Show me the Money: Shohei Ohtani's $700M Moneyball

Over the weekend, the Los Angeles Dodgers signed Shohei Ohtani to a staggering ten-year, $700 million contract. At the time of writing, this stands as the biggest contract in sports history, surpassing the previous record of $647 million held by Lionel Messi during his tenure with FC Barcelona (2017-2021).

This monumental move by the Dodgers marks a new chapter for baseball and represents a substantial gamble for the organization. Before Ohtani, the MLB’s largest contract belonged to his former Angels teammate, Mike Trout, who signed a 12-year deal worth $426.5 million in 2019. Across all American sports, the record was previously held by current Kansas City Chiefs quarterback and two-time Super Bowl MVP Patrick Mahomes, who inked a $450 million deal in 2020.

To truly grasp the enormity of Ohtani’s contract, consider this: more than half of the 62 teams in the NHL and MLB are currently valued at less than $1.4 billion, according to valuations from sportico.com. That's only twice as much as what he is set to make over the next decade…by himself.

Unfortunately for Shohei, the golden glow of California comes with a heavy tax burden. Potentially, he could be losing over half of his salary to state taxes, leaving him with only $34.8 million out of his annual $70 million salary.

In order to alleviate some of the financial burden for both parties involved, the deal has been structured in a way where Ohtani will only receive $2 out of his $70 million annually; with the remaining $680 million paid to him after his contract ends, from 2034-2043.

Deferred salaries have been allowed in the MLB for decades, allowing clubs the flexibility to pay portions of a player's salary years (sometimes decades) later. Given this, should Ohtani decide to relocate from California to a state with lower taxes at the conclusion of his 10-year contract, he could save millions in taxes on the deferred $680 million. Additionally, this strategic move gives the Dodgers much more leeway in building a strong team around him. By deferring most of Ohtani’s contract, the team gains substantial flexibility in their payroll, allowing them to beef up their roster even further.

However, there are other ways to offset the high taxes should he choose to remain in California after his deal ends. Ohtani’s endorsement earnings, estimated by Forbes at a staggering $40 million for 2023, will likely more than double, thanks to the Dodgers popularity and anticipated deep postseason runs with their new superstar.

During Ohtani’s previous six years with the Angels, the team failed to make the playoffs even once, despite having two of the game's biggest stars playing together. The Angels highest win total during that span was 80, which occurred in 2018 when Shohei was just a rookie.

On the other hand, the Dodgers have been doing the opposite, having been in the playoffs the last 10 years consecutively with three finals appearances and a championship in 2020. By joining this powerhouse of a team, Shohei’s visibility and popularity will skyrocket, as his new team continues to fight for championships.

As mentioned earlier, Ohtani already makes a fortune from his many endorsement deals. This number seems even bigger when you compare it to the second-highest endorsement earner in the MLB, Bryce Harper, who is estimated to have made close to 7 million this year.

The main reason Ohtani’s endorsement earnings are so much higher is because of how big of a draw he is internationally, particularly in Japan. So much so, that LA Angels games are televised in Japan solely for people to watch him play. These international broadcasts doubled the Angels audience, with stats showing more people in Japan watching Shohei play than in America.

Because of this, brands from these two countries and around the world are lining up to partner with him. During Angels home games, you will see just as many Japanese advertisements as American ones on the digital display screens behind home plate. The difference in viewership is so significant that even during away games other teams sell commercial spots to Japanese companies to take advantage of the viewership bump.

What makes Ohtani so special on the field is that he’s both a world-class hitter, capable of hitting 40+ homers a season, and a top-tier pitcher that can whip out 100+ mph fastballs. Although this is must-watch television, it may not be sustainable, given his injury-prone history and the fact that he’s already had two major arm surgeries in his career. While the earlier years of this deal may be great for everyone involved and baseball itself, only time will tell if this gamble ends up paying off.

If you enjoyed reading about this record breaking deal, consider checking out my previous article where I analyze an unforgettable sports-themed Dr Pepper commercial. Click here to find out what made it so memorable and captivating! ?

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