Contract Year Phenomenon: Myth or Truth?

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Jason Platkin

Jason Platkin

I am a rising freshman at Vanderbilt University, who is very interested in both economics and sports analytics.
Jason Platkin

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The Contract Year Phenomenon refers to the statistical inconsistency in which players perform at much higher levels during the final year of their contract than they previously have, but return to original form once they sign their new (and usually larger) contract. Some studies have shown that performance during the final year of a contract can increase, on average, by 5%, while others have shown that the Contract Year Phenomenon is a complete myth (negligible increase or decrease in performance).

There are three leading theories for why the Contract Year Phenomenon may (or may not) exist, which we will analyze below:

The most commonly accepted theory, despite its lack of statistical merit, is that players simply play better because of the extra incentive. Quality performance in the final year of a contract usually has a direct correlation to receiving a larger contract, which some would argue causes players to “try harder.” Since players are “trying harder,” this supposedly would lead to better performance, thus explaining this statistical anomaly. While this theory makes sense, it has one gaping hole that makes me question the validity of this theory: why wouldn’t players always be trying their hardest? This theory is assuming that players are not always trying their hardest, which I don’t necessarily believe to be true, undermining this potential theory.

Another popular theory, but not nearly as widely accepted as the first, is that players are simply less skilled after they sign their contract than they were before they did. One of the most popular times to sign contracts, for all sports, is in the 27-29 age range, which is when most players are finishing up their first real contract (excluding rookie contracts). Unfortunately, this signing happens at a very similar time to when most players exit their prime and begin their demise (usually occurs around age 28). This odd occurrence would certainly explain why the Contract Year Phenomenon exists.

The final, and least likely, of the three theories is that the Contract Year Phenomenon exists purely because of luck. Considering that studies only found a 5% increase, while others found no increase at all, it appears that we shouldn’t rule out luck as a possibility.

Let’s explore the two types of contract year phenomenon players, as well as the two types of reverse contract year phenomenon players to see if it will help give us a better understanding of whether the contract year phenomenon exists.

Prototypical Contract Year Phenomenon Player:

The player performs significantly better than he usually does in the final year of his contract, leading to him receiving a huge contract. In the year following the signing of this contract, the player returns to his original form, or even potentially worse.

DeMarco Murray, a talented, but volatile running back, is the figurative poster boy for the “contract year phenomenon” after his disaster in Philadelphia. Photo Credits: Getty Images.

Prime Example: DeMarco Murray, RB (Cowboys, Eagles, Titans)

2014: 2,195 yards from scrimmage, 14 total touchdowns

2015: 1,024 yards from scrimmage, 7 total touchdowns

2016: 1,664 yards from scrimmage, 12 total touchdowns

As discussed earlier, DeMarco Murray is the poster boy for the Contract Year Phenomenon, as he played spectacularly in the final year of his contract, but followed it up with a year that was downright terrible (he signed his contract at the end of the 2014 season). However, in 2016, he returned to his original form, which perfectly matches the mold for a prototypical Contract Year Phenomenon player.

Extreme Fallout Post-Contract:

The player performs significantly better than he usually does in the final year of his contract, leading to him receiving a huge contract (same as above). In the following years, the player’s performance drops substantially below his usual, instead of returning to original form.

Albert Pujols, an all-time great who has amassed 600 career HR’s, was one of many to fall victim to an extreme case of the “contract year phenomenon” after cashing in on a massive contract. Photo Credits: Pablo Martinez / AP Photo.

Prime Example: Albert Pujols, 1B/DH (Cardinals, Angels)

2011: .299 BA, .366 OBP, 0.25 HR/9, 5.1 WAR

2012: .285 BA, .343 OBP, 0.19 HR/9, 4.6 WAR

2013: .258 BA, .330 OBP, 0.17 HR/9, 1.5 WAR

After signing one of the largest contracts in sports history back in 2012 (10 years, $240 million guaranteed), the quality of Pujols’ play declined sharply, making him an example of an extreme fallout contract year phenomenon. While Pujols regressed slightly in 2012, 2013 was an entirely different story, as Pujols now re-established himself as an average hitter, not a world-class one.

Sustained Contract Year Performance:

The player performs at a very high level in the final year of his contract leading to a big payday, but he is then able to sustain this level of performance in years following the signing of the contract.

Daniel Murphy, quite possibly the most clutch postseason performer in recent MLB history, is one of few athletes who has sustained their “contract year performance.” Photo Credits: Brad Mills – USA TODAY Sports.

Prime Example: Daniel Murphy, 2B (Mets, Nationals)

2015: .281 BA, 21 HR, 73 RBI

2016: .347 BA, 25 HR, 104 RBI

2017: .322 BA, 23 HR, 93 RBI

After a postseason for the ages back in 2015, Murphy signed a huge contract in 2016 with the Nationals. Unlike most other players who are unable to sustain their stellar postseason performances, such as Matthew Dellavedova for example, Murphy sustained and even increased his incredible quality of play, especially his power hitting, which is quite remarkable for a second baseman.

Reverse Contract Year Phenomenon Player:

The player performs at a consistent level in years leading up to and including his contract year and signs a reasonable contract (for his production). However, after signing the contract, unlike the three others, his performance substantially increases from what it used to be.

Steph Curry, the first unanimously voted MVP in the history of the NBA, is among the many athletes who have experienced a “reverse contract year phenomenon.” Photo Credits: Stephen Dunn / Getty Images.

Prime Example: Steph Curry, PG (Warriors)

2010-11: 18.6 PPG, 2.0 3PM/game, 1.91 Assists/TO

2011-12: 14.7 PPG, 2.1 3PM/game, 2.12 Assists/TO  *26 games*

2012-13: 22.9 PPG, 3.5 3PM/game, 2.25 Assists/TO

2013-14: 24.0 PPG, 3.3 3PM/game, 2.27 Assists/TO

Curry was an above average guard for his first three years in the league and signed a fairly large contract extension back in 2012, essentially making him the “face” of the franchise. However, it was what he did after his contract extension that has made him the best player in the world. Instead of regressing, Curry did simply the opposite; he became better. In nearly every important statistic, most notably points per game and 3 pointers made per game, Curry greatly improved, which has made him an elite player.

After examining all of the evidence, it has become much more apparent whether this phenomenon actually exists; the evidence overwhelmingly suggests that the Contract Year Phenomenon is much more of a myth than truth. As discussed earlier, studies regarding this phenomenon have been wildly inconsistent, as no two studies have confirmed the same results even though they have looked at fairly similar data. So far, luck seems like the most likely culprit, not the extra incentive. It appears no more probable for a player to experience a Contract Year Phenomenon than to experience the reverse, thus leading me to conclude that the Contract Year Phenomenon is a myth.

Data courtesy of ESPN, CBS Sports, FOX Sports, Sports Reference, and Football Outsiders. Cover Photo Credits: Mitchell Leff/Getty.

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Jason Platkin

Jason Platkin

I am a rising freshman at Vanderbilt University, who is very interested in both economics and sports analytics.

Contract Year Phenomenon:…

by Jason Platkin time to read: 5 min