Newsletter: Dodgers Dugout: How can they afford to pay Shohei Ohtani $70 million next season? They aren’t

Hi, and welcome to another edition of Dodgers Dugout. My name is Houston Mitchell and don’t obsess over how much money Shohei Ohtani is making. Think of it this way, if you are making $100,000 a year, it will take you only 700 years to make what Ohtani is making next season. See, not so bad now is it?

In case you were vacationing under a rock somewhere, you must know by now that the Dodgers and Shohei Ohtani have reached agreement on a 10-year, $700-million contract. The contract has no out clause, meaning Ohtani will more than likely be with the Dodgers through the 2033 season.

It was a wild couple of days before Ohtani announced where he was signing. On Friday, there were reports that a private plane carrying Ohtani was on its way to Toronto, where he would sign with the Blue Jays. Media staked out the plane at a Toronto airport and were more than surprised when Robert Herjavec of “Shark Tank” got off the plane. No Ohtani in sight. Turns out, Ohtani was still home in Southern California, leaving several people embarrassed. Many Dodgers fans went from “We don’t need him anyway” to “There’s still a chance!” in a flash.

Blue Jays fans are now in full conspiracy mode, saying Ohtani set up the false plane ride to get more money out of the Dodgers.

But Ohtani is here, with the Dodgers only needing to clear a space on the 40-man roster to make the deal official.

If you only follow the Dodgers, you may be wondering what the big deal is about Ohtani. He’s a once-in-a-lifetime player. Heck, he’s a once-in-three-lifetimes player. He is a perennial MVP candidate as a hitter and a top starting pitcher. He won two of the last three AL MVP awards, both unanimously, and finished second the other year, when it took a historic season by Aaron Judge to beat him. Let’s take a look at some numbers:

2018
Batting: .285/.361/.564, 104 games, 21 doubles, 3 triples, 22 homers, 151 OPS+

Pitching: 4-2, 3.31 ERA, 10 starts, 51.2 IP, 38 hits, 22 walks, 63 K’s, 127 ERA+

2019
Batting: .286/.343/.505, 106 games, 20 doubles, 5 triples, 18 homers, 121 OPS+

Pitching: did not pitch, injured

2020
Batting: .190/.291/.366, 44 games, 6 doubles, 7 homers, 79 OPS+

Pitching: 0-1, 37.80 ERA, 2 starts, 1.2 IP, 3 hits, 8 walks, 3 K’s

2021
Batting: .257/.372/.591, 155 games, 26 doubles, 8 triples, 46 homers, 157 OPS+

Pitching: 9-2, 3.18 ERA, 23 starts, 130.1 IP, 98 hits, 44 walks, 156 K’s, 141 ERA+

2022
Batting: .273/356/.519, 157 games, 30 doubles, 6 triples, 34 homers, 144 OPS+

Pitching: 15-9, 2.33 ERA, 28 starts, 166 IP, 124 hits, 44 walks, 219 K’s, 172 ERA+

2023
Batting: .302/.412/.654, 135 games, 26 doubles, 8 triples, 44 homers, 184 OPS+

Pitching: 10-5, 3.14 ERA, 23 starts, 132 IP, 85 hits, 55 walks, 167 K’s, 142 ERA+

Remember, OPS+ compares batters to the league average, with league average being an OPS+ of 100. That means last season, Ohtani was 84% better than a league average hitter. ERA+ is the same, just using ERA as the stat.

To see all of Ohtani’s stats, click here

The superlatives when describing Ohtani are numerous. Oddsmakers have now made the Dodgers the favorite to win the World Series (which they’ve been in previous seasons, and we know how that turns out). Columnists and baseball reporters throughout the land are already hailing the Dodgers as one of the best teams in history. And they haven’t even played a game yet.

But here’s my fear. I’m concerned that next offseason, instead of seeing headlines that say “Betts, Freeman go one for 22 as Dodgers are swept in first round after winning 100 games in the season” that instead we will see “Betts, Freeman, Ohtani go two for 39 as Dodgers are swept in first round after winning 130 games in the season.”

Because if you read the above stats, you’ll notice that there are two seasons where Ohtani didn’t really pitch it all. In Sept. 2018, he had Tommy John surgery and did not pitch in 2019. He came back in 2020, but only made two starts when a tendon strain sidelined him again. He was still able to hit while recovering. He returned to the mound in 2021 and was great, until the end of the 2023 season, when his elbow was injured again. The notoriously private Ohtani did not reveal much about the injury, but he did have a type of modified Tommy John surgery that will sideline him as a pitcher for the 2024 season.

So, next season, the Dodgers are paying $70 million for a DH. With no guarantee as to how well Ohtani will pitch in 2025 or beyond coming off a second elbow surgery. And Ohtani will turn 30 on July 5.

In other words, if you read the fine print, the Dodgers are taking a big gamble here. What if Ohtani is not the same pitcher he was? Suddenly you are paying $700 million to a DH and a No. 4 starter.

