Posted by Brian Joseph on Sunday, September 6, 2009 at 3:07 am

Every non-waiver and waiver trade deadline sees a handful of players move teams in the final year of their contract that are likely to earn Type A or Type B free agent status. Based on the latest estimated Elias Rankings, teams who traded for Rafael Betancourt, John Grabow, Matt Holliday, Felipe Lopez, Victor Martinez and Billy Wagner are in line to earn Type A compensation if they offer arbitration and teams who traded for Joe Beimel, Jon Garland, Nick Johnson, Adam LaRoche, Ivan Rodriguez, Freddy Sanchez, Jarrod Washburn and Jack Wilson are in line to earn Type B compensation for offering arbitration.

Offering arbitration can be tricky if the goal is to earn compensation but not retain the player since it is in the player’s court at that point to accept or decline. Billy Wagner, for example, earns the Boston Red Sox two draft picks if they offer Wagner arbitration and Wagner declines to hit the open market. Then, Wagner must sign with another team and Boston would receive that club’s first round selection if it falls between #16 to #30 or their second round selection and a supplemental “sandwich” pick as compensation for losing Wagner. A Type B free agent offered arbitration earns the losing club a “sandwich” pick but doesn’t cost the signing team a selection.

The best a club can do is earn a 16th pick for their Type A loss since the first 15 picks are protected. Last year’s rental of Mark Teixeira may not have earned the Angels a trip to the ALCS but Los Angeles did collect Michael Trout and Tyler Skaggs with the 25th and 40th picks as compensation for their loss of Teixeira in free agency. In cases where teams sign more than one Type A free agent, the losing team might see their first compensation pick drop to a later round. The Yankees, for example, signed CC Sabathia and A.J. Burnett in addition to Teixeira and in addition to giving up the 25th pick for Teixeira had to give up the 73rd pick to Milwaukee for Sabathia and the 104th pick to Toronto for Burnett. Despite Sabathia and Burnett’s higher Type A status, the fact that they signed with the Yankees actually brought less compensation than fellow Type A pitcher Derek Lowe because of who they signed with.

Not only is the value of a Type A and Type B somewhat of a crap shoot due to its dependency on other signings and where signing teams finish in the standings, what the actual selections deliver has been a crap shoot as well. To illustrate this, let’s look at compensation picks from ‘99 to ‘03.

During the five year stretch from ‘99 to ‘03, MLB teams made 138 compensation selections. Here’s a breakdown of where those selections fell and the percentage of players selected that made it to the majors. In addition, the average career WAR of the 138 selections for the team that drafted them. This WAR value includes the value brought in return if the selection was traded at some point during his tenure with the team.

Overall, the average selection averaged out to 1.2 WAR for their career. Considering the best a team can hope for with a draft choice is six years of Major League experience from their selection, this averages out to roughly 0.2 WAR/year for a compensation selection.

Although the average career WAR is 1.2, most compensation selections from ‘99 to ‘03 did not make it to the majors. In all, only 27.5% of all players selected earned Major League experience with the team they were drafted by and one in 20 went unsigned.

Since most players drafted failed to even make a Major League appearance, let’s look at how the players fall in “buckets” based on career WAR:

Again, these WAR values include the WAR of players acquired via trade if the player was moved before reaching his the end of his Major League service with his original club. Nearly 79% of all players selected as compensation picks from ‘99 to ‘03 generated less than 1.0 WAR for their original teams. Here’s a look at a scatter plot of the player’s career WAR compared to where they were drafted. Labeled on the graph are the players with the highest WAR (David Wright) and lowest WAR (Matt Ginter):

Of the 138 players selected as compensation for free agent losses, here are the top and bottom 5 selections based on career WAR:

TOP 5

1. David Wright (‘01 Mets – 1st Round, 38th Selection as compensation for loss of Mike Hampton)
2. Brian Roberts (‘99 Orioles – 1st Round, 50th Selection as compensation for loss of Rafael Palmeiro)
3. Nick Swisher (‘02 Athletics – 1st Round, 16th Selection as compensation for loss of Johnny Damon)
4. Joe Blanton (‘02 Athletics – 1st Round, 24th Selection as compensation for loss of Jason Giambi)
5. Casey Fossum (‘99 Red Sox – 1st Round, 48th Selection as compensation for loss of Greg Swindell)

BOTTOM 5

134. Mike Fontenot (‘01 Orioles – 1st Round, 19th Selection as compensation for loss of Mike Mussina)
135. Casey Daigle (‘99 Diamondbacks – 1st Round, 31st Selection as compensation for loss of Devon White)
136. Abe Alvarez (‘03 Red Sox – 2nd Round, 49th Selection as compensation for loss of Cliff Floyd)
137. Mike Bynum (‘99 Padres – 1st Round, 49th Selection as compensation for loss of Ken Caminiti)
138. Matt Ginter (‘99 White Sox – 1st Round, 22nd Selection as compensation for loss of Robin Ventura)

With only 21% of all selections generating 1.0 WAR or more during the time with their original club, the 1.2 average WAR is a little misleading. And at a cost of between $1.5 and $2 million to sign two compensation selections for a Type A free agent loss or around $1 million to sign one compensation selection for a Type B free agent loss, earning compensation picks isn’t instant windfall for the team awarded picks.

However, even with the slim possibility of selecting the next David Wright or Brian Roberts, it’s far from a losing proposition. But when looking at compensation picks, it makes more sense to look at compensation picks as lottery tickets to a potential talent fortune instead of automatic value. Anyone who has played the lottery knows that it’s great to have hope and even better when your number hits but there’s going to be a lot more losing than winning.