Curious Cases of Compensation: Trade Value and Draft Picks | Disciples of Uecker

Disciples of Uecker

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Last week, Ryan Topp pointed me in the right direction regarding Zack Greinke‘s trade value and compensatory picks. I wrote my article under the assumption that the Brewers would trade Zack Greinke, as well as the reserve rights that result in compensatory picks (if the club offers salary arbitration to the player, and the player elects free agency). Ryan correctly noted that a player must be on an MLB team’s roster at the start of a season for that player to return compensatory draft picks (should that club lose that player to free agency).

Needless to say, this changes the value of what the Brewers can offer. While two prospective picks might not seem like a very big deal, the Brewers’ cannot add any leverage beyond Zack Greinke himself. If the Brewers elect to shop Greinke, it’s Greinke or nothing. While that’s certainly not a bad trade return for a contending ballclub, the buyers will have less of a chance to replenish any top prospects they send to the Brewers. In some way, this changes the scope of their gamble; they have to make their trade gamble only on Greinke’s ability, and not on Greinke’s ability and and the opportunity to potentially replenish their minors with more prospects.

The MLB under the new CBA is an MLB of extreme prosperity. Both the MLB and the MLBPA can pat themselves on the back as millionaires bargaining with millionaires, and the environment of the game now emphasizes free agency more than ever. Granted, the MLBPA has fought for unrestricted free agency almost from the get go; now, they finally have it, as the MLB gets ready to land greater TV money and decades of salary arbitration established a strong salary core.

Needless to say, this will probably affect the trade market. Granted, trades for big-name pitchers have always been gambles in one way or another, and teams did not necessarily focus on the ability to obtain compensatory draft picks once they lost their mid-season rental. The simple point is, there are fewer safety nets involved in the mid-season rental.


More Right-Handed Trades
When the Arizona Diamondbacks executed a waiver trade for Livan Hernandez on August 7, 2006, they sent Garrett Mock and Matt Chico to the Washington Nationals. The Nationals kicked in some money for Hernandez’s contract and those Diamondbacks farmhands, and the Diamondbacks gained one season and two months of control for Hernandez. The ageless change up artist put together a notable innings eating campaign for the 2007 Division Championship Diamondbacks, and earned his free agency after that season. The Diamondbacks received the 43rd pick in the 2008 draft, selecting southpaw pitcher Wade Miley (currently 8-3 with a 2.30 ERA over 82.3 IP for Arizona). For my money, the Diamondbacks made one of the best right-handed pitching deals of the new century with this transaction.

I suppose the idea of the Diamondbacks receiving a chance to draft a pitcher of Miley’s caliber as compensation for losing a veteran like Hernandez could serve as one argument for doing away with baseball’s old compensation system. The case of Tom Gordon might be even better — the Yankees lost the veteran reliever to free agency during the winter of 2005, and received two 2006 draft picks for their loss (they promptly picked Ian Kennedy and Joba Chamberlin, undoubtedly two of the best compensatory picks in MLB history).

A lot of trades involving free-agents-to-be are way less glamorous than the Headline “CC Sabathia” type deals. In 2005, the Toronto Blue Jays sent Miguel Batista and Orlando Hudson to Arizona for Troy Glaus and Sergio Santos. The Diamondbacks drafted Ed Easley as compensation for Batista. The Rangers sent Chan Ho Park and cash to San Diego at the 2005 deadline, receiving Phil Nevin. The Padres drafted Mitch Canham as compensation for Park. No harm, no foul.

Earlier right-handed pitching deals follow a similar thread. The Oakland Athletics traded Kevin Appier for Jeff D’Amico, Brad Ridby, and Blake Stein, netting two compensatory picks in the 2001 draft. That same year, the Atlanta Braves traded top prospect Bruce Chen, as well as Jimmy Osting for Andy Ashby. Those four compensatory draft picks for Ashby and Appier landed Macay McBride, Jeremy Bonderman, John Rheinecker, and Richard Lewis.

Looking back at the history of pitching trades, I have several competing feelings about the Brewers’ potential to swap Zack Greinke for valuable prospects. First and foremost, the return value for right-handed pitchers seems rather low over the last decade. Secondly, in a lot of cases, deadline deals involving right-handed starters in their final contract year seem to be much less frequent than deadline deals involving right-handed starters with contract control years remaining. Third, those compensatory picks seem to be hit-or-miss in the actual cases involving teams that received the picks after losing starting pitchers (the Brewers need not look any further than their draft picks to compensate for losing CC Sabathia after 2008.

Is this much ado about nothing? Are those compensatory picks actually an issue in determining the value of deadline pitching trades? (For instance, would the Braves have traded Bruce Chen for Andy Ashby if they did not have the chance to receive draft picks after losing Ashby?). Furthermore, is the potential trade value of right-handed pitchers at the deadline simply low in the first place?

Compensatory Picks
By my count, MLB teams made 142 draft picks in the supplemental first round between 2001 and 2009, in picks ranging from #31 to #64. Overall, those 142 draft picks netted 63 players that cracked the big leagues, although there are at least 5 highly rated minor leaguers from those picks that will probably make the MLB in the future (and of course, some current minor leaguers remain beyond those players, and they may some day make the big leagues, too). BaseballAmerica handed out 27 Top 50 rankings for 19 of those players, and 17 additional players cracked the Top 100 at one point or another. MLB organizations drafted another 50 players with compensatory picks in the supplemental rounds in 2010 and 2011, already returning one MLB player and eight BaseballAmerica Top 100 rankings from those 50 players.

