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Padres star shortstop Fernando Tatis Jr. just signed a 14-year, $340 million deal. That’s a lot of money–even after California taxes hit. But what if I told you he’ll see even less of that because of a contract he signed a year before his big league debut?
That’s right, Tatis Jr. essentially hedged his bet on becoming a Major League Baseball player while in the minors for a chunk of change early called a “Big League Advance.” If you break it down, his decision actually makes sense.
Let’s use an example:
A company may offer you $100,000 up front in exchange for a small percentage of your contract if you make it. If you don’t, then that 100 Gs means a whole lot, but if you do, then signing away a small percentage isn’t exactly the end of the world either.
The biggest advance Tatis could receive would force him to pay 10% of his new deal back to the company, which totals $34 million. Sounds like a ton, but Tatis Jr. probably weighed this decision early and figured it was worth it.
The problem I see is that 18- and 19-year-old kids are making decisions that could cost them $30-40 million when they’re probably not prepared to make a call like this. Either way, these companies are smart for coming up with these deals.
Don’t feel too bad
For the most part, these Big League Advances take advantage of players only after they’re already rich. Fans often ask, “How much money does this guy need?” And in a way, they’re right. If our bosses offered us this type of deal in our workplace–we’d take it, right? We wouldn’t really care if we get ripped off in the long run if it meant lessening our chances to fail completely.
Turns out that after the $34 million comes out and taxes hit, Tatis will still be able to afford homes all over the globe. Hang in there, young stud.