Cole Hamels Negotiations - What Kind of Numbers Are We Looking At?

Earlier this week, the San Francisco Chronicle reported that Matt Cain and the Giants had agreed in principle to the largest deal ever awarded to a right-handed pitcher; a five-year extension worth $112.5 million to stay with the San Francisco Giants.  The $112.5 million pact is in addition to the current one-year $15 million deal that Cain has in place so Cain will effectively make $127.5 million over the next six years.  There is also a $5 million signing bonus and a $21 million vesting option for a sixth year option that can bring the total of Cain's deal to $141 million (there is also a $7.5 million buyout if Cain does not reach vesting requirements).  Many sources have cited this deal as a huge win for Cole Hamels, who has reportedly been negotiating an extension with the Phillies this offseason.  This is certainly an indication that Hamels is in line for a big payday but that should be news to no one.  My gut tells me that the deal he gets could shock a lot of people.

Contracts used to gauge Hamels' value - CC Sabathia, Cliff Lee and Matt Cain

Hamels has a lot of things going for him; he is young (28 years old), he has hardware (WS and NLCS MVP trophies), he has had only minor injury concerns over the course of his career and he's left-handed.  He has also anchored the Phillies rotation through the greatest era in franchise history.  There is a reason why the top contracts in baseball have always gone to left-handed pitchers; left-handed starting pitchers are the most coveted commodity in baseball.  Sabathia inked a seven year deal worth $161 million in 2009, parlaying an opt-out clause into a $30 million raise (that will be $55 million, if he stays healthy), effectively bringing his deal to 9 years and $206 million.  According to many sources, the $30 million extension was a bargain; had Sabathia opted out, it was assumed that the he could have gotten higher offers.  Cliff Lee signed a five-year deal worth $120 million, with an escalator that brings it up to six years and $135 million (if he says healthy).  Cain signed the deal explained in detail above.

How do they compare on the field?

CC Sabathia is the best of the bunch - he's a horse, he has the most hardware and he's clearly the most dominating.  He also signed his deal around the same age that Cole will sign his (prior to his age 28 season - Cole is in his age 28 season).  Cliff Lee was a bit older when he signed his contract, a fact which capped the length that teams were willing to go with him on a deal, but since 2008, Lee has been the proverbial Chuck Norris of baseball (who will ever forget this catch he made in the 2009 World Series).  Cain and Cole have very similar numbers but I think that most people would agree that Hamels is the better of the two.  Besides being left-handed, Hamels strikes out batters at a higher clip and carries a lower WHIP (and a better winning percentage) but the two are very similar on numbers and service time.

The skinny...


Cole is going to get a contract that will make him a very wealthy young man.  I think that a deal could look one of two ways - it's either going to be modest longer-term deal (8-9 years) or a richer 6-7 year deal with an opt-out in year three or four.  Opt-outs seem to be the new rave and I think that big name pitchers will continue to seek out opt-outs as a way to maximize value while securing long-term stability.  When inking a pitcher to a long-term deal, the threat of injury always exists so teams also like those opt-out deals because they can stay a little bit shorter.  I think that a pitcher of Hamels' stature could easily seek   How much Cole will get in terms of annual average value will be somewhere around the $20-22 million mark.  I would anticipate some 6-7 year offers on the table with opt-outs; these deals will likely be around $135 and $150 million.  I could also see a few 8-9 year deals coming in at $160-170 million.  The latter deals may sound scary but the lower average annual value represents a 10% discount and if you believe in Cole Hamels, you'll be better off locking him up long-term (the opt-out forced the Yankees  to throw $30 million more on the table and it could have been worse).

Any time you're working with numbers this large, using terms like value maximization and long-term stability seems ridiculous ($100 million is well beyond my definition of security) but baseball is a wildly profitably business and pitchers like Cole Hamels are a rare breed.  There doesn't seem to be a chink in his armor and his trend lines all point up.  If he has another good season, his contract offers will surely be on the upper end of those ranges.  Hamels' injury history is not exactly spotless (he did have surgery to remove loose bodies from his elbow and to repair a sports hernia that he played through in 2011) but he has seemingly gotten stronger and more durable.  He might be the most important #3 pitcher in all of baseball there are a lot of people that think he'll win at least a couple of Cy Young awards during his career and that could be enough to attract a lot of attention on the free-agent market.

The possibilities...


The Phillies are obviously working very hard to get an extension done but I don't know if that's possible at this point.  Cole has had a great spring and the Matt Cain deal certainly seems to end any doubt that Cole will get a mega-deal in excess of $20 million per year for at least 6 years.  I think that it's likely Cole enters free-agency and I'm sure there will be a lot of teams inquiring about his services.  I think that the Yankees could make a strong push to one-up the Phillies (the sting of losing Cliff Lee is probably still fresh on their minds) and the Dodgers are rumored to be very interested in doing everything they can to bring Cole back to the West Coast (Hamels was born and raised in San Diego) but Cole won't be the only name on the 2013 free-agent market; Zack Greinke, Anibal Sanchez and Francisco Liriano will also be highly coveted.  There will almost surely be a few teams that will emerge as "almost" contenders; these teams will be willing to break the bank for a front-line starting pitcher but it's too early to tell which teams will fit that mold.  Maybe the Cardinals or the Cubs or the Blue Jays or the Marlins.  Where he ends up depends on what happens this season; as of this moment, everyone is in first place and that means everyone could use a Cole Hamels.