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Chapman will only cost the Reds $1 million in 2010

Jan 11, 2010, 8:00 AM EDT

Everyone was reporting yesterday that the Reds got Chapman for $30 million yesterday, but it’s apparently a bit more nuanced than that. According to John Fay of the Cincinnati Enquirer, it’s a $25 million deal that locks him up for over five years with a player option for a sixth, which would bump the total to $30 million.

But here’s the kicker: the payments are spread out over ten years, with his salary for 2010 being a mere $1 million. Fay says that “the first year it will be a major burden on the big league budget is 2014.”

I suppose there are two ways to look at this. Given their presumed financial constraints, it’s probably a good thing that they’re delaying the pain of this contract, such as it is, until guys like Aaaron Harang and Bronson Arroyo are off the payroll.  On the other hand, if Chapman does turn out to be a bust, it will be a total bummer when he exercises that option and the team still has to write checks to his ineffective butt circa 2014.

Oh, and while we’re on the subject of Chapman, how about these apples: according to Buster, the Athletics came in second to Cincy in the bidding.  How about that? The lowly Reds and A’s, each willing to go north of $25 million on an amateur free agent with the Yankees and Red Sox nowhere in sight. And all this time I’ve been believing people who told me that that the big teams would crush the little teams if you got rid of the draft.

  1. Moses Green - Jan 11, 2010 at 8:10 AM

    Craig, I’d be interested in your Shyster take on whether this contract is a tax dodge, an effort by his new representation to avoid liability, or some combination of two.
    It seems like the interests of the ballplayer came last, and I sense a potential conflict of interest.

  2. Craig Calcaterra - Jan 11, 2010 at 8:14 AM

    I guess I’d need to know more about the deal, Moses. I mean, he’s still getting a ton of money, more so than many figured he’d get, so I can’t say I’d agree that his interests weren’t served even if the term of the payout is long. And he still has to pay taxes on all of this just like he would have under any contract he agreed to after Jan. 1st (if he signed before Jan 1st he could have been tax free on whatever portion of the deal he was paid before then).

  3. Moses Green - Jan 11, 2010 at 8:30 AM

    It seems obvious on the face of it that the team benefits the most from this, I’ve never heard of anyone but a veteran who wants payroll flexibility for his team to “win now” structure a deal like this. Why would some guy who’s cashing his first paycheck spread it out?
    In my mind the new agents didn’t do a very good job for their client, so I’m wondering what if any benefits accrue to his representation in having the deal so structured.

  4. Jamie - Jan 11, 2010 at 9:03 AM

    I really don’t see what difference the pay structure would make for Chapman, or (more importantly, perhaps) his agent. Let me ask you this: if I offered you $20 mm, to be paid out evenly over the next four years, or $30 mm to be paid out in graduated increments over six years, which would you take?

  5. Jason @ IIATMS - Jan 11, 2010 at 9:05 AM

    The A’s signed Inoa last year. The new Moneyball is paid in Latin American currencies.

  6. Moses Green - Jan 11, 2010 at 9:09 AM

    I see what you’re saying, but that’s not the situation here. His first year salary is $1 million, and the payments are spread out over 10 years, not six. Furthermore his contract is 5 years (servitude) for $25 million, with an option year, and details are fuzzy as to whether that was a player / club / mutual option, but the option seems to be for $5 million. Take the rumored previous high bid of 5 years $23 million, and if that’s paid out in a more normal fashion, I’d take the $23 million in exactly 5 years. I’d take it 100 times out of 100 times.

  7. Moses Green - Jan 11, 2010 at 9:14 AM

    Chapman’s agent situation is such a mess that I immediately jumped to that take over his truly bizarre contract. The slow burn take is that the MLB draft system is in dire need of an overhaul. Everyone should be subject to the draft, the two-tier system is antiquated and outdated, leaving American kids frustrated. They’re also persuaded, paraded, inebriated, in doubt.
    Truly, I fear that poor Aroldis is a long way from happiness.

