What Can We Learn from The Josh Hamilton Contract?

Two years ago, the Los Angeles Angels signed Josh Hamilton to a whopping, surprising five-year contract that paid the mercurial outfielder $125 million dollars. The deal came one year after the Halos signed Albert Pujols in perpetuity for a twice-weekly fistful of diamonds, so Hamilton’s mammoth contract came as a shock.

After his two seasons in Anaheim, the deal doesn’t exactly look like a winner. Hindsight being what it is, is it easy to say the signing was doomed from the start. A look back through the archives both here at Fangraphs and at MLB Trade Rumors shows a lot of first guessing and some otherwise hilarious comments from around baseball. There were plenty of red flags around Hamilton, from his health to his performance and just about everything in between.

At the time of the deal, Hamilton was headed into his age-32 season and coming off a 43 homer year. He was unquestionably talented but also eminently questionable. The approach, the off-field history, the spotty medical records; all of it made for a bizarre free agent pursuit. The team that knew him best wouldn’t guarantee a fifth year, according to reports. The Angels rushed in with five years and no strings, much to the chagrin of Rangers GM Jon Daniels.

With two years of history on our side, we can see flippantly say this contract was doomed from the start. The biggest question is this: did Jerry Dipoto and the Angels front office offer Hamilton this deal knowing it was bad the moment he signed it?

There aren’t a lot of precedents for a deal of this nature. The huge dollar amount without the term to match makes it unique. Brian McCann and Russell Martin signed five-year deals as free agents, though they’re both catchers and they signed for a significantly lower total commitment – $40 million dollars less. Torii Hunter, the man Hamilton replaced in Anaheim, signed a five-year deal worth $90 million in 2007, when longer term deals were less common and the price of a win was (slightly) lower. Even with that inflation, the extra $35 million promised to Hamilton stands out.

One deal signed this offseason comes close to replicating the size and shape of Josh Hamilton’s contract – the four-year plus an option agreement between Hanley Ramirez and the Boston Red Sox. The enigmatic shortstop heads to Boston with four years guaranteed at $88 million, with a fifth year (at $22MM) vesting if he reaches some health thresholds.

Two supremely talented players with health concerns and underlying makeup issues, two contracts shorter than we might expect with a high AAV – the sort of messageboard deals that rarely materialize in real life. And yet, two years earlier, Hamilton received almost $40 million more guaranteed – a staggering figure.

Comparing the two players, there are similarities in their production prior to hitting the free agent market. First looking at three years prior to free agency.

Name	G	PA	HR	SB	BB%	K%	ISO	AVG	OBP	SLG	wOBA	wRC+	WAR
Josh Hamilton	402	1745	100	23	8.1%	20.1%	.269	.313	.370	.583	.401	148	16.6
Hanley Ramirez	371	1515	57	45	9.0 %	17.7 %	.200	.285	.356	.486	.365	135	11.3

And then the two year platform they built for themselves

Name	G	PA	HR	SB	BB%	K%	ISO	AVG	OBP	SLG	wOBA	wRC+	WAR
Josh Hamilton	269	1174	68	15	8.4 %	21.7 %	.267	.291	.350	.558	.379	135	8.2
Hanley Ramirez	214	848	33	24	9.8 %	16.0 %	.216	.308	.382	.525	.394	157	8.4

Yes, Hanley has even more trouble staying on the field and excluding Hamilton’s monster 2010 season isn’t something fair – the talent was never in question. It is very difficult to separate what we thought about Hamilton at the time from how far his stock fell over the last two seasons.

The league-wide unwillingness to offer a fifth guaranteed year suggests the book on Hamilton was well known. He had a short shelf life and those in the running for his services wanted nothing to do with even a fifth season on their books. Yet in swooped the Angels, hungry for a world title and eager to send a shot across the bow of their division rivals. Flush with cable cash and Mike Trout Bonus Bucks, believing (rightfully, as 2014’s regular season suggests) that they could build the best team in baseball.

Watching the Angels scrounge for pitching solutions all season, one has to wonder if, pushed higher by Hamilton’s sunk costs, they reached their financial ceiling? Perhaps this isn’t the worst case scenario for the Hamilton deal but the crushing reality staring them in the face the entire time?

Other teams can learn from the impatient Angels, who appear to have outsmarted themselves when they upped the ante for Hamilton. Now they’re stuck with a significant percentage of their payroll tied up in one player who never figures to deliver any value, perceived or otherwise. Perhaps we won’t see a contract like Hamilton’s, with an enormous amount of money promised over a relatively short period of time. It feels very, very unlikely,and yet…

All around the league, teams take stock of aging curves in the post-PED era and reassess the value of these super long deals. As contract opt-outs become more common, players can attempt double-dipping on free agency — or getting paid in bulk after selling off their arbitration and free agent years early.  Perhaps the Hamilton contract model comes into vogue as a way of shifting risk away from the teams, wary of the opt-outs biggest downside (an underperforming player stays in his contract after declining.)

It’s always tough to bet against the very thing that landed the Angels in this predicament in the first place: one gonzo owner blowing up the market and offering an extra year. Josh Hamilton’s contract looked bad from the start and looks even worse now, with three years still remaining. But as the ten-year deals extended to Joey Votto, Albert Pujols, Prince Fielder, and Robinson Cano head into their second halves, maybe the Angels balloon payments to Hamilton end up looking like the lesser of two evils.