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Pete Toms Article Archive
Written by Pete Toms   
Tuesday, 19 October 2010 06:46

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall”, MLB at a crossroads with player recruitment in the Dominican Republic, plus tidbits.

MLB AT CROSSROADS IN DOMINICAN REPUBLIC

In May, LWIB brought attention to MLB’s efforts to combat age and identity fraud amongst amateur prospects in the Dominican Republic. I wrote:

With both MLB’s Scouting Bureau and Department of Investigations both active on the ground, the buscone culture in the Dominican Republic as it has existed appears over. Going forward, whether MLB works in conjunction with the buscones or renders them irrelevant by establishing a system of leagues and instructional programs remains to be seen.

LWIB, Michael S. Schmidt of the New York Times (HT Rob Neyer) provided an update on the results of MLB’s intervention in the recruitment of Dominican players.

New rules aimed at curtailing steroid use and age fraud among baseball prospects in the Dominican Republic have reduced the number of elite Dominican teenage players being signed to contracts by Major League Baseball teams and the size of their signing bonuses.

Of the top 40 Dominican prospects identified by Major League Baseball this year, only five have signed since July 2, a date set by baseball when many 16-year-olds become eligible to sign contracts.

AND

…..Beyond the reduced number of signings of top prospects, the average bonus was about $180,000 this year, down $20,000 from 2009 and $40,000 from 2008.

This past Opening Day saw 231 players, or 27.7%, of MLB rosters (includes players on DL) born outside of the US. Approximately 80% of these players are from Latin American countries. The Dominican Republic produced more of those players than any other country (86). Venezuela produced the second most (58). In 1990, the percentage of foreign-born players (again, de facto Latin American players) in MLB was 13%. The number of foreign-born players in the minor leagues at the beginning of this season was 48% (most from Latin America) according to this report. According to this report, in 09, the combined number of foreign-born major and minor leaguers was approx 3,500 of a total of 8,532 players “under contract”, or approx 41%. According to the same report, three seasons prior the number of foreign-born players was 2,964. However you slice and dice the numbers the trend is unmistakable, MLB has never been more reliant on Latin America, and particularly the Dominican Republic, for players.

MLB long tolerated the “buscone system” in the Dominican Republic, but as signing bonuses skyrocketed the past several years they concluded that reforms were essential to stop the rampant age and identity fraud. In 1985 MLB attempted a draft of amateur Dominican players but abandoned it after several players were drafted by more than one club due to confusion over player identities. Today, MLB appears at a crossroads with player recruitment in the Dominican Republic. At a minimum, MLB will continue to monitor the “buscone system” of player development via the aforementioned “on the ground” efforts of both their Scouting Bureau and Department of Investigations. A more drastic change, the imposition of a draft in the DR, could be negotiated with the MLBPA in the next CBA. (The current CBA expires in December 2011).

SELECT READ MORE TO SEE THE REST OF THIS ARTCLE, PLUS "TIDBITS", INCLUDING MARK CUBAN LOOKING FOR A REBATE

So, as MLB changes the rules and structure of player recruitment in a country which has produced greater and greater numers of their players these past 20-30 years, what will happen? Does a draft of amateur talent suppress or inflate the cost of recruiting players? Does a draft of amateur talent increase or decrease the output of players subject to it? Depends upon who you ask. LWIB, the Sports Agent Blog posted a recently published paper in the LOYOLA L.A. ENTERTAINMENT LAW REVIEW, authored by Daniel Hauptman, titled The need for a worldwide draft to level the playing field and strike out the national origin discrimination in Major League Baseball. Mr. Hauptman argues that amateur players currently subject to the draft (those in U.S., Canada and Puerto Rico) are underpaid in comparison to their peers in countries not subject to the draft. In a nutshell, a drafted player can negotiate with one club, an international free agent can negotiate with 30. In other words, Stephen Strasburg vs. Aroldis Chapman. Mr. Hauptman argues that without a worldwide draft of amateur talent, MLB is inviting a lawsuit. From the “abstract”:

 

When applying federal (Title VII) and state national origin discrimination laws to the baseball drafting system, it is evident that all draft-eligible U.S. baseball players (as well as residents of Canada and U.S. territories) could successfully state a claim of “reverse” national origin discrimination inherent in the draft. Furthermore, the national origin discrimination claim would not be preempted by national labor law that encourages collective bargaining in sports and other industries. There have been forty-five years of baseball entry drafts in which U.S. amateurs have been treated worse than foreign players, and there would be no need for discrimination litigation if Major League Baseball were to institute a worldwide draft with uniform drafting rules around the globe.

