September 23, 2008

Future Shock

The Alvarez Standoff, Resolved

by Kevin Goldstein

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Late Sunday night, the Pedro Alvarez drama took a turn towards a surprising conclusion when the second overall pick in this year's draft agreed to terms on a major league deal that could pay him as much as nearly $8 million over the next four years.

There is still much to be done here. Alvarez has yet to actually sign a contract. There is still a physical that needs to happen, and there are still items to be worked out, including the salary guarantee provisions and injury protections that agent Scott Boras routinely addends to the deals that he negotiates. In addition, the union and Major League Baseball have to agree to additional settlements around the grievance in order to put this all to bed. As a result, this week's grievance hearings will not take place, but for now, the grievance is officially on hold, as opposed to dropped. All indications are that this will all be taken care of over the next week or so, and all sides are working diligently to end this. This conclusion will also release Royals first-round pick Eric Hosmer from his "pending active" purgatory.

Conversations with multiple sources indicate that the Pirates and the Alvarez camp re-opened discussions on or around the first day of the hearing two weeks ago. These discussions took place with the knowledge and bilateral agreement of the union and Major League Baseball, and arbitrator Shyam Das also approved of the talks.

Sources indicate that the first day of testimony, which featured Commissioner Bud Selig and Dan Halem, MLB's number two labor attorney, did not go well in any way for major league baseball. The feeling among many is that MLB informed the Pirates to work out the best deal possible, as some worst-case scenarios were suddenly looking very possible, primarily the one that included the initial deal being voided and the Pirates being punished by losing their compensation pick for not signing him.

From a previous article on possible outcomes, this is most related to the second scenario I suggested, in which an additional negotiating window was provided. In theory, this provided Alvarez with a normalized negotiating arena, one that he did not have once the extensions were granted. As discussed in that piece, such an allowance would create some understandably hard feelings among other draftees and agents who feel that this arrangement allowed both the Pirates and Pedro Alvarez with more negotiating time, as well as more knowledge than either they or their clients received in their own negotiations. In order to avoid this from becoming an issue, both sides will hold their noses and work together to insist that this is no longer a draft contract. If you look at the details of the new deal, one aspect of it is very important with regards to this subject: the bonus has not changed. It remains $6 million, so that both sides can say that this is the draft deal initially agreed to, and that all of the things on top of it (the major league deal and all of its advantages, the guaranteed salaries, etc.) represent the settlement in this case.

As for the settlement of the grievance, there are still details to be worked out, and most of them revolve around the undocumented reporting process. The current system shuts the union out, as communications are solely between teams and MLB's offices. That helped create confusion as to the precise timing of the Alvarez and Hosmer situations, and some believe this might be addressed by no longer requiring an agreement of terms, but rather an executed contract by the deadline, with of course, no more extensions granted. This would eliminate much of the gray area, and many teams hope that it would also end Major League Baseball's ongoing practice of delaying the acceptance and announcements of many over-slot bonuses until the last week before the draft, a policy that delays teams from getting their highly-paid players on the field.

Let's make no mistake here-Scott Boras won this one. It's not a massive, blowout victory, but it's a win; he got his player more money and benefits. That wasn't necessarily the ultimate goal, but it counts for something. Beyond that, Boras ensured that this situation will not happen again, and on a grander scale, Pirates president Frank Coonelly took him on directly, and looks foolish for his troubles. As one front-office staffer with another team assessed the Pirates performance, "they went into a gun fight with a water pistol and ran away before shots were fired."

Make no mistakes either that the Pirates lost this one. Yes, they got their player, a potential middle-of-the-order run producer who instantly becomes the top prospect in the system, but at the same time, the negative image hit both externally and within baseball is massive. Polls taken by local media had most fans blaming the Pirates for this situation. Coonelly looks like a paper tiger after making a strongly-worded statement at the beginning of this situation, only to fold up like a cheap suit in the end and give Boras and Alvarez that extra negotiating window-the concept that he was so against in the first place.

Now we can start looking forward to next year's draft. Going into 2008, the Pirates' new administration was under considerable pressure to take a potential superstar, no matter the cost, and avoid the cheap tactics that had the previous administration selecting Daniel Moskos over Matt Wieters in 2007. If the season ended today, the Pirates would select fourth overall in the draft behind the Mariners, Nationals, and Padres. As usual, many of the top talents in the draft are being advised by Boras. This year's actions simply replace the pressure on next year's draft, as the Pirates once again could be placed in the position of being forced to select a Boras player or be once again accused of playing it cheap for a team that hasn't had a winning year since George W. Bush's father was president.

When the Pirates first had a press conference to announce the initial signing of Alvarez in August, owner Bob Nutting called the new administration, led by Coonelly and general manager Neal Huntington, "the single best management team in all of baseball, maybe all of sports." Much like Coonelly's opening statement which begun this battle, so far, that's all talk.

Kevin Goldstein is an author of Baseball Prospectus. 
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