New Labor Deal

Major League Baseball owners and players agreed on a new labor deal today that should do a lot to decrease the difference between large and small market teams. Here are some of the basic changes:

• Random HGH blood testing during the off season and Spring Training. A positive test earns a player a 50 game suspension, the same as a positive steroid test. Players will be able to challenge the results of this test and it will not take place during the season as of now.
• The agreement includes the Astros move to the American League West and the addition of an extra Wild Card to each league.
• Luxury Tax will stay at it’s current level of $178 million and not increase until 2014.
• Revenue sharing will be based on team income so large markets will pay more into it and get less out, while small market teams will have to pay very little in.
• A competitive balance lottery will add more draft picks for small market teams.
• Overspending on draft picks will be highly penalized. A threshold will be set for each draft pick and if the team that drafts that player goes over the threshold they will have to pay luxury tax and risk losing the next seasons first round draft pick. This rule could be renamed the Scott Boras rule as it should keep good players from falling in the draft as small market teams with high picks will no longer be afraid of not being able to sign them.
• A luxery tax will also be added to signing international players.

There are also a few more additions that will be beneficial for players, but not necessarily for small market teams.

• In 2014 the minimum salary will be set at $500,000 and there will be cost of living increases each of the next two seasons.
• The amount of players eligible for super 2 arbitration status will raise from the top 17% to the top 22%.
• In order for a team to receive a draft pick for losing a free agent, the original team must make an offer to the player of at least the average of the top 125 Major League salaries. The old system is being thrown out entirely.

Overall this new agreement bodes pretty well for the Cleveland Indians. Going down the list one by one; the new drug testing shouldn’t hurt the Tribe at all. Throughout the history of steroids in baseball, the Indians have only had two players with issues (Rafael Betancourt and Paul Byrd) and are generally thought of to be a clean organization.

I wrote an article last week on how the Astros move will help the Tribe.

Keeping the luxury tax at the same level won’t hurt the Indians, but it won’t really help either. Only two teams (the Yankees and Phillies) are currently obliged to pay more than $178 million in 2012. A few other teams will probably near or pass that level, but it will do nothing to keep teams close to the Indians probable payroll of about $60 million.

The change in revenue sharing should be the biggest help out of all the changes being made. The Indians are one of the smallest market teams currently in baseball so they should get a considerable boost from revenue sharing. Also, because the Tigers are among the top spenders in the league, this change could mean that the Tigers will actually have to give money to the Indians. Hopefully any money earned by the Tribe in this fashion will be used to increase payroll and not be wasted or left to disappear mysteriously.

The changes in the draft and signing foreign players should help keep players within the Indians range a little better, but they haven’t had a whole lot of problems in this area to this point. Most of the foreign players who get paid huge salaries are older players from other leagues (mostly Cuba or Japan) and only one of these players (Ichiro Suzuki) has actually been worth the money he was paid. The Indians have done a great job picking up young players like Victor Martinez, Jhonny Peralta and Fausto Carmona through scouting and training at academies, not by paying exorbitant salaries. The changes in the draft may allow the Indians to get more great first round Boras picks like Jeremie Guthrie. For those who don’t remember, Guthrie fell much further than expected because of his unsignability. The Indians paid Guthrie $4.5 million for his 4 years of minor league service before releasing him. If this rule was in place back in 2002 when Guthrie was drafted, a team with a better draft pick would have had to deal with him.

The only other change that really affects the Indians is the new rule on free agent draft picks. The Indians have made out in the past with this rule, at least getting something for losing players like Jim Thome, Manny Ramirez and Albert Belle. In recent years players of this caliber have been traded away to get a little more for them than the draft pick. Now, players like Grady Sizemore, who may have been worth a draft pick in the past, will not be worth one, since the Indians wouldn’t be willing to offer him a salary higher than $12 million a year.