It's bit silly - he's contracted for a certain amount of time and gets paid a set amount for that time. If City want to pay him out of the contract at any point they have to pay the total contract value. So really this "pay cut" is just that the payment for his whole contract gets paid mostly in the first year rather than spread over the whole term. Probably doing it for some accounting breaks that mean that he doesn't count as a guest next season so City can bring in some other fading star
You can only have a guest for 1 year, so by doing this they get 3 marquees for two years as he falls under the cap once his guest stint is over. Just another example of Melbourne City flouting the intention of the rules.