewise had 10 picks. I am therefore using the Royals $7,537,000 as the base for the Indians. This number will change this year, but it works for this exercise.

Signing Swisher cost a second round pick, currently slotted for the Indians as the 44th overall ($1,165,800). Signing Bourn cost a third round pick, current slotted as the 79th overall ($639,700). This shrinks their pool to $5,731,500 for 8 players. Signing away their fourth round pick, currently slotted as the 109th overall, would reduce that amount a further $436,000. To sign all three players would take $2,241,500, or roughly 30%, out of their pool. This amounts to $305,250/player only considering picks 5-10. With such a fall between picks I am assuming the Indians and their top pick will agree on slot money, or right about there ($3,500,000). By keeping their 4th round pick that average jumps up to $323,929/player, just under what the 139th overall pick (5th round Indians pick) would cost ($327,100).

Note the Indians would draft in the first round and not draft again until round 5. To see the dangers of such a situation Bless you Boys put together odds on making it to the Show, which you can read here. In a nutshell 44% of players drafted between the first supplemental round through round 4 will make it, that number plummets to 21% for players drafted in rounds 5-10. This is why I see the first round pick not settling for less than slot money (and the Indians paying it) because it becomes him and who knows what turns up.

While later round gems exist, (see Albert Pujols, 13th round; or Brandon Maurer a top prospect with Seattle) losing out on three picks in the first four rounds essentially amounts to punting the draft. Not signing Lohse allows the Indians the freedom to gamble more on upside instead of taking a lower ceiling (aka safe) player. Essentially protecting the GM and the front office more than helping the team. For a farm system ranked in the lower 1/3 of the league the last thing they need is to sacrifice upside in the draft. An ace who may turn into an innings eater is a lot better than an innings eater turning into long-relief.

I applaud the Indians efforts to step up and be aggressive this offseason, but there is a fine line between winning today and succeeding both today and in the future. While signing Lohse makes sense from a fans perspective, sacrificing another draft pick and punting the 2013 draft is too steep a price for a workhorse on the wrong side of his prime.

Am I on the money or slinging slop? Feel free to chime in in the comments section below. You may need to click on "No Comments" to open up the comment box. 


*As an update the 2013 draft bonus pool totals have been released. The Indians have 9 picks and a pool of $6,188,800 the 19th lowest despite having the 5th overall pick in the draft. You can see all teams break downs here