Archives for 2023

The Dodgers and Shohei Ohtani agreed to massive a ten-year, $700MM deal over the weekend, but it was reported that there were significant deferrals. The deal still isn’t official but Fabian Ardaya of The Athletic relays some of the particulars today, most notably that $68MM of Ohtani’s $70MM annual salary will be deferred, leaving him making just $2MM per year in the short term. The deferred money is to be paid out without interest from 2034 to 2043. This will reportedly reduce the CBT hit of the contract to around $46MM per year.

When reporting on Ohtani’s deal was initially coming out over the weekend, Jeff Passan of ESPN relayed “most of” the salary would be deferred. It now appears that wording was putting it mildly, with this framing coming as quite a shock. Deferring money is not new but this scale is clearly unprecedented. Most baseball fans are familiar with Bobby Bonilla’s unusual contract structure, with many of them celebrating “Bobby Bonilla Day” every July 1. In late 1999, the Mets released Bonilla but still owed him $5.9MM. In order to save money in the short term, the club kicked the payments down the road, agreeing to pay him $1.19MM on July 1 every year from 2011 to 2035.

But deferring $68MM annually is clearly uncharted waters, since no MLB player has ever even had a salary of $45MM or higher. Ohtani is set to almost double that, in a sense, but he will only be banking $2MM per year during his time playing for the Dodgers.

From Ohtani’s point of view, the gambit makes a lot of sense and Passan reported over the weekend it was Ohtani’s idea. By taking less money now, he will leave the club with more money to build a competitive team around him. For competitive balance tax purposes, a contract is measured in net present value as opposed to pure guarantee, so this works for luxury tax purposes also. As mentioned up top, this will lead to a CBT hit of about $46MM, instead of the $70MM that would apply if going just by average annual value. As Ardaya mentions in today’s report, Ohtani makes about $50MM per year in terms of endorsements and off-the-field revenue streams, meaning he won’t be hurting for cash by taking this path. He’ll then be able to collect $68MM per year after he has played out the 10-year term of the agreement.

For the Dodgers, this will obviously be great for their competitive chances in the short term. They get an elite player the likes of which the world has never seen for a mere $2MM per year. That’s obviously still a huge amount of money for the average person but chump change in the baseball world, with the MLB minimum is set to be $740K next year. They also cut their CBT hit way down, significantly limiting the taxes they eventually have to pay at any point over the next decade. The long-term downside is that, from 2034 to 2043, they will be spending $68MM on a player that is no longer on the club. As pointed out by Brandon Wile of The Score, there are also heavy deferrals in the Mookie Betts deal, meaning the Dodgers will be paying a combined $79MM to Ohtani and Betts in 2043 when Betts will be 50 years old and Ohtani 48.

That could come back to bite them down the road, but they clearly see the present as a unique opportunity to strike while having a unique combination of talents with players like Ohtani, Freddie Freeman and Betts  all on the roster. Due to inflation, by the time those payments roll around, the value of $68MM will be less than it is today.

Some fans of other clubs may not like the way this is playing out but it doesn’t seem like there’s any hope of the league stepping in to put a stop to it. As relayed by Passan, the collective bargaining agreement clearly states that there is no limit to the amount of money than can be deferred in a contract.

Both Ohtani and the club had to agree to this deal, so it’s obviously fine with the parties involved. But it’s not great for any rival clubs or their fans. The Dodgers have already been one of the most successful clubs in recent history, running up big payrolls and having currently made the playoffs in 11 straight seasons. Now they are adding an unprecedented talent with unprecedented financial machinations that will appear to many as unfair, regardless of whether or not they are actually against the rules.

The Dodgers still have a lot of work to do this offseason, particularly in the rotation. They are currently slated to rely upon Walker Buehler, who missed all of 2023 recovering from Tommy John surgery, and then a batch of fairly unproven youngsters such as Bobby Miller, Ryan Pepiot, Emmet Sheehan, Gavin Stone and Michael Grove. With the huge amount of money they committed to Ohtani, it was fair to wonder how much powder they would have dry for bolstering that staff. With Ohtani agreeing to this deal, it makes it far more likely that they throw some money around at free agents like Yoshinobu Yamamoto, Blake Snell, Jordan Montgomery or others.

