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.
Drew used to write about baseball and other things at theScore but now he writes here. Follow him on twitter @DrewGROF
Barry Zito had the same red flags. Is this just teams hoping that these guys will repeat past success??
That is the definition of free agency, no?
I think the thing Hamilton is he had two problems.
1)We really have NO idea on his aging curve. He person that is drafted at age 18 and disappears until age his mid-20s after abusing drugs/alcohol isn’t exactly common.
2)His profile depended so much on his hit tool. He swung outside the zone all of the time because he could make contact with everything. The bat speed slows a bit and you still have this approach, you might be in trouble **cough**Pablo Sandoval***cough***
Pablo Sandoval’s current contract will carry through his age-32 season, and Hamilton signed this contract prior to his age-33 season.
The only reason I didn’t intentionally shoot my eye out when the Red Sox signed him.
Unless Hamilton signed his contract last winter then no, he signed his contract prior to his age 32 season.
That or once again Baseball-Reference has been hacked.
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interesting article! one minor point to quibble with…Hamilton deserves at least a *bit* of credit for producing at an average rate the last two seasons and being projected to do so again in the upcoming season. Average has value! (just not $25 million/year worth…)
3.1 wins in 2 seasons isn’t average.
I’d like to see the contortions required to see him as average over the past couple years.
3.1 WAR over 240 starts is about 2 WAR per 162 games, which is on the low end of MLB starter. And also, I must admit that Hamilton should not be expected to start 162 games in a season.
But then you have 84 starts needed by someone else, who probably isn’t very good and that $25M/year makes it that much hard for them to get a decent replacement.
Anyway, that’s the whole point of using a counting stat like WAR.
I give that contortion a rating of “touching toes.” Doesn’t really hit the crazy “man in a box” but I guess we can’t expect too much.
I don’t understand this sentence: “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.”
Isn’t it overwhelmingly likely that Hamilton provides SOME value over the next 3 years?
I’d say he provides some production but, given his cost, little to no value.
there are 2 ways you can look at value, WAR or ROI, i.e. value relative to replacement level players or value relative to the other ways $25mm could be spent.
I won’t be surprised if Josh Hamilton is the AL MVP this year.
He is Josh Hamilton, and he is nothing like anyone else in MLB history.
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Winner’s curse. Whoever gave him the extra year was going to regret it, but without collusion somebody was going to do it. Looking back with perfect hindsight might be fun, but you have to remember that even the Rangers thought that he would provide immediate value. Falling off a cliff is every player’s lowest possible projection. That doesn’t mean that you can sign them to a contract that pays them as such. So, if we learn anything from his contract, it’s that free agency is inherently a difficult place to get good value. Even more so for players who command large salaries, because they still can fall off a cliff like anybody else. The difference with them is that then they become 25 million dollar a year “clubhouse guys.”
Where in the linked Fangraphs article do you see first guessing? I don’t see it.
Yeah – it wasn’t hard to see that years 4 and 5 were going to be a big overpay. However, nobody was predicting the drop off we saw in years 1 and 2. Sure there were signs that he was slowing down but when he signed the deal he was just 6 months off from being the best hitter in baseball (through his first 200 AB’s he posted an OPS of nearly 1.200). He has always been a streaky hitter so it was easier to ignore the 2nd half of 2012.
The deal was never going to work out from a WAR perspective. The Angels knew that. However, I’m sure they thought that they could at least get him to average 30 HR’s over the first 3 seasons and post a respectable BA. Based off where they were on the win curve an overpay for that production isn’t the worst idea in the world. Unfortunately, his power is now non-existent, he isn’t hitting for a decent average, and isn’t seeing a lot of free passes. His injuries are more problematic. He was just absolutely lost in the post-season. What a complete disaster.
I often believe in trying to see things as probability distribution. Just because we didn’t think his drop off in 2013/2014 wasn’t going to be this bad, we did have reason to believe he was at higher risk of a big, early drop off (and one of those warning signs was his late-2012 performance that shouldn’t for any reason be ignored, streaky hitter or not. In fact his second half 2012 wRC+ is damn similar to what he did in 2013 and 2014). We also knew that projecting him to be worth $25M/year even in 2013 was probably tad optimistic, at the very least he wasn’t likely to provide much surplus value in years 1 and 2. And most FA contracts need that early surplus value to offset the decline in later years and/or increasing payments in later years.
So, the chances of surplus value early were small, the magnitude of that surplus value you get, even if you got it, was going to be small, and the chances of injury/diminished skills sapping his value earlier in the deal than later were high. Add it all up and the chances of this thing going really bad were not remote at all.
I don’t generally believe in using 1H/2H splits, but Hamilton’s 2012 season was unique. His 1H was one of the best we have seen in a very long time (relative to the league), and he completely fell off a cliff 2H. There was good reason to believe he might not ever surpass $25mm in value again, let alone justify a 5 year contract with a $25mm AAV.
apparently my memory is failing me a bit, but Hamilton did have a 200+ wRC+ in each of March/April and May, striking out under 20% in each. while he finished 2012 strong, he still struct out almost 50% more often in the final 4 months than he had prior to June.
Meanwhile, the Cubs owe Soler, Rizzo, and Castro 135 mil over the next 6 years….combined.
Do Cubs fans have nightmares that Soler and the other oh-so-promising Cubs rookies/prospects will turn into Jerome Walton and Dwight Smith?
We understand that some won’t pan out, but hope that there’s safety in numbers. Also, Dwight Smith sang the National Anthem at Wrigley one day, which WAR doesn’t take into account.
Finally, I appreciate that your examples were Walton and Smith. Those wounds have healed, while those caused by Corey Patterson and Felix Pie have not.
That’s great news for the Cubs bloodsucking owner Tom Ricketts running his scam based on how he “can’t afford to buy players because the apartment owner across the street won’t let me build a giant sign.”
Cubs fans take the prize as most gullible.
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Huh? Since you’re quoting him, please provide a link. Or are you just talking shit?
PS: You take the prize as the biggest douche I’ve encountered today.
It seems to me that a contract similar to Hamilton’s is Carl Crawford’s. (It was longer, but Crawford was younger.) In both cases the team’s assumption had to be that excess value in the early years would make up for probable overpayment for the out-years; and in both cases there was an immediate falloff in performance making the deal an obvious flop within 18 months.
Funny you should mention Carl Crawford. The Angels were aggressively pursuing Crawford until the Red Sox badly overpaid for him in FA. As a result of missing out on that “big name” FA, the Angels traded Mike Napoli for Vernon Wells and his awful contract. That deal cost the previous GM his job.
“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..”
Ryan Howard wants his recognition in regards to enormous amounts of money over a short period of time with no value added.
Howard’s contract is indeed five years and $125 million, but it was an extension two years before it needed to be written.
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That first paragraph is pretty good, props for semi-interesting writing.