The baseball world is still reeling from the news of two-way superstar Shohei Ohtani signing a ten-year, $700MM deal with the Dodgers. Not only is it the largest contract in baseball history (by a mile), it is the most lucrative deal for any professional athlete, surpassing the four-year €555MM contract (approximately $674MM in USD) soccer star Lionel Messi signed with FC Barcelona in 2017. Given the unprecedented nature of the deal, it’s more than fair for fans to wonder if it makes financial sense. Is Ohtani genuinely worth nearly twice as much as Aaron Judge? Can a single player truly provide $70MM in value per year over the next ten years?
Moreover, various outlets have reported that the Dodgers significantly outbid the competition to secure Ohtani’s services. J.P. Hoornstra of Dodgers Nation reports that the Dodgers upped their offer by as much as $100MM on the final day of negotiations. Jon Heyman of the New York Post quotes a team source from one of the finalists, who claimed, “We certainly were not at 699 [million dollars].” Meanwhile, when asked if the Angels had made an offer close to that $700MM number, team president John Carpino simply responded, “No comment” (per Sarah Valenzuela of the L.A. Times).
However, it is critical to remember that Ohtani’s deal is not worth $700MM in present-day value, due to the deferred payments in the contract. As Jeff Passan of ESPN eloquently explained, “Money today is more valuable than money tomorrow, inflation being what it is.” Thus, the other finalists for Ohtani might not have offered him anywhere close to $700MM total, but that doesn’t mean the Dodgers blew any other offer out of the water in terms of present-day value.
More to the point, while Ohtani’s contract might be unprecedented, so too is Ohtani an unprecedented player. The value he will bring to his new organization goes beyond his performance on the field, and the Dodgers could be in for a windfall if they know how to market their brand-new international superstar. Sam Blum and Fabian Ardaya of The Athletic quote an anonymous MLB evaluator who claims the deal will “pay for itself within six or seven years… Even just on advertising alone.” That might be an exaggeration, but still, it’s clear how highly Ohtani is valued around the league.
As many sources have pointed out (including Bob Nightengale of USA Today), Ohtani earned approximately $40MM in endorsement deals last offseason. The MLB player with the next highest endorsement-related income was Mike Trout, who took home $5MM. If Ohtani can personally command so much money, the team he plays for should be able to cash in big as well.
According to Mike DiGiovanna of the L.A. Times, the Angels earned somewhere between $10MM and $20MM per year in “Ohtani-related advertising, promotions, [and] marketing revenue.” Nightengale believes that number was even higher, claiming Ohtani “brought in $25 million a year.” Both reporters suggest the Dodgers could double that revenue, thanks to their higher level of popularity, both locally and across the globe. At the high end of that estimation, the Dodgers would earn back more than half of Ohtani’s annual salary, and the team is surely hoping he will continue to bring extra value to the franchise long after his ten-year deal is complete.
On that note, it’s worth acknowledging that although the Dodgers are regularly big spenders, their front office has demonstrated a keen ability to get the best bang for its buck. While some high-spending teams have crashed and burned in recent years, the Dodgers have made the playoffs in 11 straight seasons, winning ten NL West division titles in that time. They have won over 100 games in four of the last five years, and the only year they didn’t, the shortened 2020 campaign, they went 43-17 (.717, a 116-win pace) en route to a World Series championship. This team spends in abundance, but they don’t spend frivolously. If the Dodgers are paying Ohtani $700MM, it’s because they think he’s worth even more, and they haven’t given us any reason to doubt their accounting so far.
In other Ohtani news, Jack Harris of the L.A. Times points out that the signing has not yet been made official. However, that doesn’t mean the deal is at risk of falling through. Ohtani himself has already confirmed the agreement, and it’s hard to imagine his physical would hold up the deal; the Dodgers already know he is recovering from his second UCL procedure and won’t pitch in 2024. Instead, Harris suggests that the Dodgers are still figuring out their corresponding 40-man roster move. The club’s roster is currently full, so they will need to make a trade or designate someone for assignment in order to finalize Ohtani’s contract. What’s more, they also need to free up a roster spot for veteran reliever Joe Kelly, whose one-year, $8MM contract has not been finalized either. Expect a trade or a roster move in the coming days.
