Bonus Bust: Big bucks do little in international free agency

Jan 27, 2023 - 5:00 PM

January 2023 has been relatively quiet for the Atlanta Braves, punctuated by a few big days. In the middle of the month, the international free agency (IFA) signing period re-opened; a few days before that, MLB reinstated former Braves executive John Coppolella, who was ousted for improprieties in this market, and then banned from baseball for refusing to cooperate with the MLB investigation. The combination of these two events made me think about the actual value of international free agents, particularly the highly-rated ones that get the biggest bonuses, the most hype, and the biggest headlines. Back in 2019, Kiley McDaniel wrote a nice piece for Fangraphs about the value of IFA money on the whole. (McDaniel briefly worked in the Coppolella Front Office in between stints at Fangraphs, and is now with ESPN.)

While the McDaniel article linked above indicates that Fangraphs was able to secure a trove of IFA signing data, I wasn’t as fortunate. Instead, I relied on what I could gather from Baseball America (BA), namely, their top 25 projected July 2 bonuses for 2009 and their top reported 30 international free agency bonuses lists from 2010, 2011, and 2012. BA is well-respected for accurately reporting this information; I opt to focus on signing bonus as a signal and measure of anticipated production rather than media outlet rankings. The former, at least, reflects what these teenagers actually received on the (extremely flawed and likely corrupt) market; the latter has a lot of guesswork beyond just dollar signs.

The years I used are far, far in the past at this point. Why use them? A few reasons: (1) timing, since by starting so far back, I’m able to look at mostly-completed career arcs for a number of former prospects, and avoid leaving out any late-bloomers; and (2) data availability, as these were the only years I could find lists of this nature from BA for players with mostly-completed careers, although perhaps other similar lists for other years exist somewhere. I also didn’t want to go too far back in history, given that older data is perhaps not reflective of relatively modern scouting and development. With that said, my less-than-half-decade sample is probably not ideal, and teams themselves are probably better-equipped to run this kind of analysis. It is fairly well known that the hit rate on international free agents is pretty low, but I wanted to take a look at the true production of the prospects at the top of the IFA market, the ones that end up being the subjects of hype amid a sea of lower-bonus additions.

If I asked you to guess the best career fWAR by individual IFA’s signed from these four classes, you would probably guess that out of the 115 highly touted prospects there would be a few stars. The top ten career fWAR accumulators (so far in their careers) from this list are:

That is not exactly a star-studded list, nor does it include any players I would really consider a star-level player, as none have even reached 15.0 career fWAR. While most of these players have their 30s (and some of their 20s) to go, none have been perennial All-Stars or anything of the sort. Mondesi has played well when healthy, Polanco, Margot, and Candelario have been decent, Osuna was a good reliever with serious off-field issues, and the top two names here, Martinez and Sanchez, both looked like building blocks before imploding relatively early in their careers.

I also counted how many of the 115 players with top bonuses turned out to be “players of significance,” which I defined as either accumulating at least 5 career fWAR, or posting a single 3.0 fWAR season (call it the Miguel Andujar rule). Only 12 players, or roughly 10 percent of the list, fit these qualifications, and Andujar has a career fWAR total of 2.2, despite his 3.7 fWAR season in 2018. Furthermore, only a third (33 percent) of the list ever made the big leagues.

The 115 players have produced an average of 0.83 fWAR per player so far in their careers (2.5 per player that actually made the majors). Now, of course, you expect a high attrition rate for prospects in baseball, especially those that are often signed at the age of 16, but the infrequent realization of the upside is what is particularly interesting to me given that these are supposed to be the creams of this particular crop.

While it seems pretty clear that the top prospects from international free agency very rarely live up to their hype, this should not be interpreted as international free agency being a bad pathway to find quality major leaguers, as any casual follower of the sport should know. Many of the sport’s brightest stars came through IFA, they just usually are not the ones that received the highest signing bonuses as prospects.

