What Is Josh Hamilton Worth?

As you probably know by now, it has been reported that Josh Hamilton’s asking price in free agency this offseason is a seven-year contract for $175 million. The obvious knee-jerk response to such an asking price is a) laughter, b) slam the door in his face, c) faint, or d) all of the above. I don’t need to detail every reason why that price sounds so high for Hamilton, his soap opera-like 2012 season put enough of them on display. 
There are two major components to a baseball contract, years and dollars per year. In the case of Hamilton’s reported asking price, it is the length that is the more questionable characteristic. If the terms of a Hamilton contract were three years and $75 million, he would have no shortage of suitors. On the other hand, at seven years and $140 million, the apprehension would still be high, due to Hamilton’s impending decline due to injury history (extensive) and age (32 next season). Despite that, my question is if Hamilton is even worth the $25 million, no matter the number of years it is for.

The seven-year/$175 million contract sounds crazy, but we live in a time of crazy free agent contracts. Prince Fielder got nine years and $214 million, and Albert Pujols got ten years and $254 million. If they had announced in November 2011 that was their asking price, the public reaction may have been similar to what it was with Hamilton. It is not only Hamilton’s asking price that is estimating his market value is at or near $25 million per year. Grant Brisbee, one of my favorites at Baseball Nation, estimated Hamilton would sign for six years and $150 million. Jon Heyman, opposite of Brisbee in my mind, but still very plugged into the industry, estimated six years and $140 million (and an “unnamed expert source” estimated five years and $137 million, a $27 million AAV deal). While those estimates seem somewhat exorbitant for Hamilton, the way free agency has gone lately they’re probably pretty close to the truth.

Late last month, an extremely in-depth, insightful interview was done with the president of the Cleveland Indians and former general manager, Paul Shapiro. You can read the full interview here. About one-third of the way through the interview, Shapiro discusses evaluating free agents. He discusses how the Indians view free agents in terms of the number of wins they would add to the team, or as you know it, WAR. On top of using WAR to help estimate a player’s potential contribution and value to their team, the Indians have also tracked where the market values WAR in free agency. That valuation, Shapiro says, is $9 million per win. The more commonly used amount is $5 million per win, plus inflation. Shapiro’s number of $9 million per win is based on what teams have paid in free agency, and how those players then performed under their free agent contracts. The difference between the two values is the difference between what a team actually gets from signing free agents ($9M/WAR), and what they hope to get ($5M/WAR).

A rate of $9 million per WAR sounds very high, but then most free agent contracts signed in recent history have also appeared very high, so it makes sense, really. Using $9 million per WAR, and a more conservative $6 million per WAR (allowing for inflation), let’s try to determine if Hamilton would be worth a hypothetical six-year, $150 million contract.

First, a look at Hamilton’s WAR since he joined Texas in 2008, his first full season in the major leagues:

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As you can see, Hamilton has averaged 4.2-4.5 WAR per year, depending on which valuation system used. You’ll also note that this was during Hamilton’s prime years of his career, with an average age during that span of 29 years old. Additionally, I’ve accounted for Hamilton’s missed playing time, and assumed that if viewed in the most optimistic light possible, some team may think Hamilton would hold up for 150 games per season (though that would be unprecedented), and would not regress from his current production levels.

At this point, you should probably be doing some form of regression modeling in your head, even if you don’t call it that. You’re accounting for Hamilton missing games due to injury, dropping in performance due to age, losing some positional value by not being able to stick in center field or even in left field, and perhaps losing some value by no longer playing in the Rangers ballpark. You know he won’t be a four- or five-win player for the length of his next contract. But to be worth $25 million per year, does he have to be? Using both the $9 million per WAR rate, and the $6 million per WAR rate previously mentioned, let’s review:

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Starting with the $6 million rate, you see that Hamilton would have to continue to produce for the next six years at essentially the exact same level as he has the past five years, which is extremely unlikely at best. At the $9 million rate, Hamilton could regress to a 2.8 WAR per year player for six years, and live up to the value of the contract. However, as stated before, $9 million per year is the going rate, not necessarily the true breakeven point of a player being “worth” it. Any team giving a six-year, $150 million deal to a player is wanting more than just a 2.8 WAR player.

Back in May, on a different site, I wrote about the contract that I would give Hamilton this offseason. I am proud to say that I will still stand by that offer, which I believe is fair to the player, but not too risky for the team. Here is the key excerpt from that article:

My best offer to Hamilton would be as follows: 4 years, $84 million, with two option years. The year 5 option vests for $18 million if Hamilton reaches 550 plate appearances in year 4. If it does not vest, the team holds a $12 million option, and the player holds a $6 million option. The year 6 option vests for $15 million if Hamilton reaches 525 plate appearances in year 5. If it does not vest, the team holds a $10 million option, and the player holds a $5 million option.

Given the above scenario, the guaranteed deal for Hamilton would be 6 years, $95 million ($21M-$21M-$21M-$21M-$6M-$5M). The maximum deal for Hamilton would be 6 years, $117 million ($21M-$21M-$21M-$21M-$18M-$15M). Hamilton would also have the option to test free agency again after years 4 and 5 if he did not reach the plate appearance thresholds. The core of the contract I proposed is the first 4 years. Beyond that, the team is essentially only paying for what they get. If Hamilton is riddled with injuries, the team isn’t locked in to an extraordinarily back-end loaded deal.

At the maximum of that contract, the required WAR from Hamilton would be as follows:

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Seems fairly reasonable, to me. And if the minimum limit of the contract is what came to fruition:
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Now that looks just downright team-friendly.

Hamilton may project a superstar aura about him, but his on-field play has not truly been at a superstar level, at least not for extended periods of time. Hamilton’s most “superstar” moment on a baseball field came in an exhibition, the 2008 Home Run Derby. He is an All-Star caliber player, but it appears he’ll get paid at a level above that this offseason. When that happens, I am confident his next contract will immediately be labeled as a mistake. As has been seen with the Michael Young contract, and the Alex Rodriguez contract here in Texas, right or wrong a player is constantly measured by the value he produces on the field compared to what he is being paid. The tragedy for Hamilton, in that scenario, would be dealing with fan resentment for the majority of a long-term deal. It was clearly a struggle for him to properly handle just one week’s worth of it in Texas.

Peter Ellwood is a Senior Staff Writer for Shutdown Inning. You can email him at Peter.Ellwood@shutdowninning.com or reach him on Twitter @FutureGM

Peter Ellwood

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