Yes, Aroldis Chapman was in a superior negotiating position to Stephen Strasburg. But does that mean that a worldwide draft will result in an overall lowering of player recruitment costs in Latin America for MLB? Some have argued that the imposition of the amateur draft in 1965 made recruiting talent “domestically” more expensive than recruiting it internationally. (In other words, in Latin America) A 2003 Emory University School of Law Paper, U.S. Labor Market Regulation and the Export of Employment: Major League Baseball Replaces U.S. Players with Foreigners, concluded that the introduction of the amateur draft (since renamed the First-Year player draft) resulted in the drastic increase of Latin American players in MLB.

…in 1965, the imposition of both the player draft and stricter age minimums for hiring U.S. players reduced the benefits of signing and developing players from the U.S. Our empirical analysis, using an extensive new data set of every MLB player from 1947 on, then shows that, in response, teams have shifted to hiring and training players from other countries where the regulations do not apply, especially in Latin America. That is, the regulations have caused teams to replace U.S. players with foreign ones.

In 2007, Chris Isidore of CNNMoney.com quoted Jimmie Lee Solomon, MLB’s Executive Vice President, Baseball Development, "Clubs do leverage their dollars much better if they develop a kid in a country not subject to the draft,"…"Those decisions are purely business decisions, very pragmatic business decisions." In August of last year, Joel Millman wrote in the WSJ, “…Instead of signing hundreds of U.S. amateurs out of high school -- the traditional business model for stocking minor-league rosters -- teams are drafting fewer U.S. kids and signing more so-called nondraft free agents, the vast majority of them teenagers from Latin America.”

It is obviously overly simplistic to conclude that the draft alone makes it more expensive to recruit a player from the US than the Dominican Republic. A $10,000 signing bonus is worth incalculably more to a Dominican boy than a middle class American boy. And the Dominican prospects do not have the alternatives outside of baseball that their U.S. peers do. Should players in the DR be subject to the amateur draft that will not change. Drafted Dominican players will not have the option that drafted American high school players have of not signing in favour of playing at a Junior College or University and being drafted again. Nonetheless, the impact of an amateur draft on the Dominican labour market for baseball players is unknown. Some, including the Puerto Rican government, (see Mr. Hauptman’s paper) argue that the introduction of the draft in that country led directly to a steep decline in the number of prospects recruited there. And those that argue that the amateur draft “killed” baseball in Puerto Rico caution that an amateur draft in the DR will do the same. The “buscone system” will be dismantled, resulting in vastly fewer players being produced there. Warts and all, steroids, age and identity fraud, kickbacks, bonus skimming…the “buscone system” has produced a staggering amount of baseball players considering the DR’s population of approx. 10 million.

One of the biggest changes in MLB during the recent past is the huge influx of Latin American players. Will that remain the status quo or will MLB’s interventions eventually result in fewer big leaguers from the DR? In the short term, clubs will be happy that they are less frequently defrauded by crooked buscones. But longer term, will they miss the critical mass of cheap talent - particularly for their minor league teams - that those same buscones have been producing for decades. Or can MLB replace the buscones with their own infrastructure of academies and leagues which will produce the same number of players, but in a healthier environment for the players and a more ethical business culture for the clubs? Who knows?

TIDBITS

  • The SportsBusiness Journal reported that Mark Cuban and Jim Crane are asking for a combined $2.65 million in legal fees and other expenses stemming from their failed bankruptcy bid for the Texas Rangers in August. They argue that had they not bid for the club, the creditors would have received $98 million less than they did.
  • Big changes in independent baseball. The Winnipeg Goldeyes, Fargo RedHawks, Kansas City T-Bones and Gary SouthShore Railcats have all left the Northern League to join the American Association. The Northern League is the seminal league in the history of independent baseball. It debuted in 1993 and it’s success spawned many other independent leagues across North America. The departure of the four aforementioned clubs leaves the Northern League with four franchises and many questions surround it’s future. See Baseball America and Ballpark Digest for more.
  • Padres owner Jeff Moorad has purchased the Portland Beavers Triple A franchise. The franchise will be based in Tucson for at least the 2011 season. The plan is for the franchise to eventually be permanently located in the San Diego suburb of Escondido. Before that happens, the customary wrangling between the franchise and the local government has to be concluded. Again, see Baseball America and Ballpark Digest for more.


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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