That is the pessimistic outlook, of course. The Dodgers know far more about Ohtani’s health than any of us. With a couple of exceptions, Andrew Friedman has been really good at signing free agents. It’s just before we all bow down and anoint the Dodgers champions for the next 10 years, let’s tap the brakes a bit and look at the big picture. Whether the Dodgers win the World Series or not, it will definitely be exciting to watch this team.

How can the Dodgers afford such a large contract?

I’m fortunate that colleague Jack Harris looked into the financial aspect before I had to (I was told there would be no math when I took the job). You can read Jack’s story here. I am now going to be borrowing (that sounds better than stealing) some of his work here.

Some of Ohtani’s contract includes deferred money, meaning the Dodgers won’t actually be paying him $70 million next season. This helps them avoid a large luxury tax penalty.

“The deferrals were primarily about allowing the team to be successful on the field,” said one person with knowledge of the contract who was not authorized to speak publicly about the agreement. “Because above all else, he wants to win.”

In other words, Ohtani will be paid well past the date his contract expires in 2033. Think Bobby Bonilla, who retired in 2001, but is still being paid by the New York Mets and will be until 2035.

Quoting directly from Harris:

—Consider the “present-day value” of a contract. That is a calculation that determines how much a deal involving deferred payments would be worth if all of the money were paid in the present day — not in the future when inflation will decrease its overall worth.

—When Freddie Freeman signed his $162-million contract with the Dodgers two years ago, for example, its $57 million of deferred money lowered the present-day value to roughly $148 million, as calculated by the MLB Players Assn. Same with Mookie Betts’ $365-million deal, which had a present-day value of only $306.7 million thanks to its $115 million in deferred payments.

—The MLBPA will calculate the present-day value of Ohtani’s contract, which was negotiated by Nez Balelo of CAA Sports, once it is finalized. But based on the public information available Saturday night, some rival agents estimated the present-day value could end up being in the $450-million to $500-million range, if not lower, depending on the length of the deferrals and interest rate used in the calculation.

—If Ohtani had no deferrals and made a full $70 million next year, the Dodgers’ actual payroll for 2024 would’ve risen to about $210 million, already just $12 million shy of last year’s total. Under the new deal, every dollar the Dodgers save now — and instead pay out to Ohtani in the distant future — is one the team can reallocate toward new acquisitions.

OK, thanks Jack for breaking that all down for us.

What that means is the Dodgers still have plenty of room to add players to the roster. And they still need players, especially starting pitching, since Ohtani will be of no help there next season. The luxury tax threshold next season will be $237 million. The Dodgers will almost assuredly surpass that, but not by as much if they really paid Ohtani $70 million.

Free-agent starting pitchers the Dodgers are believed to have some interest in include: Yoshinobu Yamamoto, Blake Snell, Jordan Montgomery and Lucas Giolito. They could also see players via trade. There have also been rumors they are interested in bringing Joc Pederson back.

Does this mean Dodger Dogs will cost $300?

It’s doubtful. Keep in mind the Dodgers are going to reap a financial windfall thanks to Ohtani because of new sponsorship deals and merchandising, among other things.

Most economists will tell you that teams set their prices to what the market can bear. The Dodgers raise their ticket/food/merchandise prices almost every year. And people keep going. A smart business keeps raising those prices until they reach a point where fans refuse to pay that much. The Dodgers haven’t reached that point yet, because they still draw almost 4 million in attendance every season.

Every offseason, I get a handful of emails from readers complaining that the Dodgers have raised ticket prices yet again, and that they are outraged. When I ask if they will stop going to games, the answer is “No, I’ll still go.” Until the time comes the Dodgers stop filling seats, expect prices to go up, whether they had signed Ohtani or not.

It’s sad that an average family with two children can really afford to go to only one or two games a season. But that’s not Ohtani’s fault. It never has been. I’m not defending the system, but it’s the system we have, and not just in baseball.

Ohtani poll

Are you happy about this Ohtani deal? Vote here in our informal survey.

Familiar faces return

Before the Dodgers signed Ohtani, they brought back two players from last season’s team. Jason Heyward signed a one-year, $9-million deal. Reliever Joe Kelly signed a one-year, $8-million deal. Expect Kelly to get a different kind of reward too, as he wears No. 17, which is the same number Ohtani wears. Traditionally, when a player comes to a team and takes over another player’s number, they give that player some sort of gift as a thank you.

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Two-way superstar Shohei Ohtani joining Dodgers on record $700-million deal

Plaschke: Can you believe it? Shohei Ohtani, baseball’s new Babe Ruth, is a Dodger

Hernández: Shohei Ohtani joining the Dodgers is a huge win for all of baseball

Shaikin: Ohtani to the Dodgers and oh no to the rest of the NL West

Shohei Ohtani signs with the Dodgers. Now what? | The Dodgers Debate

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