Contract Situation Worse Than Has Been Reported
This is the first of four articles on Chicago Bulls 2011 draft pick Nikola Mirotić, who is quickly becoming one of the better basketball players in Europe. Today we will discuss the details of Mirotic’s contract extension and his buyout clause. Tomorrow we will show what Mirotic is telling Spanish media about the selection. Next we’ll dig into the calculus behind exactly what options Chicago has to bring over Mirotic before the 2017-2018 season (yes, you read that right), given the limitations of the new CBA. In the final article, we’ll examine what in the world each side was thinking when the Chicago Bulls and Nikola Mirotic entered into a contract they had no intention of consummating for 3-6 years.
According to Spanish media outlets (such as MSN affiliate AS.com), Nikola Mirotic signed an extension with Real Madrid on April 26, 2011 that locks him up through the end of the 2015-2016 season, with a team option for 2016-2017. Real Madrid plays in three leagues/tournaments per year: the ACB (Spain), the King’s Cup (Spain), and the Euroleague (top teams from throughout Europe).
The official press release from Real Madrid after signing the extension does not mention the team option, stating only “Real Madrid C.F. and Nikola Mirotic have reached an agreement for the contract extension of the player, who will remain linked to the club until the end of the 2015-2016 season.”
It has been repeatedly reported in the U.S. that his contract expires in 2015. It is possible that the answer lies somewhere in the middle, with the U.S. sources mistakenly leaving out the team option, the Real Madrid press release including the team option but not mentioning it, and the Spanish sources mistakenly adding an option year in addition to the five-year extension. But I’m going to have to go with the Spanish sources on this one. Not only is the resident media more likely to get an ACB contract right, but a five year extension signed at the end of 2011 and expiring in 2015 doesn’t pass the common sense test.
I suspect that the Chicago Bulls front office mentioned that they expected to bring him over in 2015, and the statement was misconstrued to mean that his legal obligations expired that year. For the most part, Sam Smith has gotten it right by avoiding all contractual details, but reporting that the Bulls’ options to bring him over early increase considerably beginning in 2014-2015. However, the Bulls are allowed to contribute more than $500K towards his buyout (more on that in the third article in this series).
The second-highest paid, youngest, and arguably the best player on the team, Mirotic makes approximately 3,500,000€ ($4,408,600) per year. Real Madrid is apparently even more tight-lipped than the Chicago Bulls when it comes to publically releasing details of player contracts. However, by their rules, 3,500,000€ is the maximum that Mirotic can receive as a JFL-licensed player of his experience. According to the Spanish blogosphere, Mirotic received a max offer from another team, which was matched by Real Madrid with the extension.
The “roughly 2 million euro” buyout that has been reported by numerous American media outlets is actually an early termination clause in the contract, which states that Real Madrid must be paid 2,500,000€ ($3,149,000) to release Mirotic to play for the NBA, or 3,500,000€ ($4,408,600) to play for a European team. Several Spanish websites have actually reported it the other way around (with the more expensive buyout applying to an NBA exit), to include the well-connected tubasket.com, which released other accurate details of Mirotic’s contract extension seven days before it was officially announced.
It appears that the beat writers are not including the portion of the buyout that the Bulls can pay without it counting against team salary (which increases to $550,000 for next season), so the “roughly 2 million” is what Mirotic would have to pay out of his own pocket. The buyout is also negotiable; if Real Madrid runs into financial trouble in a couple years and is looking to shed salary, they may accept less. However, at this time Real Madrid intends to keep him until minimum 2016, and even then would likely charge close to the full buyout.
All euro-to-dollar conversions were done based on the exchange rate on the morning of 16 June. The eurozone crisis (Ireland, Greece, Italy, and Spain bailouts) has significantly devalued the euro, which has actually made the buyout situation considerably better for Chicago than when Mirotic was first drafted. Of course, any future changes could easily make it go the opposite direction. In other news, Mirotic was born about 260 miles south of the hometown of Toni Kukoc, the year before Toni played the Dream Team at the Barcelona Olympics. Don't I feel old.