|Biggest winner of the Manny saga|
Written by Bjoern Hartig (Contact & Archive) on March 18, 2009
It's not exactly brand new news, but I do not want to deprive you of this interesting tidbit. And speaking of tidbits, you are right to expect something out of the bottomless treasure chest that is Jason Stark, although this piece of information actually has to be credited to his reader Neil Baumgarten:
MANNY'S OLD CONTRACT: Two years, $40 million computes to a present-day value of $39.05 million, Baumgarten estimates.
-- Present-day value after taxes: $19.52 million.
-- Present-day value after the commission to his previous agent: $17.96 million.
• MANNY'S NEW CONTRACT: Two years, $45 million -- but with $25 million of that $45 million deferred at 0 percent interest. So the present-day value would be $41.1 million.
-- Present-day value after taxes: $20.57 million.
-- Present-day value after the commission to Scott Boras: $18.92 million.
• SO THE DIFFERENCE IS: Just under a million bucks, basically -- or $961,064, to be exact -- is all Manny really got out of this. That's the real difference between the money he'll earn in this contract versus the dollars he could have had under his old contract.
Meanwhile, assuming Boras gets a 4 percent commission, he'll take in $1.8 million -- or possibly $1.65 million, if it's paid out over five years in exactly the same proportion as Manny's deal.
Even if Boras gets taxed at 50 percent on his take, he'll still wind up profiting from this negotiation at almost the same level that his client will -- if only because he would have gotten zero dollars if Manny had honored his previous contract.
I wonder if Manny thought about it that way and if he would be too happy with Boras if he did.
A little off-topic, but all that reminded me of a chapter of the book Freakonomics, where they talk about real estate agents. While intuition tells you that your agent's interest shoud correspond with your own in that the agent should try to sell your house at the highest possible price, the agent's interest is actually to sell it as quickly as possible, because an extra $10.000 for you is like a loss for you agent if it delays the finding of a buyer by more than a few days since the agent gains very little from the $10.000, but looses a lot of time looking for a buyer who is willing to pay more.