If prospective compensatory picks do not necessarily influence clubs’ decisions to trade for a starting pitcher at the trade deadline, those compensatory picks can help shape the value that the seller expects to receive. In this case, we might ask: is it worthwhile for the Brewers to hang on to Zack Greinke for the draft picks?

I see a few potential ways to answer this equation. The Brewers should hang on to Greinke if:

Getty Images

(a) They are offered prospects that are not likely to crack the MLB. Since nearly half of players drafted in the supplemental rounds break into the MLB, the Brewers should emphasize the positive half of that probability when they set their price for Greinke.

(b) They are offered prospects that are not “of the talent” of typical Top 100 prospects. Granted, there are Top 100 prospects that don’t amount to great players in the MLB, and there are Top 100 prospects that fail to make the MLB. Nevertheless, this is where the Brewers should push their gamble with Greinke and the compensatory picks. Given that they can simply keep Greinke and play their chances to draft strong prospects, they can add that to their demands from potential buyers.

(c) They are offered prospects that are not “of the talent” of Typical Top 50 prospects. This is where we move beyond the sheer value of the Brewers’ ability to hang on to Greinke for draft picks, and move into the overall value of Greinke’s pitching performance. After two average seasons in 2010 and 2011, Greinke is once again performing at a notably above average level in 2012. Even if Greinke’s 2012 campaign does not appear to be as great as his exceptional 2009 campaign, the Brewers are still offering a notably above average pitcher to potential buyers (if they decide to trade Greinke). While they might have slightly more than a 10% chance to draft a Top 50 prospect with a compensatory pick, they can lean on Greinke’s 2012 performance and demand a top prospect.

Conclusion
More than anything, I am nervous about a potential trade involving Greinke. We can find more than a handful of pitching trades that do not return value for the traded pitcher, and we can find more than a handful of cases where teams traded a strong MLB pitcher for prospects that did not pan out.

The difficult part is, the gamble is threefold:
(1) To what extent are the Brewers a good team that is underplaying their potential? This could determine whether or not the club even views themselves as sellers; one could argue, looking at the whole picture and the players returning from the disabled list, that the Brewers could gamble to put things together and compete for one of the National League Wild Card spots.
(2) To what extent can the Brewers match Greinke’s talent with compensatory picks in the 2013 draft? Under the new CBA, they are the only team that can receive compensation for losing Greinke to free agency.
(3) To what extent can the Brewers match Greinke’s talent with a deadline trade? The history of trades involving right-handed pitchers does not seem promising for the Brewers’ potential return for Greinke. Is this the trade that bucks that tradition?

REFERENCES:
Baseball-Reference. Sports Reference, LLC., 2000-2012. (BaseballAmerica rankings from Baseball-Reference).

IMAGES:

http://sporting-ego.com/2011/10/14/this-is-what-greinke-wanted-time-to-deliver/

http://www.zimbio.com/pictures/SlWT-WxbXbN/Milwaukee+Brewers+v+Atlanta+Braves/2XyfaBCn4v3/Zack+Greinke

http://www.exposay.com/livan-hernandez-2007-mlb—arizona-diamondbacks-at-los-angeles-dodgers-1-2—may-1-2007/p/20026/1/?f=Livan+Hernandez

http://beatofthebronx.com/tag/joba-chamberlain/

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Comments

Tell us what do you think.

  1. Tom says: June 21, 2012

    Nice article, Nicholas. I think one factor you kind of missed with the trade vs. compensation value is the time of impact.

    While both methods are a gamble, a trade will bring more immediate returns than compensation. If they miss on the trade, they have a chance to respond to it more quickly than they would waiting for draft picks to pan out into potentially nothing. Either way, if they miss on either on, they’re screwed. It’s a gamble though in it and everything.

    The best way to go is probably to set the ransom high, hope a desperate team bites, and if not, hang onto him and take your chances on players your scouts have had more time to see.

    There’s so many gambles one direction or another, though. Plenty of

    • Tom says: June 21, 2012

      (continued) arguments that can go for one or another.

  2. Nicholas Zettel says: June 21, 2012

    Thanks for reading, and for commenting, Tom!

    I agree with you that the impact of an immediate return could be more valuable to the Brewers. In this case, I’d actually say that there are some returns that would be acceptable even if they do not match Greinke’s value.

    For instance, I gather that if the Brewers land a SS, or a controllable SP, that player will probably not match Greinke in terms of full value, but immediately filling a need could make the ballclub better.

  3. Rob says: June 21, 2012

    You seem to ignore the dollar cost, which is substantial. Greinke’s “second half” salary is about $5m and the cost to sign two draft picks is likely around $3m.

    You also ignore injury risk. Which for Greinke isn’t great, but is why I think if the Brewers do sell Marcum will not be held for picks even if the value offered isn’t as great.

    • Nicholas Zettel says: June 21, 2012

      Thanks for reading and commenting, Rob.

      Those are definitely significant; do you think the second half salary makes an impact in Greinke’s trade value?

      • Ross B says: June 21, 2012

        I would say his salary doesn’t make a lick of difference. Since I don’t see Mark A running out of cash anytime soon, he would probably view it as a sunk cost and not worry about it. Plus, I would venture to guess that there is an uptick in attendance the nights Greinke is pitching vs when Wolf is, but that would be difficult to quantify with all of the other variables like night of the week, opponent, etc.

    • Nicholas Zettel says: June 21, 2012

      Thanks for commenting, Ross — to add to your train of thought, if Greinke continues to pitch at his current level, $5 million and then the $3+ million signing draft picks is a bargain from here out.

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