Both Jack Harris of the L.A. Times and Jeff Fletcher of the Orange County Register report that Ohtani explored these kinds of contract structures with every team he negotiated with, so this wasn’t just a Dodgers-exclusive thing. It seems that Ohtani wants to win and has agreed to structure his deal so that his chances of doing so are as high as possible. He’ll take home far less money now in order to make the team stronger during the course of his playing career.

The Dodgers officially announced the signing of two-time MVP Shohei Ohtani to a 10-year contract.  The two-way superstar had announced his intention to sign with the club via his Instagram page on Saturday.

“Dodger fans, thank you for welcoming me to your team,” Ohtani said in a statement released by the team.  “I can say 100 percent that you, the Dodger organization and I share the same goal – to bring World Series parades to the streets of Los Angeles.”

Ohtani is guaranteed an astounding $700MM on the deal, as revealed in a statement from his CAA agent Nez Balelo.  However, the contract comes with a staggering set of deferrals, a concept apparently suggested by Ohtani himself.  Ohtani will only collect $2MM of his salaries annually over the course of the next decade.  The remaining $680MM is deferred to be paid out between 2034-43, thereby reducing the contract’s competitive balance tax number to roughly $46MM.

Regardless of how that distribution, the 29-year-old Ohtani lands the single largest contract ever given to a professional athlete.  The $700MM guarantee surpasses the $674MM deal that soccer legend Lionel Messi signed with FC Barcelona for the 2017-21 La Liga seasons.

“First of all, I would like to express my sincere gratitude to everyone involved with the Angels organization and the fans who have supported me over the past six years, as well as to everyone involved with each team that was part of this negotiation process,” Ohtani said in his Instagram message.  “Especially to the Angels fans who supported me through all the ups and downs, your guys’ support and cheer meant the world to me. The six years I spent with the Angels will remain etched in my heart forever.  And to all Dodgers fans, I pledge to always do what’s best for the team and always continue to give it my all to be the best version of myself.  Until the last day of my playing career, I want to continue to strive forward not only for the Dodgers but for the baseball world.”

Balelo’s statement: “Shohei is thrilled to be a part of the Dodgers organization.  He is excited to begin this partnership, and he structured his contract to reflect a true commitment from both sides to long-term success. Shohei and I want to thank all the organizations that reached out to us for their interest and respect, especially the wonderful people we got to know even better as this process unfolded.  We know fans, media and the entire industry had a high degree of interest in this process, and we want to express our appreciation for their passion and their consideration as it played out.”

Aaron Judge’s ten-year, $360MM deal with the Yankees last winter was the largest free agent deal in baseball history, while Mookie Betts landing $365MM in new money in his 2020 extension with the Dodgers was technically the largest deal overall.  Mike Trout’s ten-year, $360MM extension with the Angels was considered by the team as a 12-year, $426.5MM pact due to its inclusion of previously owed money in Trout’s previous deal, but while that extension had been considered by some to hold the “biggest contract ever” title, Ohtani’s contact now ends all debate.

While it was widely expected that Ohtani would set a new standard for baseball contracts this winter, nearly doubling the Betts/Judge totals is an incredible new benchmark.  The $700MM figure speaks to several factors — Ohtani’s generational talent as a two-way superstar, the amount of revenue Ohtani can personally generate in terms of additional endorsements and fan interest from Japan, the number of big-money offers made by the other known suitors in the race, and simply the Dodgers’ determination to land a player who has been on their radar for years.

If the National League had had the designated hitter in 2018, it is quite possible Ohtani would’ve signed with the Dodgers when he initially came to MLB from Nippon Professional Baseball during the 2017-18 offseason.  The Dodgers (along with the Cubs, Rangers, Padres, Mariners, and Giants) were the finalists behind the Angels, whose willingness to give Ohtani free reign as both a pitcher and a hitter allowed the Anaheim club to seal the deal, and set the stage for one of the most remarkable stretches baseball has ever seen.

