Why Ohtani’s Historic Contract Could Pay Off Even Bigger for the Dodgers

In the end, all initial monetary estimates surrounding the Shohei Ohtani free agent contract proved to be almost embarrassingly small. But such is the unique stature of the two-way phenom, the resources of the Los Angeles Dodgers, and the hunger for victory in Chavez Ravine.

Ohtani announced his signing with the Dodgers on Saturday, a 10-year, $700 million deal that shatters all prior records not only within MLB but all of U.S. team sports.

The superstar had been previously pegged since this past summer for a contract potentially worth $600 million. That bullishness then ebbed somewhat toward projections of a deal around $500 million to $550 million after a season-ending elbow injury that led to surgery — and will prevent him from pitching until 2025. 

Such projections ultimately were no match for what actually transpired, with the Dodgers in particular pressed hard by a competing bid from the Toronto Blue Jays, sources told Front Office Sports.

While Ohtani’s historic exploits thus far in his career make him the closest thing to a sure bet among MLB players, the deal represents a massive show of faith by not only him and his agent, CAA Sports’ Nez Balelo, but also by the Dodgers.

Ohtani is betting that he will remain healthy enough, even after two major arm surgeries, to perform at his prior, dominant level. The Dodgers already have an enhanced sense of what they’re getting there, as team doctor Neal ElAttrache performed the latest surgery.

The Dodgers — already MLB’s perennial attendance leaders and locked into a 25-year, $8.35 billion local media rights contract with Spectrum — are similarly betting that there is enough possibility for significant revenue growth to make the deal financially viable.

“The lift is going to come from this team being the biggest brand in baseball for the foreseeable future,” Marc Ganis, president of Chicago-based SportsCorp Ltd. and a longtime sports industry consultant, told Front Office Sports. 

To that end, the Dodgers immediately soared to become the consensus favorite among sportsbooks to win the 2024 World Series.

The Returns Are Real

Within minutes of Ohtani’s announcement, MLB’s official online shop set up a page for fans to enter their email or mobile number “to be notified when Shohei Ohtani’s Dodgers gear is available.” 

That online league merchandising is split across all 30 teams. But there will still be plenty of additional, and much more meaningful revenue opportunities for the Dodgers. The Angels are estimated to have netted between $10 million and $20 million per year in Ohtani-related sponsorships and marketing revenue, a figure that could potentially double with the superstar playing for the far more popular crosstown rivals.

The deal also brings together one of MLB’s most prominent endorsers, as Ohtani himself makes more than $35 million per year off the field, with one of the league’s most popular and prominent teams. 

“With Ohtani in the fold, you’re now looking at the ability for higher prices across the board, including tickets, luxury seating, and sponsorships,” Ganis said.

The Dodgers’ value, already second-highest in MLB at $4.8 billion, is now set to rise further and solidify the team as the one of the world’s most valuable sports franchises.

World Series or Bust

Local observers believe it’s actually winning at the true heart of the bold moves from the Dodgers and the Mark Walter-led ownership group. 

Since Walter and his Guggenheim Baseball Management took over the Dodgers in 2012, buying the club out of bankruptcy in a then-record $2.15 billion deal, the team won 10 division titles and reached the World Series three times. But the club’s only World Series title in this historically successful era was during the pandemic-shortened 2020 season, a year so difficult and unusual in baseball history that questions have surfaced on the real value of that championship. 

Since then, the Dodgers lost in 2021 to eventual World Series winner Atlanta in the National League Championship Series and suffered consecutive Division Series losses to San Diego and Arizona teams they dominated during the regular season. 

“Dodger fans have definitely grown concerned about this team getting over the hump,” David Carter, a University of Southern California professor and longtime sports industry consultant, told FOS. “There is a very real demand for success and this fanbase is really looking to get to the next level. So there’s a sense of the Dodgers paying Ohtani to be Mr. November here.”

Dodgers manager Dave Roberts at MLB’s recent Winter Meetings called signing Ohtani the team’s “top priority.”

Ohtani being squarely in the postseason mix will also likely pay huge dividends for MLB overall as well. The league for more than a decade has been somewhat hamstrung given arguably its two best players, Ohtani and former teammate Mike Trout, have played a combined three playoff games. 

“What the Angels were able to do [economically] with Ohtani was somewhat limited because they weren’t winning,” Ganis said.

Salary Deferrals

The full details of Ohtani’s contract have yet to be disclosed. But the deal will include significant salary deferrals, believed to account for a majority of the deal, to help keep the Dodgers competitive over the next decade. Those deferrals were described as at Ohtani’s idea, at least in part, as he chases his first MLB championship. 

“This is a unique, historic contract for a unique, historic player,” Balelo said. “He is excited to begin this partnership, and he structured his contract to reflect a true commitment from both sides to long-term success.”

Prior to signing Ohtani, though, the Dodgers actually were relatively light in 2024 salary commitments, having just $131 million on the books for next season. That number is slightly more than half its 2023 payroll of $240 million.

Aiding the Ohtani signing was a significant amount of money coming off the Dodgers’ payroll after the 2023 season, including $22.5 million paid this year to disgraced former pitcher Trevor Bauer.

The concept of salary deferrals in MLB is now decades old. And more than 30 years after signing a contract with the New York Mets, Bobby Bonilla is still receiving annual payments from the club, to the point where it’s considered something of a national holiday within the sport.

But Bonilla’s annual $1.19 million check from the Mets will likely look more like scraps compared to what Ohtani will be getting from the Dodgers.

Moving out of California to a lower tax state such as Florida or Texas in his retirement, however, could allow Ohtani to save millions in state taxes on that deferred income. Such a strategy has already been employed by Texas Rangers pitcher Max Scherzer, who moved to Florida, in part for similar reasons.

But while Ohtani is deferring much of his record-setting payday, the Dodgers are doing everything they can to avoid further deferring championship glory.