The Phillies have signed LHP Cole Hamels to a one-year, $15 million deal, avoiding a final year of arbitration with one of their aces. In the short term, this is fine. Hamels was among the best pitchers in baseball last year, and $15 million is more or less in line with what he was going to make in arbitration, and at any rate, makes him something of a minor bargain.
This news, however, does warrant jumping off a cliff, because indications look good that one of two things will happen to Hamels: 1) He’ll re-sign with the Phillies next year for one of the richest contracts ever given to a pitcher or 2) He’ll sign with the Yankees for one of the richest contracts ever given to a pitcher. What appears almost impossible now is that he’ll sign for something along the lines of the 5 years and $85 million the Angels gave Jered Weaver last summer, or the 5 years and $77.5 million they gave C.J. Wilson last month.
In the winter of 2008, Sabathia was entering his age-28 season, a left-hander who had posted a career 120 ERA+ over 1,659 1/3 innings. Up to that point, he’d posted a K/BB ratio of 2.66 and accumulated 33 wins above replacement, according to Baseball-Reference. Hamels, in the winter of 2012, will be entering in age-29 season, and if he slides back to his career averages, he’ll have posted a 128 ERA+ and a 3.74 K/BB ratio over a little less than 1,400 innings, good for about 27 WAR in half a season less than Sabathia. When Weaver signed with the Angels in August, ESPN’s Jerry Crasnick, among others, suggested that Weaver’s deal would make a good starting point for a Hamels extension. Now, after a breakout season, and with another year’s worth of uncertainty resolved, Hamels could easily make half again what Weaver made in overall value. With another season like 2011, when he posted a WHIP under 1 and struck out more than four times as many batters as he walked, Hamels will raise his price to the point where Weaver’s contract will look like Evan Longoria‘s. Even in a strong pitching market, bidding could start at Cliff Lee‘s 6-year, $147.5 million deal and end up looking like Sabathia’s 7-year, $161 million contract from the 2008/09 offseason, adjusted for inflation.
Of course, there’s nothing to be done about this now–the time to act was after 2009, when Hamels’ public perception was at an all-time low, but his peripheral stats remained unchanged, or after 2010, when Hamels was once again the front-line starter who was voted MVP of the World Series at age 24, but before he turned into the kind of molten lava-flinging cartoon superhero he was in 2011.
Locking up top homegrown talent long-term has become almost a reflex action for Major League Baseball’s smarter franchises. The Rays signed Longoria in 2008 to a contract that allows them to pay, on average, less than $4 million per year for one of the game’s best two-way players until the end of the 2016 season. James Shields will cost the Rays an absolute maximum of $44 million between 2008 and 2014, and this offseason, they signed rookie starter Matt Moore to a 5-year, $14 million contract that could run to eight years for $40 million.
The key to those contracts is signing players with great potential early. The longer a team waits to sign a player, the more certainty exists over his value. So a team like the Rays can approach Longoria or Moore before either has established himself as a quality major league player and offer to lock them up to a long-term extension with multiple team options. If Longoria had flamed out, he’d have cost the Rays less than 3/4 of what Ryan Howard will make this year, but instead, the Rays have locked up a perennial all-star third baseman for roughly the same annual salary as Kyle Kendrick. Likewise, Moore, who has thrown only 9 1/3 regular season innings in the majors, is projected to become one of the top left-handed pitchers in the game, comparable to Hamels, David Price, and their like. If he blows out his arm in April and never pitches again, the Rays have lost less than what Cole Hamels will make this year. If he fulfills his potential, they’ve picked up a bargain–an ace lefty for about a fourth, give or take, of his market value.
The Rays, as you know, are characterized by their extreme relative poverty, so their reliance on signing players long-term and early is extreme. The Phillies can afford to be more conservative, but they’ve overshot the mark with Hamels. The advantage to signing young homegrown players long-term is that they can be had for less than what the free market would dictate, and for a term that would end before the decline phase woes that make teams gunshy about thirtysomething free agents like Jayson Werth and Albert Pujols. This is what the Phillies did with Chase Utley before the 2007 season, and what the Cardinals did with Pujols when they extended him in 2004. Those were instances of teams locking up players after they’d become franchise players, but before they demanded to be paid as such.
The Phillies have missed that opportunity with Hamels, and this $15 million deal is evidence of that. As Longoria, Shields, Moore, Utley, Weaver, and Pujols all showed is that young players are willing to sacrifice earning potential for financial security. As their quality becomes evident, their value goes up. Now, there Hamels has no uncertainty for the Phillies to buy out. He knows he’s a star, he knows he can make nine figures over six years if he wants to, and he has no incentive to take a discount for the Phillies to give him long-term security. If they’d tried to sign him a year or two ago–or even five months ago–he might have, and failing to pounce on that opportunity will likely cost the Phillies somewhere on the order of $40 to 60 million, if it doesn’t cost them Hamels himself.
So as far as the one-year arbitration buyout is concerned, that’s fine. Hamels is well worth front-line starter money, and he’s making a little bit less than that, so he represents, as I’ve said, a minor bargain. But when all is said and done, that this contract is only for one year and not for six could very well lead to Hamels playing out the best years of his career in pinstripes of a different color, and that could cause the Phillies’ run of dominance to unravel quite a bit more rapidly than it might have otherwise.