Who Does Free Agent Compensation Help?

Ever since free agency reared its head in 1975, baseball’s owners (particularly the cheap ones) have demanded compensation for their departing talent. The 1981 strike was, in part, driven by player resistance to a system of free-agent compensation in which the owners would “receive a player of similar value,” which would effectively kill the free-agent market by eliminating any real incentive to pay for talent. The two sides compromised with a free-agent-compensation draft that looked a bit like the Rule 5 Draft, in which teams would get their pick of a pool of players left unprotected by their organizations.

This system lasted just four years before it was replaced with something similar to the system in place today, in which any compensation or forfeitures come in the form of amateur draft picks, not players. By the 1985 Collective Bargaining Agreement, owners reverted to an old system of draft-pick compensation, the old Elias Type A/B/C system, which lasted until the current qualifying offer system was put in place in during the 2012 offseason.

This system is sold as another method meant to help redistribute talent to the small market franchises, much like revenue sharing, the luxury tax, and the various caps on spending in the international and draft markets. But what actually happens? As I’ve been asking with revenue sharing and small-market rhetoric this entire offseason, who is actually helped by this system?

Let’s take a look at the Brewers and their history with draft compensation. First, the picks they’ve received (all data from Baseball-Reference):

It’s an extremely underwhemling group. Kelly Wunsch went on to finish fifth in Rookie of the Year voting in 2000 with the White Sox after leading the American League in games out of the bullpen; Odorizzi was a key piece of the Zack Greinke trade; Coulter or Haniger could still reach the majors. But largely, this is bust city, and that’s just how things go with draft picks coming in the 20-50 range. Only one of these players, Todd Dunn, has even made the Brewers, and he put in 130 plate appearances of exactly replacement-level performance between 1996 and 1997.

The CC Sabathia situation in particular shows how much of a crapshoot this system can be for teams losing free agents. Because Mark Teixeira ranked first among all free agents after the 2008 season, when the Yankees signed both Teixeira and Sabathia, the Brewers received pick number 73 from the Yankees and the Angels instead received New York’s first-round slot, number 25 overall, where they drafted Mike Trout. The Brewers weren’t the only ones screwed by the Yankees’ spending spree — the Blue Jays wound up receiving only pick number 104 (third round) from the Yankees after they plucked A.J. Burnett from Toronto’s rotation, as he ranked behind both Teixeira and Sabathia in the Elias rankings.

Meanwhile, the Brewers have only dared to dip into the free agent compensation market four times, listed here:

Mixed results. Slaton was a key relief piece on the American League Champion 1982 squad and was well liked after his previous stint in Milwaukee. Howell struggled throughout his Brewers career, hitting just .253/.307/.377 (95 OPS+) over four seasons. Parker had his one All-Star season before the Brewers traded him for Dante Bichette, who was flipped for Kevin Reimer the next season. Reimer promptly tanked, hitting .249/.303/.394 (87 OPS+) after producing a 113 OPS+ or better in each off the previous three seasons in what turned out to be a disaster of a deal. And finally, there’s Lohse, who was a solid part of the rotation in 2013 and through the Brewers’ attempt at contention in 2014, but completely lost his game in 2015.

Can we really say this compensation system is helping the Brewers? They have received next to nothing in return for their free agents, barring a major surge from Clint Coulter over the next few years. The Sabathia situation was a particular disaster, as part of the Brewers’ plan in dealing Michael Brantley and Matt LaPorta to get Sabathia was that they would be receiving a first-round draft pick when he left, all to see that go up in smoke because the Yankees could afford to sign both of the top free agents in the league.

But I think the more revealing problem here is how draft-pick compensation actually works to price teams like the Brewers out of the midsection of the free-agent market. We already know teams like the Yankees, Red Sox and Dodgers are going to sign the top free agents, aside from anomalies like Arizona’s signing of Zack Greinke this offseason. But by forcing teams to give up a high draft pick to sign mid-level free agents like a Kyle Lohse (or this year, a Dexter Fowler) it actively discourages teams like the Brewers from pursing these players. And even if, in many cases, these players wouldn’t have pushed the Brewers over the top, having the option of signing them to mid-level, long-term deals would have allowed the Brewers another option to build their core besides simply waiting and hoping for draft picks to hit.

So in reality, instead of making life easy for the Brewers by ensuring they get something in return for their prized assets, the compensation system is making it harder for the Brewers to acquire said assets in the first place. And since the draft pick penalties don’t hit teams like the Yankees nearly as hard, they have no problem taking the hit of giving up a draft pick, allowing them to re-enter that market again and again with progressively lesser penalties every time.

The Brewers clearly liked Kyle Lohse back in 2013; they were interested in him all offseason and may have made an attempt to sign him even without his market tanking as a result of the qualifying offer. Without the draft-pick compensation, they may not have been able to get him — his market may have reached higher than, for example, the four years and $52 million Edwin Jackson received that offseason. But the current system put the 2013 Brewers, a team with an extremely strong core between Ryan Bran, Jonathan Lucroy, Carlos Gomez and Yovani Gallardo, in a position where they had to either look forward and waste their stars’ peak years or sacrifice the future in the form of a top draft pick. And with the other recent changes to the CBA, the Brewers can’t make up that advantage in talent by going over slot in the draft or over the cap in the international market — the taxes are too prohibitive, in ways they aren’t for large-market teams.

And so the Brewers are left where they are now, in tanking (or tanking-ish) purgatory, waiting again for another wave of prospects to hit and left with little else to do but sit and wait for next year. It’s not just because the team is limited by small-market resources, but because the only way for such a team to stretch above its means is to sacrifice its future. And so again, I ask: Who is this system really helping? Because it sure doesn’t seem like it’s helping anybody who wants to see good baseball in Milwaukee.