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Re: MLB guaranteed contracts
"Yeah, but the problem is if they could've just thrown $20 mil for 2 years..."
No. This was never an option. They would have had to offer significantly more than $20m over 2 years. "or even $15 mil for 1 year it's a much better deal than $50 over 5 where you're tied down into a deal with a guy who's 32 and just had a banner year in a contract year." Maybe, maybe not. You have to look at the NPV of GMJ's 5 year contract compared to the NPV of what you will likely have to pay a CF for the next 4 years after GMJ's contract expires. Then you have to compare GMJ's expected production v. what you will get in the open market. Using a 6% discount rate, GMJ's contract is only worth about $42m. It might very well be the case, given MLB's astonishing revenue growth, that 6% is too low of a discount rate. In which case, GMJ's contract starts looking better and better for the Angels. Now, based simply on an eyeball analysis, and based on GMJ's past numbers, I agree with you that GMJ's contract is probably not a good one for the Angels. But that fact is you can't just make a blanket statement that GMJ's contract sucks because "the Angels are tied down to $50m over 5 years." The analysis is much more complicated than that. Given GMJ |
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