The impact was immediately, as Ohtani hit and pitched at such as high level in 2018 that he was an easy choice as AL Rookie Of The Year.  He had to undergo a Tommy John surgery that kept him off the mound in 2019, though he was still able to hit as a DH and posted some impressive numbers.  However, an injury-marred 2020 campaign saw Ohtani deliver poor numbers at the plate and only 1 2/3 total innings on the mound, creating doubt as to whether he could truly live up to the hype.

The doubts were erased from 2021-23.  Ohtani posted a 2.84 ERA, 31.4% strikeout rate, and 8.3% walk rate over 428 1/3 innings on the mound, while also hitting .277/.379/.585 with 124 home runs over 1904 plate appearances.  Not even Babe Ruth amassed such levels of performance while both hitting and pitching at the same time, earning Ohtani the unofficial nickname of “the Unicorn.”  Ohtani won AL MVP honors in both 2021 and 2023, and finished second to Judge in 2022 in the aftermath of Judge’s AL-record 62 home runs.

As stunning as Ohtani’s contract is, it seems possible that he might’ve landed even more if he’d been fully healthy.  Ohtani suffered a tear in his UCL that required surgery in September, and though it isn’t clear whether or not his surgery was another Tommy John procedure or a brace procedure, he isn’t expected to pitch during the 2024 season.  It seems likely that Ohtani will miss some time at the start of next season to recover well enough to operate as a DH, and after his TJ surgery in 2018, he was able to get onto the field by May 7, 2019.

More details should become available as we get closer to Spring Training, though that perhaps isn’t a sure bet given Ohtani and Balelo’s penchant for keeping quiet on specifics.  Ohtani’s last few months have been marked by a somewhat unprecedented level of secrecy about not just his health, but any hints about his free agent market.  It was made clear by Balelo that leaking details to the media would be marked against any team in the chase, and thus most clubs played ball with the Ohtani camp’s requests.

The lack of information led to no end of speculation about what exactly Ohtani was looking for in his next team.  It was known that Ohtani was eager to win, which perhaps isn’t surprising considering that the Angels were never able to deliver even a .500 season with both Ohtani and Trout on the roster.  Ohtani’s initial venture to MLB prioritized West Coast teams, yet that didn’t appear to be a true determining factor in this case.  The reported finalists for Ohtani’s services included three West Coast teams (the Dodgers, Angels, and Giants), as well as the Cubs against, and a new suitor altogether in the Blue Jays.

Two reports yesterday suggested that Ohtani was signing with the Jays and was en route to Toronto, leading to a social media flurry that included everything from flight-tracking at Toronto’s Pearson Airport to queries about a large reservation allegedly booked by Jays pitcher Yusei Kikuchi at a downtown sushi restaurant.  In the end, the Blue Jays fell short in their attempt to sign the two-way star, though as with all of the suitors, it could be that Dodgers’ final offer simply blew every other bid out of the water.

Ohtani’s free agency in some ways held up the rest of the market entirely, as several top talents were waiting for Ohtani’s situation to be resolved so they could have a clearer picture of what teams might be bidding on their own services.  Yoshinobu Yamamoto, Cody Bellinger, Jordan Montgomery, Matt Chapman, and others might now see their markets kick into higher gear with Ohtani off the board.  The trickle-down effect bled into the trade market as well, as numerous teams with players available can now shop for offers from clubs who missed out on Ohtani — and might be even more pressed to make a big addition.

The Giants, for instance, are still feeling the heat to add a superstar after also falling short on Judge and Carlos Correa last offseason.  The Blue Jays still have a lot of holes to fill in their lineup after an almost team-wide lack of consistency at the plate in 2023.  The Cubs were perhaps seen as less likely to spend to quite the same level as other suitors, though president of baseball operations Jed Hoyer firmly denied a report from earlier this week suggesting that Chicago was out of the hunt.  The Mets, Red Sox, and Rangers did seemingly pull back prior to the start of the Winter Meetings, whereas speculative candidates like the Yankees, Braves, Phillies, or Mariners never seemed involved to any great extent.

