12/14: Bronx Discipline
Posted by: Jason
You may have heard/read recently about an AL East team signing a pitcher from Japan. The media blares: 6 years, 8.5m per year!! This is completely incorrect, for it ignores the posting fee, which must be factored in.
There are 2 cost accounting ways to look at this contract.
1) Load the posting fee over the life of the deal, or
2) "Take the hit": Reflect the posting fee in the first year of the contract.
Scenario #1: 17+ million per year over 6 seasons. This accounting method means that he would have been the 8th highest paid player in MLB in 2006.
Scenario #2: 59+ million in year one, then 8.5m/year after that. Using this accounting method means that what the Red Sox must pay for DM's services (in year one) crushes the record for the highest annual salary in the history of sports, easily surpassing current recordholder David Beckham (not including endorsements, Tiger).
Also remember: If Matsuzaka leaves the Red Sox at some point before the deal's end, then one should load the posting fee over the time he was with the Red Sox. For example, DM is traded in 3 years: 51m/3: 17m + 8.5m per year = total annual contract price of 25.5m (or the second highest salary in MLB).
Cashman learned his lesson well as he moved through the ranks in the Yankees organization and seems to have changed the 15+ year culture of brute force expenditures.
There are 2 cost accounting ways to look at this contract.
1) Load the posting fee over the life of the deal, or
2) "Take the hit": Reflect the posting fee in the first year of the contract.
Scenario #1: 17+ million per year over 6 seasons. This accounting method means that he would have been the 8th highest paid player in MLB in 2006.
Scenario #2: 59+ million in year one, then 8.5m/year after that. Using this accounting method means that what the Red Sox must pay for DM's services (in year one) crushes the record for the highest annual salary in the history of sports, easily surpassing current recordholder David Beckham (not including endorsements, Tiger).
Also remember: If Matsuzaka leaves the Red Sox at some point before the deal's end, then one should load the posting fee over the time he was with the Red Sox. For example, DM is traded in 3 years: 51m/3: 17m + 8.5m per year = total annual contract price of 25.5m (or the second highest salary in MLB).
Cashman learned his lesson well as he moved through the ranks in the Yankees organization and seems to have changed the 15+ year culture of brute force expenditures.
