Josh Hamilton and Texas Avoid Arbitration with Deal

About three weeks after the exchange of arbitration figures where Josh Hamilton requested $12 million and the Rangers countered with $8.7 million, the two sides have reached a contract agreement that will cover this and next season. It is being reported as a two-year, $24 million deal. In essence, this deal can be summarized as Hamilton “wins” his 2011 arbitration case and cedes any possible raise for 2012.

At worst, projections are likely to place Hamilton in the 4-5 WAR bucket. That level of production would demand about $20 million a year in free agency, or about $12 million in second year arbitration. Hamilton’s offer then was fair while the Rangers were low balling him quite a bit. Working against Hamilton however was his poor 2009 and the resistance to offer a gigantic raise, but his newly awarded MVP trophy might have been enough to mitigate that.

While this can be looked at as Hamilton winning his 2011 case, how much does the locked in 2012 salary cost him? $24 million spread out over a player’s final two arbitration seasons translates to about $17 million a year on the open market, a price that is being paid for about 3.5 to 4 wins, which Hamilton should clear. Josh Hamilton probably deserved something closer to $27 million. However, the advanced stage of his arbitration hearing means that Hamilton and the Rangers were not operating in a very fluid environment. Given the constructs already involved, how did Hamilton do?

To answer that, we have to investigate the alternative that he had, which was to go through with arbitration. If you assume Hamilton had a 50/50 chance of winning his arbitration case then his expected salary in 2011 was $10.4 million. That means he has locked in $1.6 million of surplus salary this season.

Predicting his 2012 hearing is more difficult, but if we assume that he meets his 2011 playing projection of 4-5 wins, then Hamilton would have been justified in seeking around $16 million for his final year in arbitration. He’s actually getting $13.6 million if you count the surplus salary from 2011. That’s a discount for Texas, but not a huge one. Personally, I doubt that the two sides would have submitted offers that bracketed a fair number for Hamilton so the gap is even smaller.

In summary, the Rangers do well here, but Hamilton had little leverage in which to extract a perfectly fair deal since the two sides had already exchanged arbitration numbers.

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Matthew Carruth is a software engineer who has been fascinated with baseball statistics since age five. When not dissecting baseball, he is watching hockey or playing soccer.

15 Responses to “Josh Hamilton and Texas Avoid Arbitration with Deal”

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  1. phoenix2042 says:

    His injury last year and fear of the same for the next two seasons might have lowered his price somewhat. The Rangers are paying him fairly, but not risking overpaying an asset that might get injured again.

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    • vivalajeter says:

      Agreed. It should also be mentioned that he only had 5.1 WAR in 2008-2009 combined. Last year’s 8.0 WAR was unbelievable, but if he’s closer to the 2008-2009 Josh then it’s not a slam dunk for Texas.

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  2. Mark says:

    I’ve got a question about the value of WAR.

    I know the value of $4 or $5million (whatever it is), is derived from the average amount free agents get for the WAR totals over the past season (seasons?), but is there, or should there be, some sort of sliding scale built into this? By that I mean, do guys who are 1 or 2 WAR typically get more per WAR than guys who are 5-6 WAR guys?

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    • This has been looked into a couple times. I’m not sure of when the last study was, but to my knowledge they have all found that the $ per WAR teams pay is fairly constant as WAR goes up or down.

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    • Not David says:

      Rather than getting more money per WAR the elite tend to get the years instead. That could be viewed as a kind of sliding scale,

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      • Paul Thomas says:

        This is something of a non sequitur. If you assume decline over time (and nearly all free agents are at or past their peaks when they sign huge deals), then more years at the same salary IS paying more money per WAR. Basically, you can monetize the “more years,” so the distinction is one without an economic difference.

        But we don’t see that.

        It could be that what’s fouling up the numbers is that relief pitchers are (depending on your point of view) either grossly overpaid or not being measured correctly, and that’s inflating the $/WAR figure at the low end. It could be that once you correct for relief pitchers, there IS a dollar premium for higher-WAR players, but we’ll have to wait for someone to crunch the numbers.

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  3. NEPP says:

    Good deal for both sides. There’s some risk there given Hamilton’s history (injury and otherwise) but he’s a truly great player when healthy.

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  4. Phantom Stranger says:

    Given Hamilton’s history, I can see why he would take the deal. $24 million is better than nothing if he falls off the wagon or gets injured this year. My guess is that the Rangers thought they were going to lose this year’s arbitration case and viewed it as nothing more than locking in a second year to prevent possibly paying him some outlandish sum next year if he put up another MVP season.

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  5. Sandy Kazmir says:

    Cocaine for everybody!

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  6. Turbat says:

    Cocaine – hah. Hamilton thinks that stuff is for pussies and favors shit like heroin and crystal meth.

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  7. Jack says:

    Note to Turbat:

    Hamilton would settle for cocaine if it is was in its freebase form – crack.

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  8. nolan says:

    Now that Votto deal is making more sense.

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  9. JC says:

    If it wasn’t for Vlad Guerrero and the season he had, does anyone really think Josh Hamilton would have had the season he had? For my money, Guerrero was more worthy of the MVP, but that wouldn’t have looked good for a guy in his first year with the team. Enough of the drug talk! What MLB should do is put half of the salary in a trust until the player is 50 years old.

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