The Angels have the toughest pill to swallow in seeing Ohtani not just leave, but head across town to the other Los Angeles team.  Because the Halos were just barely able to maneuver themselves under the luxury tax threshold, the Angels will maximize their compensatory return for Ohtani, who naturally rejected a qualifying offer.  Anaheim will now get a compensatory pick after the second round of the 2024 draft, which is admittedly small consolation for losing one of the game’s all-time singular talents.  There hasn’t been any sense that the Angels are planning to rebuild or take a step back now that Ohtani is gone, as the team has reportedly still been trying to add top-end talent to finally get back into contention.

As for the Dodgers, they got their man, cost be damned.  They’ll also surrender $1MM in international bonus pool money, as well as two draft picks — their second- and fifth-highest selections in the 2024 draft — to sign a player who rejected a qualifying offer.  Ohtani now joins Betts and Freddie Freeman in one of the more fearsome top-of-the-order trios in recent memory, and solidifies at least the DH spot in Chavez Ravine for the next decade.  There have been some whispers that Ohtani might try his hand at playing the outfield should he ever opt to stop pitching, and while he did make some brief appearances as an outfielder during his time with the Halos, the question of a future position probably isn’t being raised for at least a few years down the road, or until Ohtani has exhausted all options as a pitcher.

Ohtani’s arm injury was particularly troublesome for the Dodgers in the short term, as the club is still in need of pitching help heading into 2024.  Walker Buehler is returning after missing all of 2023 due to his own TJ surgery, swingman Ryan Yarbrough is probably penciled into one rotation spot for at least the start of the season, and Bobby Miller has all but officially won himself a spot after an impressive rookie year.  That leaves a collection of other young arms (Ryan Pepiot, Emmet Sheehan, Michael Grove and Gavin Stone) battling for other rotation spots, and Dustin May could be a factor by midseason once recovered from a flexor tendon surgery.  Longtime ace Clayton Kershaw is a free agent and will miss a big chunk of the 2024 campaign due to shoulder surgery, though it would seem that if Kershaw decides to keep playing, it will be either with the Dodgers or with his hometown Rangers.

Yamamoto is known to be another target on the Dodgers’ wishlist, while Dylan Cease and Tyler Glasnow are two of the undoubtedly many more experienced pitchers L.A. has discussed in trade talks.  The Dodgers could perhaps trade from their deep farm system to facilitate some pitching trades, or make yet another big signing.  Even after adding Ohtani to the books, the Dodgers had created enough space on the books that they’re only slightly over the $237MM luxury tax threshold — as per Roster Resource, the club’s projected tax number is just over $244MM.  Since Los Angeles hasn’t been reluctant to pay a tax bill in the past, president of baseball operations Andrew Friedman can continue to be aggressive as the team enters the Ohtani era.

Despite 11 straight playoff appearances and 10 of the last 11 NL West titles, the Dodgers have captured “only” one World Series title within this fantastic run of success.  All those postseason near-misses have left something of an underwhelming feeling amongst Dodger fans, and the team has won only a single playoff game over its last two trips to October.  It always felt as though the Dodgers were going to be pushing to sign Ohtani no matter their recent results, yet his addition perhaps acts as some kind of turning point in translating a few more of those playoff visits into championship rings.

Claiming that the Dodgers will become even more of a high-profile franchise is a little difficult to claim, since obviously the club’s long line of past Japanese stars has made them a household name overseas.  Still, adding the biggest star of all in Ohtani will only enhance the Dodgers as a worldwide brand.  The added marketing, merchandising, and broadcasting revenues that come with signing Ohtani won’t exactly cover $700MM, yet it isn’t a stretch to say that the Dodgers will enjoy some unprecedented economic benefits in addition to what Ohtani delivers on the field.

Alden Gonzalez of ESPN reported the absence of any opt-out clauses. His colleague Jeff Passan first reported the majority of Ohtani’s contract would be deferred, while Fabian Ardaya of the Athletic was first with the deferral specifics. Bob Nightengale of USA Today reported the no-trade provision.

Photo courtesy of USA Today Sports Images