MLB free agency has always been a little easier to understand than its NFL and NBA counterparts, without a salary cap, but 2013's MLB free agents arrive in the Hot Stove League with one of baseball's cruftier offseason traditions completely revamped. In: Qualifying offers. Out: Terms like Type A and Type B and the entire arbitration process. It's a much simpler system, inasmuch as now you can ignore the Elias Sports Bureau like you always wanted to. Now you just need to know one thing: What is a qualifying offer, who makes them, and how does it change the draft compensation system?
Let's use St. Louis Cardinals starter Kyle Lohse—who received a qualifying offer in November and is almost certain to leave the club for greener pastures in the offseason—as an example. With Type A and Type B a thing of the past, the Cardinals are left with one decision to make about their free agents: Qualifying offer or no qualifying offer?
A qualifying offer is nothing more or less than a one-year contract for a moving average of the year before's top 125 salaries. This year, that's $13.3 million. A team can offer it to its free agents—at which point they become eligible for draft compensation—or choose not to.
In this sense, it's a lot like the old arbitration system, only things are simplified; teams still have to decide whether to gamble money on a draft pick, but it's the same money for every free agent. (Teams are also no longer able to receive draft compensation for players who didn't spend the entire season on their roster—that is, no more draft picks for midseason trade pick-ups.)
So the Cardinals offered Lohse a one year, $13.3 million contract, which he will probably turn down. When another team signs him, they'll forfeit a first-round draft pick, and the Cardinals will receiver a separate compensation pick after the first round is over; the old pick just disappears.
The Cardinals had an easy decision to make; Lohse will almost definitely earn multi-year interest from other teams, so there's little risk of him accepting the offer. But the new standard protects players whose old "Type A" designations used to torpedo their market value. Unless their old team is willing to risk a double-digit payroll hit on a qualifying offer, teams in the market for relievers will no longer have to give up a first-round pick to sign them.
So that's the qualifying offer system. No more arbitrarily sequenced lists of players, no more classes of compensation, and no more relievers getting burned by the increasing value of first-round draft picks. Either you offer the contract or you don't.