Of the IFAs that have turned into stars, Ronald Acuña Jr., Jose Ramirez, Framber Valdez, Ozzie Albies, Luis Castillo, William Contreras, Fernando Tatis Jr., Sandy Alcantara, Xander Bogaerts, Willy Adames, and Eugenio Suarez are a number of names that were outside of the top 30 signing bonuses of their class. Meanwhile, Julio Rodriguez, Juan Soto, Vladimir Guerrero Jr., Wander Franco, Yordan Alvarez, and Andres Gimenez received signing bonuses within the top 30 of their class. Shohei Ohtani was also an IFA who received a large bonus, but he was a unique case that should more appropriately be dismissed as a clear outlier than included within the larger sample.

Of course, this does show that stars can and are found amongst the prospects given larger signing bonuses, and perhaps teams are getting better at identifying those prospects, since the star players listed above who did sign for big bonuses do trend on the younger side. Even then, however, the hit rate is still so low that the strategy of signing one or two of the top IFA prospects for millions of dollars in a signing bonus instead of a handful in the 100k-500k range should be examined. It is extremely difficult to accurately project which 16-year-old will develop into a quality major leaguer, as they are simply so far away from the majors, on both a physically and technical/baseball skills level. As such, it may be smarter to target multiple “good” prospects than one “great” one for the same overall bonus expenditure.

In order to examine the value of these top-bonused prospects versus a strategy more focused on accumulating more prospects requiring middling or low signing bonuses, I use a dollar-per-WAR comparison. Using Kiley McDaniel’s Fangraph’s piece mentioned above, I compare the return on investment of the top prospects to that of IFA money spent in general.

• I use $8.9 million per WAR as the dollar value for the purpose of this calculation, which I derived by averaging the value for fWAR calculated by Fangraphs from 2014 to 2022, (2014-2017 and 2018-2022) replacing 2021’s post-pandemic season outlier with the midpoint between 2020 and 2022. This should result in relatively little discrepancy between my calculations of value accrued, and those used by McDaniel, which might otherwise result from different valuations of WAR.
• Since the 2009 BA list did not include bonus numbers, I only use the 2010-2012 BA lists.
• I compare each of these years to the year from Kiley’s article that had the same amount of time elapsed to the time the article was published, to mirror and sync the aging experienced by a prospect class. In other words, since McDaniel’s article was published prior to the 2019 season, this means that the 2006 class was at the same age at that point as the 2010 class is now. Correspondingly, 2007 mirrors 2011, and 2008 mirrors 2012.

This analysis is never going to be perfect, due to the ever-changing landscape of the sport both in terms of scouting and development, and in terms of the financial landscape, but it does still say something about the value of the top IFAs. In short:

As you can see by the red column, the return on investment on the the “Top 30 Bonus” prospects is substantially less than the collective ROI of the class as a whole. This necessarily means that the IFAs outside the top 30 enjoy a much higher ROI than the “Top 30 Bonus” group.

Further, McDaniel included expenses as part of the return-on-investment calculation, on top of bonuses (about an extra $100k per player). This means his ROI numbers are slightly deflated compared to my calculations, which have no expenses, meaning that the spending on “Top 30 Bonus” prospects is even less efficient than my calculations indicate relative to the rest of the IFA classes, once expenses are taken into account.

These data suggest strongly in favor of a quantity-based IFA bonus allocation strategy, which appears to be more fruitful than splurging on a large bonus for one (or fewer) “top” prospects. The data also indicate some inefficiency, i.e., that the prospects not getting the highest bonuses are relatively underpaid.

A key note here is that this analysis lumps together every team. Some better player development or scouting systems might have better outcomes from higher signing bonuses. Further, this analysis takes a binary view of top 30/not top 30, instead of analyzing the ROI of different tranches or tiers of prospects-by-signing-bonus, which might yield further insights on the optimal distribution of an IFA bonus pool. Teams might do well to dive deeper into IFA bonus pool allocation strategy and find that optimal ROI point for their pool. As outside observers, this should also be a lesson for us to give less praise to whichever teams sign the “best” (most expensive) IFA prospects and perhaps even to admire the teams whose IFA classes are built less around one or two costly prospects, who instead opt to spread around their entire bonus pool to cast a wider net.