  8. Moses Green - Jan 11, 2010 at 9:20 AM

    And to go one further on the inadequate player representation, it’s not really that far from likely that somewhere right now his old agent’s lawyer is adding another count to their complaint regarding the freaky structure of the contract and the measly upfront money.

  9. Simon DelMonte - Jan 11, 2010 at 9:25 AM

    Ignoring the question of who has money to burn, I wonder if it means anything about Chapman’s skills that Cashman and Epstein took a pass. Are they and their usually capable staffs just not sure about his future? If so, are the Reds taking a big risk? Or do we note that Billy Beane and staff wanted in?
    My guess about the Yanks and Sox is that they are both a little shy of such players. Cashman recalls Jose Contreras and Kei Igawa, Epstein is coping with Dice-K even as we speak.

  10. Charles Gates - Jan 11, 2010 at 9:39 AM

    $30MM over a 5 contract (avg $6MM/year) is not the same as $30MM over 10 years (avg $3MM/year). In real dollars, the 2nd contract is much worse. It’s a time value of money issue.

  11. Phil - Jan 11, 2010 at 10:12 AM

    “It’s a time value of money issue.”
    Well, yes and no. Unless there’s an adjustment for inflation or the Reds’ are paying interest on the deferred amount, they’ll be paying Chapman with dollars that are worth less 10 years from now than today.

  12. Charles Gates - Jan 11, 2010 at 10:29 AM

    Yes, thank you. I assumed just a straight, unadjusted capital deferment.
    Also, the inflationary adjustment ignores the opportunity cost of using the potential gains from investing dollars received in the future from now until then.

  13. APBA Guy - Jan 11, 2010 at 12:53 PM

    My two cents on the contract is that the $ 30M was probably significantly more than anything else on the table, meaning the reported $ 23 M from another club may have been structured non-linearly as well. We just don’t have all the information we need to conclude that the deal was “bad” relatively.
    And I say relatively, because $30M is a lot more than zero, which is what he had before he signed the deal. You’ll be hard pressed to find a judge who will say he was badly represented with a contract for $ 30M in his pocket. Was the representation perfect? No. But bad? Here’s the $ 30M that says otherwise. He’ll be 27 when the deal expires, and free-agent eligible. If he’s anywhere close to his hype, $ 30M will look like tip money compared to his next contract.
    I have no evidence for the claim that $ 30M was probably much better than anything else on the table. But the report that the A’s, and all their money woes, were second in the bidding tells me that the next best offer was probably not that compelling.

  14. Rex Ryan - Jan 11, 2010 at 2:32 PM

    When he learns how to pitch in the Majors the Yankees
    will give him PLENTY of MONEY.

  15. Rex Ryan - Jan 11, 2010 at 2:33 PM

    When he learns how to pitch in the Majors the Yankees
    will give him PLENTY of MONEY.

  16. Moses Green - Jan 11, 2010 at 2:34 PM

    That was a lot of verbiage to say “i don’t know and i have know evidence either.” Thank you for playing.

  17. Greg - Jan 12, 2010 at 12:57 AM

    I’m a bit surprised at your conclusion that this signing somehow means that the draft does nothing for competitive balance.
    I thought statheads were all about the sample size? One signing proves a point?
    If the Yankees or the Red Sox both wanted Chapman and were willing to shell out 30 million, I’m sure he’d be playing out east.

  18. Mark - Jan 12, 2010 at 1:24 AM

    Big teams already crush little teams for the most part. I don’t think the draft plays a huge role. The lack of a salary cap does. When the Yanks want a dominant lefty starter, they can just go out and pay C.C. Sabathia $161M over 7 years. They don’t need to take a flyer on someone with huge upside and downside risk because they can afford to pay the proven commodity. Under today’s financial reality in MLB, teams like the Reds and A’s can’t pay the proven commodity so they take risks for lower, but still significant, money. If it (and several other roster moves) works out, they may be able to compete with the big boys for a year or two. If it doesn’t, they will stink even more than they usually do.

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