3 ms·
This kind of reminds me of a couple of situations in the sports world: Bobby Bonilla[1], middling former baseball player for the Mets, who cut a deal when bein
by douche 10y ago
This kind of reminds me of a couple of situations in the sports world:
Bobby Bonilla[1], middling former baseball player for the Mets, who cut a deal when being released by the Mets that they wouldn't have to pay him the balance of his contract now, but would have to pay 5X as much over 25 years, ten years hence. Thus a baseball player who hasn't taken the field in 15 years is making a cool $1.19 million.
In 1976, the ABA finally collapsed, and arranged a merger with the NBA[2]. There were six remaining ABA teams, but the NBA would only accept four. The Indiana Pacers, New York Nets, Denver Nuggets and San Antonio Spurs were chosen to join the NBA. The two remaining teams, the Spirits of St. Louis and the Kentucky Colonels, disbanded. The owner of the Colonels reached a buyout agreement with the other ABA owners for $3 million, plus another couple from selling off rights to his players. On the other hand, the Silna brothers, who owned the Spirits, cut a deal to fold their team in exchange for $2.2 million, plus a 1/7th share of the television revenue of the four remaining ABA teams, in perpetuity. This probably seemed like a bargain in the mid-70s, when NBA Finals games were being shown on tape-delay. However, as the league expanded in popularity, that TV money exploded, to the tune of tens of millions of dollars a year.
[1] https://en.wikipedia.org/wiki/Bobby_Bonilla https://en.wikipedia.org/wiki/Bobby_Bonilla
[2] https://en.wikipedia.org/wiki/American_Basketball_Association%E2%80%93National_Basketball_Association_merger https://en.wikipedia.org/wiki/American_Basketball_Associatio...
- ghaff 10y agoAnd of course it's even easier to make a decision that makes you look like a savvy businessman today while kicking costs or potential costs down the road when they're likely to be someone else's problem.
- ubernostrum 10y ago538 had an analysis of Bonilla's contract recently: http://fivethirtyeight.com/features/bobby-bonilla-was-more-than-the-patron-saint-of-bad-contracts/ http://fivethirtyeight.com/features/bobby-bonilla-was-more-t... They concluded that, by the time his contract is paid off, he'll have received total compensation in line with the market rate for a player of his caliber. The deferred payments also opened up payroll space immediately, allowing the Mets to make successful roster acquisitions.
- douche 10y agoI thought that they also thought that they were getting higher rates of return with their Madoff investments than the deferred interest of his contract?
- ghaff 10y agoThere are various weird examples of royalties etc. being paid in perpetuity. See, for example, the case of Listerine. I don't know the status today but as of a few decades ago, Warner Lambert was still paying royalties based on a contract that was signed in 1880s. [1]http://law.justia.com/cases/federal/district-courts/FSupp/178/655/1642490/ http://law.justia.com/cases/federal/district-courts/FSupp/17...
- giarc 10y agoHere's a great little 10 min segment on Bobby. http://fivethirtyeight.com/features/the-bobby-bonilla-retirement-plan-quit-baseball-in-2001-get-paid-until-2035/ http://fivethirtyeight.com/features/the-bobby-bonilla-retire...