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Theo Epstein on why a second-round pick matters

01.04.13 at 9:55 am ET

Cubs president of baseball operations and former Red Sox GM Theo Epstein, in an interview on WEEI’s Red Sox Hot Stove Show on Thursday night, suggested that draft picks — even second-round picks — are more valuable than ever in the current baseball climate, helping to explain a reluctance for teams to pursue certain free agents. (To listen to the complete interview, click here.)

Like the Red Sox, the Cubs — who went 61-101 in 2012, the second-worst record in the game, thus entitling Chicago to the No. 2 overall pick in next year’s draft — have a protected first-round pick. Chicago thus could sign one of the players who received one-year, $13.3 million qualifying offers from their 2012 teams without forfeiting its top selection in next year’s draft. Still, like the Red Sox, the Cubs are extremely protective of the second-round pick that they would have to give up if they were to sign a free agent who received a qualifying offer (pitchers Kyle Lohse and Rafael Soriano, first baseman Adam LaRoche and outfielder Michael Bourn are the remaining free agents who would cost a draft pick).

In short order, the reasons for the Cubs’ protectiveness of the pick include:

— The second-round pick is higher than ever. In past years, under previous Collective Bargaining Agreements (when teams simply needed to offer free agents salary arbitration in order to secure one or two compensatory picks), there was a broader array of free agents whose departure would result in their former teams receiving one or even two compensation draft picks. The result was dozens of picks in the sandwich round that falls between the first and second rounds, on top of the 30 (or more) picks in the first round.

The result? In the last six drafts, the average top pick of the second round was the No. 56 overall pick in the draft.

This year, however, the number of compensation picks has been drastically reduced. In functional terms, the sandwich round has been almost eliminated. While there are six new picks at that stage of the draft (the result of a competitive balance lottery for small-revenue clubs), second-round picks now expose teams to a position in the draft where they should be able to make a more impactful selection. The top pick of the second round this year will be roughly the No. 38 overall pick in the draft.

“You don’€™t have the amount of compensation picks that you had in the past, so that second-round pick for us is where a high sandwich pick would have been in the past,” said Epstein. “So it doesn’€™t matter what round your pick is in. It matters what number it is. So we’€™re protecting more than a second-round pick. We’€™re really protecting a high sandwich pick. That’€™s the case for most teams that look at it that way.”

— The new Collective Bargaining Agreement drastically restricts the ability of teams to spend on amateur talent. Teams are penalized for exceeding draft bonus pool recommendations that are defined by Major League Baseball based on the order in which they pick, with the potential to forfeit a subsequent first-round draft pick if teams blow too far beyond a draft spending threshold.

When Epstein was with the Sox, the team gave up its first-round draft pick in 2007 in order to sign free-agent Julio Lugo. (Commentary unnecessary.) But the team could offset the loss of its first-round pick by smashing past slot recommendations later in the draft to draft and then sign players who faced signability questions, including fifth-rounder Will Middlebrooks, sixth-rounder Anthony Rizzo and 23rd-round pick Drake Britton.

Under the new CBA, by giving up a second-round selection and the potential bonus money (in excess of $1 million) that goes along with it for draft spending, it actually would become even more difficult to draft and sign such players who would would require above-slot bonuses in later rounds. In other words, teams that lose high draft picks can no longer spend their way past such limitations. The consequences of giving up a pick, then, are greater than ever.

That fact is reinforced by the spending restrictions that Major League Baseball has likewise placed on signing international amateurs. Teams face a cap in terms of what they can spend for top international amateurs. They can no longer reallocate money that would have gone to the draft for players abroad.

“There aren’€™t multiple paths into the amateur marketplace anymore. In the past, you could give up a high pick and realize you were going to overpay someone later on. You could give up a couple draft picks and realize that you’€™d just go out and try to dominate international free agency that year. You just don’€™t have the ability to do those things anymore,” said Epstein, who will be in Boston next week for the annual Hot Stove Cool Music events (a roundtable discussion on Friday, Jan. 11, and concert on Saturday, Jan. 12) to benefit the Foundation To Be Named Later. (For information and tickets, visit the website of the Foundation to Be Named Later.)

‘€œSo when you surrender a draft pick and the [draft bonus] pool space that goes with it, you’€™re really admitting that you’€™re not going to have as impactful a draft that year as you would otherwise, and that’€™s something that’€™s really hard to do, given the price of free agents these days and just how meaningful it is to develop your own talent and have that player under control for six years.

“It’€™s really hard to say: ‘€˜Hey, we’€™re trying to build a healthy organization, but we’€™re going to do it while admitting our draft is not going to be quite as impactful this year.’€™ You’€™re seeing a real premium placed on the draft picks and the pool space that goes with it for good reason.”

— The result has been a chilling effect on some free agents who fall short of elite status. While the Angels forfeited a first-round pick to sign a superstar like Josh Hamilton, the Braves gave up their first-rounder to add B.J. Upton and the Indians (who had a protected first-round pick) parted with a second-round selection to sign Nick Swisher, there are still four free agents who would require the sacrifice of a pick who remain on the market. And there’s no question that the market for their services has been impacted by the pick attached to them.

The Sox, for instance, likely would have pursued LaRoche more aggressively if he (like Mike Napoli) had not required the sacrifice of a pick, or if there were avenues to offset the loss of a pick. But because the cost of signing him would be not just extending as far as three years but also potentially damaging the farm system for years to come, the team has done little more than check in on LaRoche.

“I think it’€™s a little bit unfortunate, the effect it’€™s had on certain free agents when there’€™s no rhyme or reason to it,” said Epstein. “I feel like the best thing that can happen to a prospective free agent in his platform year is getting traded, because it removes the burden of the draft-pick compensation. I’€™m sure that’€™s something that they’€™ll look at going forward.’€

Still, there are players who will justify the loss of a second- or even a first-round pick. (The Sox, for instance, would have been willing to give up a pick to sign Josh Hamilton to a contract at the right terms.) However, the threshold for the type of player — and deal — whose signing would justify the sacrifice of a pick has been raised.

‘€œYou can’€™t be dogmatic about it. Clearly, there are major-league free agents who are talented enough to justify surrendering a first-round pick and certainly a second-round pick,” said Epstein. ‘€œIt all depends on ‘€“ not just the player ‘€“ but the contract and then potentially what you could get out of the player in terms of contributions on the field or a potential trade down the road.’€

Read More: Adam LaRoche, draft pick compensation, Theo Epstein,
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